Financing hydrogen iron

A wonkish plan for problem industries in the energy transition.

We know how to make the electricity supply renewable. We know how to make land transport electric. Both are on track. But there are four problem industries where things are not so clear.

These estimates are not all for the same year and not strictly comparable, but they are good enough to make the point that to reach net zero emissions, the four sectors (together 20% of global fossil emissions) cannot be ignored.

The challenges are distinct but they have common features.

  1. Very plausible technological pathways exist to decarbonise. But these are not mature, and for the moment they are far more expensive than BAU.
  2. There is no guarantee or strong expectation that technical progress will ever eliminate the cost barrier, in contrast to electricity and land vehicles.
  3. The industries are typical of modern capitalism: they are international and oligopolistic, with a lot of trade, a handful of large companies, and a myriad of small ones.
  4. Their products and services rarely have plausible substitutes. (We shall see later on why this matters).

Points 1 and 2 mean that the issue for public policy is not R&D (pace all the Democratic presidential hopefuls) but early deployment.

Recall how we got to cheap wind, solar and batteries. It wasn’t a carbon tax, since that does not exist anywhere in the pure form. Partial cap-and-trade exists in the EU, but it has only just started to bite, after giveaway initial allocations. It was done by subsidies for early deployment to create economies of learning and scale:

  • In the USA, tax breaks for wind, solar, and electric cars; renewable obligations at state level.
  • In Europe and China, tax breaks, subsidies, and regulatory privileges for electric cars.
  • FITs and ringfenced auctions for wind and solar generation in Germany, other European countries, China and India.

The costs of FITs have been large in the past, though the cumulative liability (in Germany for instance) has now almost stopped growing as the few surviving FITs are near market rates. Well worth it of course, especially if you aren’t a German consumer.

The same principle holds for our four problem industries. Carbon taxes are politically toxic, and a coordination nightmare in globalised industries. So what’s the workable second-best kludge?

I’d like to float a possible solution. I’ll take steel as the example. The principle extends to the others ceteris paribus.

!

One clean beach

Why is my local beach now free of plastic litter?

No pretty photograph for this one. How can you take a snap of something that isn’t there?

Plastic litter on my local beach, that’s what.

I moved to Spain 15 years ago. My beach walks were interrupted by regular collections of litter, almost all plastic of one sort or another: drinks bottles, throwaway shopping bags, formless lumps of polystyrene, broken tangles of fishing net. It was densest along the shoreline, so jetsam (nice word: its counterpart flotsam is floating junk).

Recently I have had to leave my spandex Supergramps suit at home. There is hardly any to collect. On reflection, the change has been slow, though I’ve only just noticed it. Why has this happened?

Continue reading “One clean beach”

The verdict against Monsanto

A California jury has awarded $289 million to DeWayne Johnson, a groundskeeper who has non-Hodgkins lymphoma and claims his disease was caused by glyphosate, Monsanto’s blockbuster pesticide marketed most prominently as Roundup.

Michael Hiltzik of the LA Times reviews the facts of the case and the scientific dispute surrounding glyphosate’s role, or lack thereof, in causing cancer. He points out, reasonably, that a courtroom is a lousy places to resolve scientific disputes; how many of the twelve jurors could define “statistical significance” or “type II error”? And the notion that non-experts can pick out the truth in a swearing contest between experts is simply laughable.

Hilzik notes that alternatives, including “bringing these cases before specialized tribunals or setting up public funds for victims of certain products,” “all have their own flaws,” and concludes with an expert’s view that the jury trial “is a highly imperfect process,” but that “like democracy, it’s the best we have.”

I doubt it. Continue reading “The verdict against Monsanto”

Penn Law forum on cannabis and federalism

Cary Coglianese and Nancy Nord of the University of Pennsylvania Law School organized a panel called “The Cannabis Conundrum: An Experiment in Federalism or States’ Rights Run Amuck?” with Peter Conti-Brown of Wharton talking about banking regulation and Judge James Colins of the Commonwealth Court talking about a case brought against the Commonwealth by some unsuccessful applicants for growing and distribution licenses under Pennsylvania’s new medical-marijuana program. I’m on (from about 9:45 to about 26:45, aka “too long”) talking about how the states are screwing up legalization and only federal legalization can unscrew it.

