There is a common misconception that true adherents of the free market – libertarians – are “pro-big business” and do not care about the environment. This came up recently on the Rush Limbaugh show as he admonished libertarians to explain to Bob Barr, the Libertarian Party’s presidential hopeful, “what libertarianism is.”
Now Bob Barr has many embarrassing deviations from hardcore libertarianism, but what had enraged Limbaugh was Barr’s flip-flop on global warming. A month ago, on Glenn Beck, Barr said unequivocally that global warming was a “myth.” Now Barr is hanging out with Al Gore and saying global warming is a “reality.”
To Limbaugh, believing in global warming makes one a liberal and not a libertarian. The truth is that there are libertarians who believe in man-made global warming and there are skeptics — but true libertarians are unanimously opposed to pollution, which is seen as an act of aggression against the rights of property owners.
In fact, this makes free-market libertarianism the most hardcore environmentalist creed there is. Robert F. Kennedy Jr., a leftist-environmentalist and National Resource Defense Council (NRDC) leader, has pointed out that “regulations” – for which leftist-environmentalists lobby – are really just permissions to pollute, whereas free-market environmentalism would hold polluters accountable for the damage they caused in civil court. This is the true free-market approach, and trust me, Exxon Mobil wants no part of it!
This is not, necessarily, what Bob Barr is calling for, and thus, Limbaugh’s admonitions – though perhaps inappropriately inspired – may have been no less on-the-mark. But for advocates of the free market, whether global warming is a “myth” or a “reality” is unimportant: Property rights are absolute, and they should not be abrogated by the Left’s regulations or by the Right’s indemnity for aggressive polluters.
Finally, the issue of climate change should be put into perspective. Even if it is real, it is not the be-all, end-all issue. After all, we have plenty of more immediate concerns that are just as threatening as the apocalyptic vision offered up by Al Gore’s An Inconvenient Truth. Here’s what Ron Paul, a global-warming moderate, said when asked if he thought climate change was a “major threat to civilization.”
“No. [Laughs.] I think war and financial crises and big governments marching into our homes and elimination of habeas corpus — those are immediate threats. We’re about to lose our whole country and whole republic! If we can be declared an enemy combatant and put away without a trial, then that’s going to affect a lot of us a lot sooner than the temperature going up.”
Now that, Rush Limbaugh, is what libertarianism is!
In this two part article, I will demonstrate using game theory that it is not possible for the the human race to cooperate to save the earth from global warming. No matter how dire the situation or how clearly it is demonstrated that the earth will be doomed if we all don’t stop polluting, it can never happen.
To demonstrate this however, I will need to elaborate on the concepts of the Nash equilibrium that I introduced earlier. To recap, it simply means that given the strategies that everyone else is playing, each person is happy with their own decision.
The Nash equilibrium implies stability. It’s a stable solution to the game, inasmuch that people have no incentive to change their strategy. In the movie A Beautiful Mind, despite the implication, the solution given by Russell Crowe (the actor playing John Nash) is not a Nash equilibrium!
The situation, if you remember, was that Nash and his two pals were in a bar, and four women walked in, one of whom was truly stunning. Nash proposed to his friends that if everyone hit on the beautiful babe, then the rejected men (two of them) would fail to score with even the other women who would not like being “second choice.” As a result, only one out of the three would get laid. His solution was that they all hit on the other women and thus increase their chance of collectively scoring.
The movie implies that this was what set Nash thinking and laid the path for his paper on Nash equilibriums. However, you will recognize that the above situation was not a Nash Equilibrium. If everyone has hit on the other women, then no one has hit on the stunning babe. Consequently, each man would regret not hitting on her (since no one else has) and would be dissatisfied with his choice. In a Nash equilibrium, everyone is happy with their choice, given that everyone else has made theirs.
In a given game, it is possible for multiple Nash equilibriums to be present or no Nash equilibriums at all. If this is the case, then it is not possible to predict the outcome of the game. There are various types of games including coordination games, trust games, outguessing games, and chicken games. Out of these, outguessing games and chicken games have no Nash equilibriums, whereas trust games have multiple Nash equilibriums. Hence, for these games, it is not possible to predict the outcome. In coordination games, however, there is just one Nash equilibrium, and so, it is possible to predict the outcome for coordination games.
In the next article, I will demonstrate that when it comes to saving the planet, there is only one Nash equilibrium – that of everyone using carbon based fuels and is, therefore, the only stable outcome for rational beings like us! It is a completely new sort of game that deserves special attention…and one that dooms us all.
