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I once looked for a reputable source (meaning, not people with an interest in denying climate change, etc) on what global warming would cost in a few decades an

I once looked for a reputable source (meaning, not people with an interest in denying climate change, etc) on what global warming would cost in a few decades and tried to equate it to dollars per gallon of gasoline. The implication was that, yes, the price of gas in the US is too low. But it also suggested the price of gas in Europe is already roughly including the estimated cost of fossil fuels. Plus or minus a couple dollars per gallon. What I don't see people grappling with, is if you talk about externalities, that inherently means there is an objective number, even if it's uncertain and imprecise, that captures the value of avoiding climate change (and other environmental damage) to society. And there is a completely independent number stemming from peoples' supply and demand curves, which captures the additional cost of fuel that will meaningfully slow or prevent climate change. If [externalities] <<< [price that will stop people from using fossil fuels], then we've painted ourselves into a corner. I think some people may be implicitly aware and not admitting it, which is a logical reason for micromanaging the economy rather than going for carbon taxes. I'm not sure everyone is aware though. Understand, I'm not saying I know the numbers, or that I would accept economic dogma that would say we should do nothing about climate change. I'm saying that using the language of "externalities", is potentially a trap, given the agreed-on goal. It's such a popular word, but that's when it's not tied to an actual number. Specific numbers can be inconvenient.

wmf 5y ago
If [externalities] <<< [price that will stop people from using fossil fuels], then we've painted ourselves into a corner. Are you trying to say that it might be cheaper to simply let climate change happen than to prevent it?
- perl4ever 5y ago
  I'm trying to say that if it is cheaper to let climate change happen, because externalities are determined to be $X and taxed away, but people value energy more, then climate change will happen. Which is bad if one doesn't want it to happen. My conclusion, then, is it may be bad to talk about externalities. At least as economics jargon, and it's confusing to use it otherwise. It's a tool that isn't bound to doing what people want it to do.
version_five 5y ago
I think you have a good point, and I don't have a solution. With respect to the article though, i feel like there are two possibilities (maybe more): (a) energy is "cheap" and we can only use it for "approved" things, ie we're not really buying it, or (b) it has a higher "sustainable" cost and we decide how much to buy based on the utility we see in it at that cost. As you say, it's hard to put a price on those costs (and even if we taxed it it introduces a whole other set of challenges - this is why in my original comment I said I don't like carbon taxes, but I didn't want to get into a side debate about that, it's a complex discussion). But some "externality" pricing is preferable to option (a) where some power specifies what we're allowed to to with energy. All told, it's not an easy problem that we can solve with something blunt like banning bitcoin mining. My personal view is that a technological solution is the only actually practical way forward and that's what we should be pursuing, but that's another discussion.

wmf 5y ago

If [externalities] <<< [price that will stop people from using fossil fuels], then we've painted ourselves into a corner. Are you trying to say that it might be cheaper to simply let climate change happen than to prevent it?

perl4ever 5y ago
I'm trying to say that if it is cheaper to let climate change happen, because externalities are determined to be $X and taxed away, but people value energy more, then climate change will happen. Which is bad if one doesn't want it to happen. My conclusion, then, is it may be bad to talk about externalities. At least as economics jargon, and it's confusing to use it otherwise. It's a tool that isn't bound to doing what people want it to do.

version_five 5y ago

I think you have a good point, and I don't have a solution. With respect to the article though, i feel like there are two possibilities (maybe more): (a) energy is "cheap" and we can only use it for "approved" things, ie we're not really buying it, or (b) it has a higher "sustainable" cost and we decide how much to buy based on the utility we see in it at that cost. As you say, it's hard to put a price on those costs (and even if we taxed it it introduces a whole other set of challenges - this is why in my original comment I said I don't like carbon taxes, but I didn't want to get into a side debate about that, it's a complex discussion). But some "externality" pricing is preferable to option (a) where some power specifies what we're allowed to to with energy. All told, it's not an easy problem that we can solve with something blunt like banning bitcoin mining. My personal view is that a technological solution is the only actually practical way forward and that's what we should be pursuing, but that's another discussion.