Nudging, shoving, and manhandling

I’ve been puzzled why Richard Thaler’s “nudge” idea attracts such hostility from some people to my political left (including very smart people such as Henry Farrell and Cosma Shalizi). The worst thing you can say about nudging as I understand it is that it’s not very powerful; other than that, nudging is like chicken soup: it can’t do any harm.

So I’m grateful to Tyler Cowen for clarifying matters for me. Either Cowen or I badly misunderstands Thaler’s idea; if Cowen is right, you can add me to the list of anti-nudgers. But I’m pretty sure the Cowen is wrong about what Thaler says, and certain that his account confuses things that ought to be distinguished.

Nudging, as I understand it, involves changing “choice architecture” – altering the way options are presented or the time choices are made, or changing the “default outcome” if no option is explicitly chosen – in order to bring people’s actual choices more closely in line with their true preferences, as measured by the choices they would make with full information after serious reflection. That is, nudging is simply the opposite of temptation.

One of the defining features of a nudge (understood this way) is that it doesn’t narrow the range of outcomes available to the chooser. For example: presented with a menu of retirement-savings options, many employees will pick none of them, in part because of the psychological costs of decision-making and the fear of getting it wrong (“analysis paralysis”). This can be true even in the case when inaction is clearly the worst option (e.g., when the employer is picking up all of the cost). In that case, a nudge strategy would be to make enrollment in the plan that seems to experts most appropriate for the largest number of employees the default option: i.e., what happens if an employee just doesn’t fill out the form.

Crucially to the definition of a nudge, an employee who doesn’t want that option can costlessly (other than the effort of making the decision) switch to another, or none at all. As long as there’s no deception involved, and the people designing the choice architecture know what they’re doing and have the welfare of the people making the choices in mind, nudging seems to me almost entirely benign. A program that doesn’t limit freedom of choice can’t properly be said to reduce liberty, so replacing “opt-in” with “opt-out” should be thought of as facilitative rather than coercive. The same is true of, e.g., putting the salad bar first in the cafeteria line.

However, Cowen’s understanding of nudgery has a much harder edge. He gives examples where a choice less preferred by the government (or whoever is setting up the system) is made materially less attractive or more expensive, such as legally complicated and expensive divorce procedures, or abortion restrictions that force women to travel inconvenient distances. Cowen even wants to call restrictive immigration laws “nudges,” because would-be immigrants who can’t get visas can always forge documents or sneak across the border!

In my view, that sort of cost-imposing policy is radically distinct from “nudging;” Steve Teles calls it “shoving.” I don’t doubt that some such “shoves” are justified on paternalistic grounds: taxation to reduce cigarette consumption is an example. (Shoves are often justifiable on non-paternalistic grounds, such as taxes to reduce air pollution.) But such strategies aren’t always benign; people who keep smoking in the face of heavy tobacco taxes wind up just as sick as they would have otherwise, and poorer. And of course for those with limited means making something expensive can amount to barring it entirely.

Now, I agree with Cowen that the “shoving” for paternalistic reasons he wants to label as “nudging” is often preferable to more drastic means of protecting people from their own bad decisions: means that we might call “manhandling.” A tax on cigarettes is more respectful of liberty, and less prone to generate bad side effects, than an outright prohibition would be. But – in contrast to nudging – shoving is like manhandling in making those who don’t take the hint worse off. Changing incentives isn’t the same thing as changing choice architecture, and requires much stronger justification.

Nudging is no panacea, because changing choice architecture can only go so far in changing choice. Some people will continue to fall into behavioral traps even if the traps are clearly marked. And when the intervention is on non-paternalistic grounds, a considerable amount of shoving, or even manhandling, may be both justified and required. But there is clearly some room for improving outcomes at low cost and without diminishing liberty from the use of pure nudges. It’s therefore worthwhile to distinguish clearly – as it seems to me Cowen’s analysis does not – between generically benign nudges and the less benign alternatives he wants to include under the same label.

Enforcing laws against interstate tobacco smuggling

Cigarette taxes protect health by reducing smoking.

But tax disparities across states create a multi-billion-dollar annual market in smuggled tobacco products. Current enforcement efforts are inadequate and ill-organized.

As a result, the illicit trade in tobacco products (ITTP) is growing, and the larger the market grows, the harder the problem of controlling it. (That’s the usual positive feedback problem in violation rates due to enforcement swamping.) So inaction now has long-lasting costs.

Tax equalization would solve the problem, but isn’t likely to happen. Feasible changes in enforcement strategy could protect health and revenue while reducing crime.

