Hurricane Sandy has become the climate change lobby's besty

Dealing with global warming will be expensive. The price tag last year for the drought was about $35 billion, according to the reinsurer Aon Benfield. Hurricane Sandy cost a further $65 billion. The National Oceanic and Atmospheric Administration said that last year ranked as the second-costliest in terms of natural disasters since 1980 — lagging only 2005 when Hurricane Katrina swamped New Orleans.

via www.env-econ.net

Seemed relevant given my comments today.

Comments

[Doug Poetzsch]

I find it very interesting that of the 34 OECD nations, the U.S. ranks 33rd, only in front of Mexico, in its average effective tax rate on a metric ton of carbon emissions. The U.S. claims to be the leader of the free world - yet it is not leading the efforts to combat carbon emissions and global warming. Hopefully we get our act together soon on the subject of climate change.

One other point from this article: the article claims that a tax on energy could single handedly take on climate change and could reduce greenhouse emissions by 14%. Will 14% really make much of a difference in combatting global climate change? I do not think so. If the temperature is projected to increase by 5 degrees in the next century 14% does not even lower that figure by a full degree. 14% from a tax on carbon is a start, but much more will need to be done to combat climate change.

[Account Deleted]

I agree with Doug's concerns over the costs associated with a 14% reduction in emissions. One thought also occurred to me as I was reading this article; to what extent do the damages from some of these superstorms constitute a portion of a calculable marginal damage function? While I don't think this would be scientifically rigorous at all, it is unsettling to see all of the strange storms we seem to be having over the past decade. It would be interesting to see a back of the envelope examination of temperature and storm damage over time.

One counterpoint is that economic buildup around these coastal areas may have something to do with the higher costs; as demand increases for these coastal locations increases as supply remains constant, the prices and values of these areas will increase, possibly inflating damage figures.

[Nick Bell]

I agree with Jack in the sense that I would like to see more examinations of natural disasters and their correlation to climate change before making any decisions based on these disasters. While I do see climate change as one of the major issues facing the Obama administration, I am not convinced that these natural disasters are occurring because we are emitting too many fossil fuels. While Hurricane Sandy was a tragedy, it doesn't mean we should make assumptions out of a impulse reaction.
The most interesting part of this article to me had nothing to do with Hurricane Sandy. I found it very surprising how much less the United States taxes carbon dioxide compared to other industrialized nations. We are taxing energy less than 10 percent as much as the average country does, per ton. As one of the leading nations in carbon emissions I find it very irresponsible of the United States to not at least comparatively make an attempt to slow down climate change.

[Alex Fernández]

In this article we see that once again, the United States is the outlier when compared to other developed nations (think healthcare, maternity leave, etc).

Out of curiosity I did some quick research to find out if perhaps the practically negligible federal carbon tax might actually be bolstered by state carbon taxes. However, I found that there are few states that enforce additional carbon taxes. The behavior that this lack of a tax generates should not be surprising. Of course American companies emit without restraint and pollute as if there are no consequences (there certainly aren’t major tax consequences!). It does not make sense that we forgo taxing activities that generate negative externalities. Unlike income taxes, this tax should be less disputed and easier to justify. As one of the countries that emits the most carbon, one would expect that we would feel the need to step up and begin a more stringent carbon policy; especially in light of the rising costs due to climate change that the article points out.

[Jonathan Stutts]

I feel obligated to be the brake pedal on this one - John Whitehead gets on a roll a little quicker than I can reconcile here. Within a three sentence span he has assumed that natural disasters can be linked directly to global climate change. I realize he has probably done way more research on the matter, but I am not comfortable making that jump. From what little I know, warmer oceans magnify the strength of hurricanes, which cost billions of dollars, but to suggest a causal relationship between global climate change and something like Katrina, he is going to have to do a lot more proving for me to nod my head along.

I certainly think global climate change is an important issue. I also agree that the United States needs to pay more to address the issue. But I think this particular article is a weak attempt to simplify the valuation of climate change's adverse effects.

