Thursday, March 26, 2009

Green comments in passing

Cap and trade

I'm deeply disappointed over the casual brushoff that congressional Democrats have given the greenhouse gas cap-and-trade (C&T) portion of the Obama budget.

The government desperately needs ongoing revenue sources to ameliorate future debt, fuel prices are low enough to make an increment for C&T relatively painless, and the rate of climate change is accelerating, so it is the perfect time to bring this system online. It looks worrisomely like the congress is hopelessly in the pocket of industrial interests, even on the Democratic side.

Ideally, instead of C&T, a straight carbon tax would be instituted, which would be transparent, easy to apply, and would rise over time to reduce emissions as needed. The C&T system is more complex to administer, and prone to corruption and mis-pricing, as has been seen in Europe. The amount of emissions have to be ascertained somehow, which, short of simply taxing fuel, is difficult to measure.

Some would surely say that the economic recession already decreases emissions, thus making the whole project of reducing emissions less urgent. Nothing could be more irresponsible. The last decade has been lost in policy terms. Temperature rise is gathering steam, and the lag in the system means that substantial further temperature rise will still take place in the next decades were our emissions to halt immediately.

In addition to the physical lag, there is also a political lag, where our leadership will only slowly translate into action in other countries, just as our lack of leadership and action over the last decade has provided the excuse for others, especially in the developing world, to match our do-nothing policy.

It is high, high time to ask for the small sacrifice that will get us going in the right direction of stewardship of this precious and delicate planet.
  • Oil is still getting short, despite the downturn, so purely in peak oil terms, we need to plan ahead.

And what's up with Paul Krugman?

Paul Krugman has emerged as the prime critic of the administration's newest plan to set up a market in toxic assets. His articles and interviews have been a bit vague, but I think what he is saying is that the program conjures buyers (with federal sweeteners), but will not create sellers. The government's example shows an asset face value $100 being bought at $86 by new investors. If that was all we had to worry about, we wouldn't be in a crisis. No, banks are carrying assets worth $5, $0, or even deeply negative values, thanks to "sophisticated" financial filleting, and they are petrified at having to sell them or honestly value them on their balance sheets.

Thus the danger is that the most toxic assets will stay right where they are- hidden in the vaults of zombie banks who will continue to lurk in the economic shadows, waiting desperately for the general economic upturn that will magically re-value those assets to something rather than nothing. That is why the other half of the strategy- the stress-testing and recapitalization [ed- strike recapitalization, how about orderly bankruptcy of insolvent banks?] of problem banks- is equally important. Most commentators seem to think that this stress-testing is merely window dressing, since Geithner is a Republican at heart, has little money to play with right now, and little immediate prospect of getting more. Hopefully not, is all I can say.
  • For a more conspiratorial and pessimistic take on this, read Glen Greenwald.

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