Further thoughts on this from Mike DeFeo and me now up on SSRN.

Benefits, costs and the Grenfell Tower fire

In the aftermath of the Grenfell Tower fire,

Jeet Heer posted what seemed to me a thoroughly ungenerous Tweet aimed at Megan McArdle, a frequent punching-bag for the Twitter left. (Full disclosure: I regard Megan as a friend, and intensely admire her book on failure, The Upside of Down.)The Tweet has a picture of a friend of one of the victims, and reads (in full) “Megan Mcardle [sic] should tell him that libertarian cost/benefit analysis proves his friend’s death is totally worth it.” Since the original Tweet didn’t link to anything McArdle had written, it looked as if Heer had simply picked her at random as his target.

But that wasn’t in fact the case. The Tweet was an allusion to a McArdle essay on Bloomberg News headlined “Beware of Blaming Government for London Tower Fire.” And while that piece does not in fact say that the deaths in Grenfell Towers were “totally worth it,” it really is just about as unfeeling as Heer makes it out to be. Worse (from my somewhat unusual perspective), it’s also a catastrophically bad piece of policy analysis. This is a case where the self-parody is even meaner than the parody. As someone who teaches and practices benefit-cost analysis, let me say that Megan’s essay is the sort of thing that gives the rest of us cold-blooded, heartless bastards a bad name. Continue reading “Benefits, costs and the Grenfell Tower fire”

The London high-rise fire

The inferno in London is out, mainly because the entire flammable contents of the building have burned up.  Fire hoses cannot deliver water to the upper floors of such buildings, and the ladders trucks can bring to the scene don’t reach nearly high enough. Many more deaths will be recorded–I expect a toll in the dozens–as the search for the missing continues. Police and fire brigades told people to stay in their flats and close their doors rather than escaping, and those people have been incinerated. As the structure of the building, whether concrete or steel framed, has certainly been compromised, possible collapse will make it impossible to search for bodies for quite a while. [update 14/VII: they are using drones! Nature imitating art; the Economist big drone wrapup was published last week.)

How is such a thing possible?  Well, first we should note that dying in a fire is rare and getting more so in all industrialized countries: annual fire deaths per million in the US are only about 12, and remarkably, down by two-thirds since 1979. The UK is on a similar trend and about a third safer overall. We should also note, as more information about administrative and regulatory failures dribbles out, that this was housing for poor people.

The ways to avoid fire deaths are as follows:

  1. start fewer fires
  2. faster emergency response from fire brigades
  3. buildings that resist fire spread after ignition
  4. buildings that facilitate escape
  5. proper behavior by occupants
  6. better medical care for survivors

No. 1 is the biggie, and it has to do partly with electrical codes and enforcement, but progress in recent years has mainly to do with smoking, both less smoking overall and safer cigarettes. A third of residential fires used to be caused by cigarettes, usually dropped on upholstered furniture. Cigarettes used to be laced with enough saltpeter to keep them burning if not puffed on, so the tobacco company could sell another cigarette when one left in an ashtray consumed itself; at least in the US that’s no longer true. But fire can start in many ways; see 5. below.

No. 2 is occurring, because fewer fires mean engine and ladder companies are less busy, and because it’s politically difficult to close unnecessary fire stations. Nearly all engine and ladder sorties in the US now are actually medical calls.

No. 3 is a matter of codes and code enforcement: hour-ratings for partitions and doors, less flammable materials, UL listing for electrical components, etc. and honest, effective inspections to be sure that’s all happening. Otherwise known as job-killing regulatory government meddling in the free market, don’t you know. Here the US is disadvantaged by traditionally building with wood rather than masonry. It’s also a matter of the most reliable, proven, life- and building-saving technology, sprinkler systems; something the Grenfell Tower seems not to have had, even in the corridors and escape routes.

No. 4 involves a variety of features. Small things like an alarm system (have you checked the batteries in your smoke detectors lately?) and quick-release locks on the bars people in poor neighborhoods put on their first-floor windows matter. For larger buildings, it’s a matter of having two escape routes from every location, and one of these has to be protected from filling with the smoke that kills more people than heat and flame; an example is the exterior fire escape we see on older buildings. I was appalled to read in the Guardian that 1970’s high-rise UK buildings of the Grenfell era had  “one escape stair which is not designed for a mass evacuation, but is designed for a small number of people to get out whose individual flats are on fire”. No; two stairs, and one has to be open to the outdoors (sometimes an interior “fire court” open to the sky) at every landing. When I was working in architects’ offices in the 70s and 80s, this was completely standard practice. It still is. If you live in a high-rise, do you know how to get to your fire stairs in the dark? If not, practice.