[Tim Werner]

Regardless of whether or not global climate change and the intensity of natural disasters is highly correlated, I think a tax of this kind is something to be considered. The revenue from this tax would bring in enough money for the government to provide aid to damaged areas as well as reduce carbon emissions, but the specific tax mention in the article seems excessive. In this article, Eduardo Porter states that a similar tax to the ones imposed by other industrialized nations of the Organization for Economic Cooperation would bring in “1.6 percent of G.D.P. [which] is $240 billion a year. And $41 per ton amounts to an extra 35 cents a gallon of gas.” Hurricane Sandy inflicted about $65 billion worth of damage, far less than the revenue to be gained by this tax. 35 cents more per gallon of gas is a steep increase for many drivers, and $240 billion outweighs the current need for aid funds. I’m assuming that the other 33 industrialized nations of the Organization for Economic Cooperation and Development use these figures because they have done regression analysis or other research and are convinced that carbon emissions may have a time lag-effect, which indicates more aid will be needed in the future as carbon emissions amount and natural disasters become more devastating. If carbon emissions indeed have a time lag-effect on global climate change and it is significant, the tax on emissions will reduce carbon emissions and alter the rate of climate change. I understand the logic of an avid supporter for this tax and I acknowledge the increasing intensity of natural disasters during my lifetime along with the increasing greenhouse gas emissions, but I am not completely convinced it is due to the greenhouse effect and not just a natural cycle our planet experiences.

As a resident of New Jersey, I think it is ridiculous that the government is providing such a great amount of aid to the area hit by Hurricane Sandy. Why encourage history to repeat itself? In 2011, a relatively less intensive (damage-wise) Hurricane Irene hit the Jersey Shore, along with Long Island and the rest of the east coast. Financing the reconstruction of an area only to be destroyed again years later is insane. For the government to justify such aid programs in the future, it could consider a tax on emissions as an option. It could use the revenue from a tax on emissions to provide aid to damaged areas, as well as fund more research on the topic.

[Gyung Jeong]

I really like the way this article begins: “Dealing with global warming will be expensive.” This addresses the trade-off that we have to make; either we pay right now to save the future or we don’t do anything to keep the cost low to have a worse future. Whatever we decide to do, it will change the outcome. However, as this article suggests, we are facing an even larger problem. What we are experiencing is due to 0.8 degrees centigrade, but the experts argue that it can be 4, 5, or even more degrees in the future. However, the fact that the budget is shrinking to its smallest share of the economy shows that the government does not really take this problem seriously. Also, the fact that United States’ tax on energy amount is $6.30 per ton, which is one of the lowest among the 34 nations of the Organization for Economic Cooperation and Development countries, shows the lack of concern we have for this huge dilemma. Although there are some states that do ask for more tax, it is still low. The best answer to solve this problem and to have a better future is to raise the tax on energy. The fact that US is one of the nations that has the lowest amount of tax on energy per ton surprised me. Increase in tax will affect the economy, but the trade-off has to be made.

[Wen Xiang Chuah]

I suspect that much of the controversy over carbon tax originates from an issue closely related to government transparency – as a simple heuristic device for ‘controlling’ government spending, the populace at large seeks to draw causal links between a carbon tax and global warming, ignoring the fact that government revenue and government spending do not have to be proportionally linked by source. As discussed in class, the carbon tax allows for the re-alignment of MPC to MSC, whereas the issue of government spending (in relation to the effects of global warming) has little to no actual bearing on the viability of the tax. Revenue is revenue and revenue is for the government to allocate as it sees fit. While the damages caused by Katrina and its ilk constitute part of the MSC, the time-delay on the effects prevent reactive responses to current costs.

[Eric Notari]

It is rather embarrassing that the United States is the second lowest country in terms of carbon tax per ton, while being the top producer of carbon. While this something that needs to be changed, and a tax seems to be the best way to accomplish that change, an increase of 35 cents per gallon of gas is not something to be taken lightly. Yes, it seems insignificant, but people are already outraged over the high price of gas. People may not stand to see another 35 cents added on top of the ridiculous fluctuations we already have. Whether or not it sounds good to be reducing carbon emissions by 14%, the average person is only going to be concerned with how it affects him or her financially. So why would they elect someone who is going to increase their out of pocket costs?
I also agree with Jonathan and Tim in that I don't necessarily follow the rapid link established between global warming and natural disasters, or that what we are seeing is not just a natural cycle.

