james stodder, (ph.d., economics, yale 1990) lally school of management & technology rensselaer...
TRANSCRIPT
![Page 1: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/1.jpg)
Tradable Pollution Permitsor
Green Taxes/Subsidies?
James Stodder, (Ph.D., Economics, Yale 1990)Lally School of Management & Technology
Rensselaer Polytechnic Institute at HartfordHartford, Connecticut, USA
Stodder, Presentation on Pollution Permits, Sept. 14, 2011
![Page 2: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/2.jpg)
CO2 and Temperature Change
http://www.ngdc.noaa.gov/paleo/icecore/antarctica/vostok/vostok_data.html Stodder, Pollution Permits, Sept. 14, 2011 2
![Page 3: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/3.jpg)
CO2 and Industrialization
http://www.globalwarmingart.com/wiki/Image:Carbon_Dioxide_400kyr.png
3Stodder, Pollution Permits, Sept. 14, 2011
![Page 4: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/4.jpg)
Surface Temp & Hurricane Intensity
“Increasing destructiveness of tropical cyclones over the past 30 years”, Nature, 8/4/05, ftp://texmex.mit.edu/pub/emanuel/PAPERS/NATURE03906.pdf
Hurricane Intensity - - -
Sept. Surface Temp __
4Stodder, Pollution Permits, Sept. 14, 2011
![Page 5: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/5.jpg)
Stodder, Pollution Permits, Sept. 14, 2011 5
Majority Believes in Global Warming
Source: Yale University Project on Climate Change Communication
![Page 6: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/6.jpg)
Good Old Supply & Demand!
Stodder, Pollution Permits, Sept. 14, 2011 6
![Page 7: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/7.jpg)
Planning is Perfect – if No Uncertainty!
Stodder, Pollution Permits, Sept. 14, 2011 7
![Page 8: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/8.jpg)
But if Costs are Uncertain …
Stodder, Pollution Permits, Sept. 14, 2011 8
![Page 9: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/9.jpg)
… Outcome with Quantity Controls
Stodder, Pollution Permits, Sept. 14, 2011 9
![Page 10: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/10.jpg)
Losses with Quantity Controls
Stodder, Pollution Permits, Sept. 14, 2011 10
![Page 11: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/11.jpg)
Losses with Quantity Controls
Stodder, Pollution Permits, Sept. 14, 2011 11
![Page 12: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/12.jpg)
With Cost Controls, further from Equ.
Stodder, Pollution Permits, Sept. 14, 2011 12
![Page 13: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/13.jpg)
Stodder, Pollution Permits, Sept. 14, 2011 13
Greater Losses with Cost Controls
![Page 14: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/14.jpg)
Steep Decline in Benefits => Quantity Controls
14Weitzman (1973)
![Page 15: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/15.jpg)
What if more Gradual Define in Benefits?
Stodder, Pollution Permits, Sept. 14, 2011 15
![Page 16: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/16.jpg)
Stodder, Pollution Permits, Sept. 14, 2011 16
Quantity or Cost Controls?
![Page 17: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/17.jpg)
Stodder, Pollution Permits, Sept. 14, 2011 17
Cost Controls Closer to Equilibrium
![Page 18: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/18.jpg)
Stodder, Pollution Permits, Sept. 14, 2011 18
Quantity Controls Further from Equilibrium
![Page 19: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/19.jpg)
19
Costs more steeply sloped than Benefits => Cost Controls
Prices vs. Quantities Revisited: www.rff.org/documents/RFF-DP-98-02.pdf
![Page 20: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/20.jpg)
Stodder, Pollution Permits, Sept. 14, 2011 20
Best Method is an Empirical Question:
If Social Benefits are Less Price Sensitive (More Steeply Sloped) than Costs =>
Use Quantity Controls(Pollution Permits).
![Page 21: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/21.jpg)
21Prices vs. Quantities Revisited: www.rff.org/documents/RFF-DP-98-02.pdf
Benefits more steeply sloped than Costs=> Quantity Controls
![Page 22: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/22.jpg)
Stodder, Pollution Permits, Sept. 14, 2011 22
If Social Benefits are More Price Sensitive
(Less Steeply Sloped) than Costs =>
Use Cost Controls (Taxes / Subsidies).
![Page 23: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/23.jpg)
23
Costs more steeply sloped than Benefits => Cost Controls
Prices vs. Quantities Revisited: www.rff.org/documents/RFF-DP-98-02.pdf
![Page 24: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/24.jpg)
Stodder, Pollution Permits, Sept. 14, 2011 24
Volatility of S02 Prices, US: 1995-2006
William Nordhaus (Copenhagen, 2009)
![Page 25: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/25.jpg)
Stodder, Pollution Permits, Sept. 14, 2011 25
Basic Business Argument:
What is more important for your Business?• Knowing the future price of energy that your
business must pay?
or …
• Knowing the future quantity of energy that the country as a whole must use?
![Page 26: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/26.jpg)
Stodder, Pollution Permits, Sept. 14, 2011 26
Additional Arguments:
• Carbon taxes will make the cost of carbon-based energy higher, but also more stable.
• Taxes on energy are already in place. Pollution Permits would require new levels of bureaucracy.
• Much easier to tax oil at the refinery than check pollution permits at the tail pipe or smokestack.
• Carbon tax applies to all users, while permits are monitored for just the biggest polluters.
![Page 27: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/27.jpg)
What about the Recession?
Stodder, Pollution Permits, Sept. 14, 2011 27
Martin Wolf, Financial Times, Sep. 6, 2011
![Page 28: James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut,](https://reader030.vdocuments.mx/reader030/viewer/2022032705/56649dab5503460f94a99a35/html5/thumbnails/28.jpg)
Bond Market Worried About Growth
28http://research.stlouisfed.org/fred2/graph/?id=FII10,