Exxon claims it has already spent $3.5 billion cleaning up the Alaskan coastline, and the court decided 5-3 that indeed that was plenty good enough for them. Justice Alito sat the decision out because he owns stock in Exxon. Lucky Samuel Alito. The five siding with Exxon interpreted the letter of the law and said they saw no precedent for a punitive award that large. Justices Ginsberg and Stevens dissented, noting that Congress has already chosen not to impose restrictions on punitive damages in such cases.
In reversing this award, the court violated the spirit of the law if not the letter of it, and to reverse the decision now, just as ordinary Americans are watching the American standard of living plummet as fast as oil prices rise, is like kicking a body that’s already down and nearly dead.
I have to ask, why did Exxon feel the need to pursue and argue that decision for 19 years ongoing after the fact; a decision which, even in its original $2.5 billion form, was but a small fraction of the money the corporation made in any single one of those 19 years since the spill occurred? What was the point of that? To demonstrate that they had the resources to do it? To argue until they won? Were they thinking, “Wow, we aren’t hated nearly enough yet. What can we do that will make even our few remaining friends wince and hide? I know! Let’s get back that paltry Exxon Valdez money!”
What was the cost of the litigation itself? I have to wonder, what if the cost of all those corporate lawyers over all those 19 years had been put into some kind of subsidy for green energy initiatives? It’s a good thing it wasn’t, or we’d think we were living in Iceland or Sweden, and we wouldn’t want that! Sure we’d have enough heat and power to free up money for, I don’t know, healthcare or education or something, but that would be too much like socialism. Thank God we were saved from it by raw corporate greed and the reliable power of enormous amounts of money in the hands of a select few.
Because of their legal persistence, our capitalist way of life has been preserved.
A study conducted by NOAA determined that as of early 2007 about 26,000 gallons of oil remain in the contaminated sandy soil at the site of the Alaskan spill. But what’s 26,000 gallons after 19 years among friends? Certainly it’s a whole lot less than the 10.8 million gallons that covered over 11,000 square miles in 1989 the day of the spill and instantly killed between 250 and 500 thousand seabirds, 22 Orca whales, 250 bald eagles, and countless other creatures during years and years of slow, ineffective clean-up efforts that relied heavily on wildlife volunteers and local citizens who were working for hours and hours for free.
What exactly are 500 thousand seabirds and 250 bald eagles worth on the open market anyway? Can we even put a price on something like that? Maybe not. But we do know now what they are not worth.
According to the Supreme Court, they’re not worth $2.5 billion.
I just hope they don’t decide to charge the citizens who live around Prince William Sound for those 26,000 gallons of good oil still lurking in their beach soil. It does belong to Exxon after all.
In 1798 Coleridge wrote, “water, water, everywhere, [but not a] drop to drink”. By 2100 this may become “water, water, everywhere, but not a fish to eat”. Carbon dioxide (CO2), a greenhouse gas, may be doing more than warming our atmosphere, it may be acidifying our oceans. According to Dr. Richard Feely, an Oceanographer with the National Oceanic and Atmospheric Administration (NOAA), 525 billion tons of CO2 has been absorbed by the ocean over the last 200 years with 22 million tons being absorbed daily. This gas is converted to carbonic acid and has resulted in a 30% increase in ocean acidity since the early 1900s. Dr. Ken Caldeira of the Carnegie Institute of Washington stated in a written testimony to the Committee on Science and Technology that 65 million years ago the oceans acidified and not only did almost all marine life with shells disappear, but coral reefs dissolved and weren’t seen again for two million years. Although the impact of ocean acidification has become a concern for scientists and legislators alike, much research to this point has been conducted only in fish tanks and on a small scale. In a July 3, 2008 publication of Nature, Dr. Jason Hall-Spencer presented the first large-scale study of an oceanic ecosystem to provide disturbing proof of what could happen to marine life if the acidity of the ocean continues to rise.
Many things are acidic, such as battery acid and orange juice. The ocean, however, is supposed to be slightly basic at pH 8.2, similar to baking soda. However, the pH has dropped to 8.1 and is estimated to drop to 7.7 by the year 2100. Hall-Spencer has shown that this could be detrimental to the marine ecosystem. By surveying oceanic areas where volcanic vents were either present or absent, he and his colleagues drew comparisons involving the marine life present in each area. These vents released millions of liters of CO2 gas each day, acidifying the surrounding water. In areas of normal pH, marine life which depended on calcified shells thrived. When the pH dropped to 7.8, the number of marine species was reduced by 30%. In more acidic conditions around 7.4, the shells of various shellfish were eaten away, pitted and fragile. Many scientists worry that as the ocean acidifies, aquatic creatures will become unable to make shells. Another pressing concern is the preservation of coral reefs. In acidic conditions, the population of Corallinaceae, an alga important in protecting reefs, dropped by 60%. This left the reef vulnerable to harmful algae and dissolution due to the acidity of the water.