[Katherine Rush]

While I agree with some of the commenters above that are skeptical about the causal link between climate change and natural disasters, I hope that events like Hurricane Sandy will force people to realize that a slight increase in gas prices is worth the cost of such tragic disasters. While this article focuses on just the economic losses incurred by Hurricane Katrina and Sandy, we all know from class last week that there are certain damages without market values. According to the article, temperatures are only going to rise faster in the coming century and "damages will rise more sharply than the temperature curve". So why is the United States so slow to increase emission taxes when top economists agree that it is the cheapest method for combatting climate change? I agree with Eric that the United States' rank as 33rd out of 34 countries in terms of carbon taxation is pretty embarrassing, given that we are one of the top emitters in the world. Looking at the list, I can't help but wonder what China's policy is and whether they would rank above or below us on carbon tax per ton.

[Katja Kleine]

I agree that Eric that it is pretty embarrassing that the US ranks second to last in our average effective tax rate on carbon admission. And I appreciate the approach at this article took towards linking natural disasters with global climate change. I am not an expert in this arena, but it is my understanding that there is scientific support for global warming attributing to and intensifying these natural disasters. And even if there is not as strong evidence for natural disasters like Hurricane Sandy, there is definitely support for rising sea levels causing flooding, which has had huge economic impacts for other countries. I would like to know the cost of all of that very visible damage.

I also recently watched a documentary about Hurricane Katrina. In looking back upon the documentary and I found it interesting that climate change and our governments lack on involvement in that aspect wasn't mention at all.

Finally, I would like to know how a carbon tax would effect different income levels in the United States. Would it be regressive like a gas tax? Or because of high income, high carbon activities (like flying), would a carbon tax be more equitable.

[Kathryndstewart]

This article is particularly pertinent as our nation deals with the fiscal cliff looming, debt growing, and a budget that can't handle another financial burden-- dealing with self-imposed natural disaster costs. I'm typically a proponent of small government and lower taxes, but I think that we do need to find a way to meet in the middle and collect as much as we spend.

What's especially interesting--or ironic-- is that this article comes at the same time as Virginia governor Bob McDonnell proposing eliminating the gas tax in the state of Virginia to encourage economic growth, stimulate travel and tourism, attract industry to the state, etc. He plans to make up the losses of a gas tax with higher sales taxes. This article says that the gas tax would encourage people to burn less fuel and raise a lot of money. McDonnell's proposal would do the opposite: encourage more fuel consumption, induce more wear and tear on the highways, create traffic, and make more pollution. All these are negatives but it goes to show that environmental priorities are far from his mind and that the public has little concern over equating social and private costs. Gas is a hot-button issue and McDonnell's proposal may be popular but it won't help us if we fall over the fiscal cliff or if another Katrina hits and we can't afford to send help.

[Austin Pierce]

I feel like almost everyone who has posted is quick to jump onto the anti-climate change band wagon and blame a lot of the disasters that are occurring on climate change.

One thing I would like to ask everyone is what would the potential benefits of climate change be? Wouldn't it unlock fresh soil that is currently permafrost, raise the carrying capacity of extreme-latitude ecosystems, and have other "positive" results? It's just something worth considering.

Another thing is that the disasters that the article mentions (drought, Sandy, etc.) are not necessarily caused specifically or solely by global warming. It is fairly obviously that there is a correlation between climate change and some of the superphenomena (annual 100-year floods, superstorms, etc.); however, whether global warming is the sole contributor cannot be proven. Furthermore, on some of the other issues, such as the drought, people willfully ignore other contributing factors. There are many poor environmental decisions that have been made by the environmentalists in Texas that are throwing the ecosystem out of whack (such as surveying for toads during a drought and then deciding to protect the "endangered population" by banning the cutting of all areas where they breed, etc. This in turn led to a much higher and attainable set of fuel for when the wildfires came through in 2011. Furthermore, the drought would be much less significant if the river water wasn't being diverted to unsustainable cities, which are also emptying the aquifers.

This is all stuff that should be kept in mind if we're really seeking to understand the true costs and benefits of policies.

