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Making Sense: An Economist's Letters

Columns about current events and everyday economics   

Limiting global warming at home

It's been a warm, dry, pleasant summer. But if global warming continues unchecked our climate is going to get a lot less agreeable, and the changes may wreak havoc on the economy.

This election season, ask your candidates for the Washington Legislature what they're going to do about global warming. That's right — ask your candidates for state legislature.

Even though global warming is a national and international issue, there's a specific action the Legislature should take in the coming session. Californians have taken state-level action against the emissions that cause global warming. The time is ripe for Washington to join the cause.

Global warming is caused by a build-up of "greenhouse gases" in the atmosphere, primarily carbon dioxide. When we burn coal, oil, and gasoline, the carbon in the fuel combines with oxygen in the air to produce carbon dioxide. Accumulation of carbon dioxide in the atmosphere traps infrared radiation, interfering with the Earth's natural cooling mechanism.

Carbon dioxide emissions differ from other forms of air pollution in two fundamental ways. First, carbon dioxide is a natural by-product of burning carbon-fuels.

Because carbon dioxide production is intrinsic to combustion, the only way to reduce emissions is to cut the use of petroleum and coal. The technological improvements that cleaned up many smog-producing pollutants in the last few decades won't work. We have to switch away from carbon fuels or reduce overall energy use.

The second difference is that many other pollutants have mostly local effects. If cars in Beijing cause smog, the effect on Washington State air is pretty small.

In contrast, carbon dioxide mixes in the atmosphere so that the effect is global.. As a result, there's a temptation to sit back and hope someone else will reduce emissions. Unfortunately, this is what the U.S. has done by not signing on to the international Kyoto protocols.

California just passed tough anti-greenhouse gas legislation, which phases in caps on greenhouse-gas production that by 2020 will lower emissions back to 1990 levels. Some of the reduction will be achieved by reducing energy use and some by converting energy production from burning fossil fuels to wind power and other sources.

The economics of California's new regulations is particularly clever. Companies that innovate and find cheap ways to get under their assigned caps can sell their "extra" carbon dioxide reduction to companies where the changeover would be prohibitively expensive. This lets the state as a whole reach the cap in the cheapest possible way, saving money for businesses and consumers.

But won't even the most cleverly designed regulations hurt the California economy? A University of California study claims Californians will actually save $60 billion, because the savings from greater energy efficiency and the profits from new technologies will outweigh the cost of the clean-up. I'm dubious of claims that we can clean-up greenhouse gases and save money in the process, but at the least we can expect significant savings to offset costs.

In California, this was a bipartisan deal struck between the Republican governor and the Democratic legislature. The caps had a great deal of backing from business, although it certainly wasn't unanimous. In particular, venture capitalists were enthusiastic because they saw profit opportunities in creating a whole new type of high-tech company.

This winter, the Washington Legislature should adopt the California plan. Rather than just enacting similar caps, we should try to adopt rules as nearly identical as possible. This will give us a level playing field with California by matching the costs and benefits of emission reduction for Washington industries with those experienced by our competitors to the south.

It will also give Washington companies local design experience, putting them into play for the new high-tech markets broken open by the California move. If we have the same rules, our companies can build to the same technologies—and we can get in early on what will eventually be a world market.

Most importantly, joining with California will begin a bandwagon effect, sending a ringing message to the Other Washington that now is the time to act against global warming.




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