Socializing Risk: The New Energy Economics

from Frank Ackerman

Despite talk of a moratorium, the Interior Department’s Minerals and Management Service is still granting waivers from environmental review for oil drilling in the Gulf of Mexico, including wells in very deep water. Until last month, most of us never thought about the risk that one of those huge offshore rigs would explode in flames and then sink, causing oil to gush out uncontrollably and befoul the oceans. The odds seemed low, and still do: Aren’t there lots of drilling rigs in use, year after year? Twenty years ago, your elected representatives thought that you’d be happy to have them adopt a very low cap on industry’s liability for oil spill damages. 

What is the social cost of carbon?

from Frank Ackerman

The social cost of carbon may be the most important number you’ve never heard of. U.S. climate legislation is stalled in Congress, but in the meantime, the Obama administration is trying to fill the gap by considering climate impacts in the regulatory process: from the tailpipe emissions limits and gas mileage standards unveiled April 1, to energy-efficiency standards for many types of residential appliances and commercial equipment.

This is important work; U.S. action to reduce greenhouse-gas emissions is long overdue, and it’s crucial in the global picture, both because of our large share of total emissions, and because of our ability to influence other nations. But it’s also important to do this right, and a look at how the administration has handled the social cost of carbon (SCC) raises some serious concerns. 

Why Is Obama Drilling?

from Frank Ackerman

Once upon a time, “There’s Only So Much Oil in the Ground” was a popular song that could be heard on the radio. The year was 1974, and Tower of Power, an Oakland-based soul and funk band, was enjoying some commercial success. They made the year’s top 100 with “What is Hip?” In addition to the important topics of being young, hip, and falling in and out of love, they sang about the energy crisis. Following a brief OPEC oil embargo, the price of crude oil (in today’s dollars) jumped from $23 per barrel in 1973 to $41 in 1974. Everyone was thinking about the world’s finite and diminishing supplies of oil. As the song continued, “Sooner or later there won’t be much around.” 

Climate change – why we can afford to stop it

I haven’t been writing much about the state of economics per se lately, but I am deep into the same issues in another venue: the economics of climate change. The same old mistaken theories are said to have “proved” that the optimal climate policy is to do very little, and do it very slowly.

For a recent round in the struggle against this nonsense, see the report co-authored by a group of 8 economists, “The Economics of 350.” (Yes, we can afford to save the planet; if not, what were saving all that money for?) A short summary with links to the main report can be found in my on-line article at Yale Environment 360, http://e360.yale.edu/content/feature.msp?id=2200 . The report is sponsored by “Economists for Equity and Environment,” a fairly new, growing organization which is one of the hopeful signs in the U.S. economics profession lately – see http://e3network.org/ . In addition to practical work aplenty that can be found there, be sure to read the group’s manifesto, “Real People, Real Environments, and Realistic Economics.”

– Frank Ackerman