[Paul R]

This article talks considerably about all the benefits of adding a tax on the American People. I merely want to point out that yes a tax on carbon output would raise revenue and cut emissions; however, there would be several negative impacts as well. By adding a tax on fuel and energy every american would bear the burden. This across the board taxation seems fair yet most people can not afford to redo their house instantaneously. Insulating a house is expensive and could cause people to not be able to keep their house or place of business. Overtime new houses would be built with the tax in mind, yet most people now know about the cost savings that can come from insulating in a house. I would prefer an incentive and not a tax. It is easy to say a 14% tax is easy to manage when your not the one who has to enforce it on a family.
_Paul Reilly

[Sommer Ireland]

In answer to Austin's question, yes the permafrost would thaw, but that just releases stored carbon into the atmosphere and we're trying to minimize the amount of carbon being released as to not speed up or further the process of global warming. And while "fresh soil" may be unlocked, I highly doubt that there would be a mass migration to the northwest territories of Canada.

Though I do agree with Austin on the fact that I don't believe there is substantial enough evidence to link "super storms" with global warming. I believe we would have to have access to a much longer history of records of these storms to justify a claim like that. But it is embarrassing that we are 33rd on a list of 34 in carbon taxes. As a leader in the industrialized world, what kind of example do we set when we aren't trying to be economically efficient when it comes to carbon taxes. Clearly we are taxing way below the equilibrium for the gas tax as we aren't fully taxing the negative externality. Granted I hate paying more at the pump as I drive a Ford Expedition, but it's a car that my parents gave me and I drive very little because I hate paying for gas. But this is an instance where I would suck it up and pay more if it would help the GDP that much. I'm all about raising that revenue.

[Emily Foggo]

I also find it embarrassing that the United States is ranked so poorly for our effective tax per ton on carbon emissions. I was curious to see if those countries that are ranked the highest, emit the fewest metric tons of carbon, or if those countries that are ranked the lowest, emit the most metrics tons of carbon. As it turns out, it doesn’t seem like there is much correlation between these two variables. Countries such as Luxembourg, heavily tax carbon emissions, but also emit 20.4 metric tons of carbon per capita each year, whereas countries such as Mexico do not heavily tax CO2 emissions, but only emit 4.0 metric tons of carbon per capita each year. After some quick research on the World Bank’s website, http://data.worldbank.org/indicator/EN.ATM.CO2E.PC, I found these statistics about the following countries and the amount of metric tons of carbon per capita they produced in 2009:

1) Switzerland – 5.4
2) Luxembourg – 20.4
3) Norway – 9.7
4) Netherlands – 10.3
5) Denmark – 8.3

32) Canada – 15.2
33) United States – 17.3
34) Mexico - 4.0

With these results, I question whether or not a tax on carbon emissions is as effective as John Whitehead says it is. It definitely seems possible that countries could have an appropriate tax on carbon emissions yet still produce carbon at incredibly high rates. I think this raises a potentially interesting counter argument to Whitehead’s claim.

[Will Andrews]

Regardless of whether climate changes do in fact foster deadly natural disasters, what is made evident in reading is the fact that a market failure exists in the market for fossil fuels. It is possible that the market is in equilibrium, but that this equilibrium is not the socially obvious equilibrium. However, I claim that this possibility is in fact reality. Marginal social cost in this market does not equate with marginal private cost. An obvious fix for this problem is to raise gas prices through a tax. However, I feel like this market correction is only obvious due to my economic studies. A lack of education in the realm surrounding natural resource economics inhibits people’s ability to find the logic on what they presume to be “over priced” fossil fuels. I think that the problem lies in inadequate education of the general population. In my opinion the question becomes not how do we educate the world?

[Scott Diamond]

Although this article seems to focus on a gasoline tax as the centerpiece to generating revenue and (more importantly) reducing carbon emissions as a solution to climate change, I am impressed by the efforts already underway to reduce carbon emissions. California’s successful implementation of an excise tax is certainly a step in the right direction and would be an excellent way for struggling states and local governments to generate funds without waiting for federal legislation from Washington to be decided and passed on (also unlikely in the near future). Additionally, this article led me to explore existing command-and-control type policies that may serve as an alternative to such a tax. Most notably, I discovered that new energy-efficiency standards recently negotiated with American carmakers promises to double the average fuel economy of cars and light trucks sold to 54.5 miles per gallon by 2025. These standards would reduce energy use by 12 billion barrels and would cut carbon emissions from automobiles in half. Considering the American public’s hostility towards anything that resembles a tax, I think that this shows that cost effective and potent command-and-control policies do exist and can be very promising solutions to this environmental problem.