Twenty-four stories is a long way to walk down in the dark, afraid, aroused in the middle of the night from a sound sleep, in pajamas or nothing, especially with terrified little children. I would not live above the twelfth floor of any building. I wonder if the people enjoying the view from high up in the fifty-story condo buildings popping up in New York think about this.

No. 5 includes some training (point the fire extinguisher at the base of the flames) and occasional drills, not filling your apartment with unnecessary inflammable stuff (what doomed the partiers at the Ghost Ship in Oakland), not storing the gasoline can for your lawn mower in the same room as a water heater, staying in the kitchen when you have a frying pan on the burner, and so on. And do you know where your kitchen fire extinguisher is, and how to use it, and have you checked the pressure gauge?

Where fire comes to your house from outside, as in Mediterranean climate landscapes that burn regularly and will do so more with climate change, you have to maintain what we call “defensible space” in California, and stay on top of it as grass and brush try to grow into it.

The Japanese have a long history of living close together in wood and paper houses, and cooking indoors on open charcoal fires, but their fire death record is not much different from other industrialized countries: this is assuredly the result of learning to respect fire, and that hibachi. It’s also socially unacceptable to have a fire in Japan, an expert in fire safety told me a few years back: if you do, even a small one, you probably have to leave your home and move to another city. The FEMA study linked above notes, interestingly, that incendiary suicides inflate Japanese figures.

Every catastrophe has multiple ’causes’, so there will be lots to learn about this one as the facts come in. Whatever they are, they will include irresponsible, probably corrupt, behavior by people who should have known better.

[update 14/VI] Useful stuff is beginning to come in.  Aside from the other terrible mistakes and oversights,  it appears the exterior cladding, a Chinese aluminum/polyethylene sandwich, is so flammable that testing in Australia was suspended after the first sample practically blew up in the lab. Here’s an excellent post-incident report from a very similar fire in Australia. It has everything:  ignition by cigarette, overcrowded units, cladding carrying the fire up the outside of the building…but also working alarms, sprinklers, and proper fire stairs for evacuation. Deaths and injuries: 0.

Empty threats

Theresa May’s threat for Britain to set up as a corporate tax haven after Brexit is empty.

King Lear, Act 2, scene 4:

Lear: No, you unnatural hags,
I will have such revenges on you both,
That all the world shall—I will do such things,—
What they are, yet I know not: but they shall be
The terrors of the earth.

This is very much the Trump style. I’ll cancel the Paris Agreement! Mexico will pay for the Wall!

Making credible threats is still an essential part of diplomacy. An Fengshan, spokesman for China’s policy-making Taiwan Affairs Office, said on 14 December :

Upholding the ‘one China’ principle is the political basis of developing China-US relations, and is the cornerstone of peace and stability in the Taiwan Strait. If this basis is interfered with or damaged then the healthy, stable development of China-US relations is out of the question, and peace and stability in the Taiwan Strait will be seriously impacted.

Major national interest? Check. Means to deliver on threat? Check. Careful wording allowing plenty of space for future escalation? Check. This threat is serious. Like this one.

https://www.youtube.com/watch?v=q2CX20bBNJE

You can also go wrong by being too specific. Theresa May, in her Brexit speech on January 17:

While I am sure a positive agreement can be reached – I am equally clear that no deal for Britain is better than a bad deal for Britain. Because we would still be able to trade with Europe. We would be free to strike trade deals across the world. And we would have the freedom to set the competitive tax rates and embrace the policies that would attract the world’s best companies and biggest investors to Britain. And – if we were excluded from accessing the Single Market – we would be free to change the basis of Britain’s economic model.

What had she been drinking?
Continue reading “Empty threats”

Balkin’s Three (revised) Laws of Robotics

Balkin updates Asimov.

The eminent Yale scholar of, and blogger on, constitutional law Jack Balkin has published a very nice article updating Issac Asimov’s famous Three Laws of Robotics.

robot

It’s a rich short essay, not a treatise; an opening shot in a new debate, not the last word. Read it and comment please.

A few takes of mine. Continue reading “Balkin’s Three (revised) Laws of Robotics”