While the fate of a snail or coral reef may not initially trigger concern, the future consequences of ocean acidity on all marine life and the global economy might. In May 2008, NOAA released a “State of the Science” fact sheet. It stated that not only is the U.S. the third largest seafood consumer globally, but patrons spend $60 billion per year on fish and shellfish. Furthermore, coastal and marine fishing supports 70,000 jobs and produces revenue of $30 billion each year. This industry is dependent on the stability of coral reefs. Reefs are the lynchpin for many fisheries since half of them use reefs for the life cycles of their fish. Fish stocks are currently estimated at over $250 million. The marine plankton and small snails which serve as a food source for many fish such as salmon, mackerel and cod would be reduced, along with the coral, as acidity increased. This could reduce the amount of food available and restructure the food web altogether. In the end, if the coral fails, so too does a large portion of the lucrative fishing industry.
Coral does not, however, only support marine life and fishing. It also supports tourism. NOAA estimated that the economic losses from coral reef degradation in the Caribbean will be $350-780 million per year by 2015. Trying to protect the reefs will entail another $3-4 billion each year. The Florida Keys generates $1.2 billion per annum in coral reef tourism while Hawaii collects $360 million every year. These numbers do not even consider the amount of money saved in real estate damage that is averted due to the protection coral reefs provide from storms and tsunami. On June 5, 2008, a hearing was held by the Committee on Science and Technology in the U.S. House of Representatives to listen to testimony regarding ocean acidification and its consequences. As stated by the chairman, Nick Lampson, “H.R. 4174 was introduced by…Congressman Tom Allen…to coordinate and expand…efforts…to expand our knowledge of ocean acidification. Through more comprehensive monitoring and research we can begin to address the impacts of these changes on our fisheries and…ecosystems.” In his written testimony to the committee, Feeley wrote that the ocean is estimated to be more acidic in 2100 than in the last 20 million years. The Intergovernmental Panel on Climate Change (IPCC) has calculated the CO2 concentration could be so high in 2100 as to begin dissolving the coral reefs faster than they can grow. If the predictions for 2100 are correct, the growth rate of coral reefs could be reduced by 85% when compared to today’s rate. They are already growing 15% slower than they did at the beginning of the 1900s when ocean acidity was at a proper level according to data in NOAAs “State of the Science” fact sheet.
The question is what can we do about it? While many, such as Caldeira, believe the “only way to really save the oceans is to greatly decrease carbon dioxide omissions soon.”, H.R. 4174 proposes to give $25 million over three years and $30 million every following year towards research of acidification and how to reverse it. Dr. Joan Kleypas of the National Center for Atmospheric Research, however, stated in her written testimony that $50-55 million each year is the “minimum if scientists are to provide useful information regarding how oceans are responding to acidification and how we should change our…policies.” While this initially sounds stunning, Caldeira noted in his written testimony that, “It’s impossible to say what the oceans are worth to us, but it has to be…tens of billions of dollars per year. [The] research investment [is] starting at several millions of dollars per year…that’s a ratio of about ten thousand to one. That’s like having a $20,000 car and…spending only two bucks to find out what’s going wrong. We shouldn’t be surprised when it breaks down [on] the highway.”
There’s only so much many companies can do to reduce pollution. A steel smelter can scrub all it wants, and it’s still going to produce pollution. There’s no way around it. Pollution is an inevitable byproduct for many industries.
In order to look better on paper, companies offset their pollution by supporting carbon reduction elsewhere, purchasing credits from carbon reducers to offset their own carbon production.
In many cases, in order for the polluter to keep polluting at the same rate it always has, it buys credits from some random farmer who keeps doing the same thing he’s always done. So there’s been no real change in the level of overall carbon output.
In the future, however, carbon credits may rise in price to the point that farmers and others have an incentive to reduce carbon emissions further in order to sell more credits. Also, regulation may force carbon reducers to prove they’ve done something to earn the right to sell credits.
Believe it or not, there is actually an active futures market for these credits, and it’s blowing up. By mid April, trading volume on the Chicago Climate Exchange had already surpassed total trading volume for all of 2007! Since the beginning of the year, the contract price has risen from under $2.50 to nearly $7.50 then fell back to a current price* of $$3.90. It’s a hot but volatile market.
Besides trading in the futures markets, there are several ways one may be able to get in on this market. Chicago Climate Exchange is owned by Climate Exchange PLC (CLE) which trades on the London exchange. A couple of relatively new ETFs (exchange traded funds) are available as well: PowerShares WilderHill Progressive Energy Portfolio (PUW) and PowerShares Cleantech Portfolio (PZD). And XShares Advisers has an agreement with Chicago Climate Exchange to develop other ETFs.
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