[Rachel Samuels]

I think one of the interesting things that we have not covered regarding a gas tax is just how widespread its effects would be on the current economy. We are usually analyzing it in the face of a single consumer, and often state our own preferences as an individual. However, especially in the United States, almost every single industry uses oil in some way, whether for production or only for transportation. It is one of the reasons why America consumes so much. Therefore, while a per capita analysis of oil consumption might seem like the easiest way to understand where the oil is being consumed and who would be paying the tax, it is limiting in that it assumes that 17.3 metric tons of carbon are being produced on an individual rate, when the statistics for the matter are most probably bimodal. I do not believe we can so easily dismiss the idea that raising a tax on gas will harm the economy. Yes, it is correcting for a market failure, and yes, were we to say, "Just wait until the economy is better," we would never stop waiting, and I do believe that a tax on oil would correct a budget deficit and a carbon excess, but I still believe that the issue of the immediate effect on the economy should be analyzed and assessed in order to reduce short term damage.

The idea that the United States is ranked only above Mexico rankles. I understand that this is not taking into account state legislature, and there does not appear to be literature combining the two, but this is still unacceptable from our position as a world power, especially considering our reluctance regarding the Kyoto Treaty and other initiatives we have only tested the waters of. We constantly talk of the greatness of the American country, but it is when you start relying on your reputation of greatness in order to appear great that you cease being so. We need to stop focusing on the marvels of the past and start looking towards what we can do to be a global leader again, this time advancing towards a more sustainable state. As it is, we have rather obviously become a follower, and a slow one at that.

[Dylan Florig]

I was surprised by the U.S.'s lack of energy taxes. I knew from class that the U.S. had a low carbon tax, but I never realized that there isn't a special federal tax on residential heating and air conditioning. It seems to me that a tax on these would do an effective job of encouraging families to keep the heat one or two degrees lower in the winter or the air conditioning one or two degrees warmer in the summer, which could lead to results on climate change if many families and businesses react to the new tax. The author also brings up the idea of investing in better home insulation. One idea that came to mind after reading these comments was to place a small tax on home energy, and use the tax dollars to subsidize new insulation in older homes. This idea could create jobs in addition to limiting our carbon emissions. While the specifics of the plan would have to be determined, it seems that the concept could be logical and efficient.

Similarly, an increased tax on gasoline could be levied and used to somehow incentivize cars with better mileage, either by increasing the subsidy on high-efficiency cars or by incentivizing higher mileage car development by firms. Of course, we have to be very careful with excessive taxation in this economy, as lowering incentives to spend could push our economy back into recession. If the author of this post is correct, however, it is difficult to put a price on essentially saving the world from ourselves. Another concern is that just because the U.S. does something about carbon emissions, there is no guarantee that other countries will take action as well. Therefore, even with U.S. policy changes, the world could still be threatened by other countries' policies. It's a bit of a game theoretical issue, since we need cooperation from all nations, but everyone also has incentive to cheat in their own interest.

[Haley Miller]

This article was particularly interesting to me since I worked in the agriculture industry last summer and saw firsthand the costs associated with draught and rising temperatures. The lower levels of crop production (especially corn) and increase mortality rate of livestock caused food production prices to skyrocket. These prices will be passed along to the consumer. Although it may not represent a huge burden on those who do not use the majority of their incomes on food, people in poverty around the world will face dire consequences of rising food costs.

I like the idea of increasing taxes on energy to account for the social costs, but again, the highest burden will be placed on the poor unless taxes were lowered in other areas or the revenue was used to relieve the burden.

I like the idea of increasing taxes on energy to account for the social costs, but again, the highest burden will be placed on the poor unless taxes were lowered in other areas or the revenue was used to relieve the burden.

[Tyler Voorhees]

I agree with the sentiment already expressed in the thread so far. It is embarrassing that the US is so far behind other rich countries in terms of taxes on carbon. I think though that we have to consider why it is that other countries are so quick to adopt controls on carbon. It seems strange that Northern European countries have the highest tax on carbon, when they will not incur as much of the costs of global climate change as some countries in the tropics. Have politicians framed the carbon tax in a different way to constituents? Could that sort of framing make a difference in the political discourse for a carbon tax in America?
The article starts by mentioning the costs of Hurricane Sandy, which seemed to show Americans how costly global climate change could be. I would be interested in seeing what percentage of the total cost associated with climate change could be attributed to super storms, like Sandy. Perhaps if Sandy could help convince a lot of Americans about the cost associated with climate change, showing them the other costs beyond that would be even more convincing. Maybe the best way to show Americans the necessity of a carbon tax it will require more concrete costs as opposed to dealing with abstract costs.

[Ellison Johnstone]

I agree with many of the comments above that have expressed concern with jumping to conclusions about causality between climate change and natural disasters. However, I also agree with the author of the post who believes that the article is worth passing along because of its message. As we all know, in economics we often have to simplify reality in order to create models that can hopefully shed light on real-life situations. In this case, I think we can acknowledge that direct causality may not exist, but still accept the message from this article as valuable information. The message is that something needs to be done in the United States about climate change. We are clearly lagging behind almost all other "advanced" nations. The article hopes that the prospect of more droughts and powerful hurricanes will push the American people to embrace a tax like other advanced nations use. However, if you're unsure of the link between climate change and natural disasters, simply substitute another effect of climate change into this statement. Perhaps the loss of natural habitats from the emission of carbon touches home more for you. Maybe its the threat of poor air quality. The fact is that there are a multitude of negative changes occurring due to cimate change and global warming. Whether or not causality between natural disasters and global warming has been proven, there are plenty enough incentives for the US to implement a system of taxes on emitted fuels and carbons.

[Ellen Gleason]

I agree with many of the other posts - ranking 33rd out of 34 countries in terms of our carbon tax does signal a real need for raising taxes. This solution is dual-sided; not only would it raise the real price of energy, reducing the demand and our carbon output, but this taxation would also give us a new revenue source to use towards offsetting the costs of natural disasters. At this point, the evidence in favor of instituting such a tax seems relatively strong. What I'm left with is the issue of the American public's reaction to such a tax. Especially during this past election cycle, when there was such a strong voter reaction to rising and fluctuating gas prices, we can expect that any effort to raise carbon taxes would be hard fought by both politicians and the majority of Americans. Accustomed to (relatively) cheap energy prices, as Will stated, the main issue with Americans will be educating people on the reasons behind such a tax.

[Brett Murray]

The U.S. is clearly lagging behind the rest of the developed world in terms of commitment and taking action to combat climate change and rapidly increasing carbon emissions. Some argue that we simply cannot enact a law that limits carbon emissions in the U.S. because of the adverse economic consequences that such a tax would have on American citizens. However, I argue that this is not necessarily such a valid argument to make considering who is responsible for the majority of emissions in the U.S. The energy industry and major business sector have been shown to contribute to more than 80% of carbon emissions in the U.S., so it is absolutely essential that these businesses start having some sort of incentive or reason to start being more concerned and aware of their emissions. This tax is not necessarily going to harm all companies, and the companies who have been operating with greater environmental and social responsibility would be the ones who could benefit if such a tax were implemented.

Furthermore, if U.S. citizens are so extremely concerned with the economic consequences of a carbon tax, would they still be so opposed to a carbon tax if the labor tax (income tax) were simultaneously reduced to offset the new tax on carbon. I believe that many Americans would support such a proposal because it makes more sense to put a tax on something that harms society as opposed to taxing individual’s hard work.

I am by no means arguing that this is a simple issue and that debating a carbon tax is unjustified because this is simply not the case. I am however stating that it is time for our country to accept responsibility for our actions and emissions and start working together to develop an effective solution that contributes to economic growth and reductions in carbon emissions. It is absolutely essential for our government to establish consequences for carbon emissions in the business sector because it clear that no company is going to invest in renewable energy or reduce their emissions if there is no financial justification. Moral suasion has clearly shown to be insufficient in encouraging businesses to operate with greater environmental and social responsibility.