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RICHARD SCHMALENSEE:
OK, any burning

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issues from last time or
earlier, before I begin?

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OK, we're going to do a little
primer on climate science

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and a very little primer
on the science and a primer

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on the policy.

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This could easily take
more than a semester.

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But we'll do it in
an hour and a half.

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So what I'm going to mostly do
is do what economists often do,

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which is to say, well, let's
suppose we have a tsar.

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Let's suppose we have a
tsar, who can set policy.

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What would the tsar
do about climate?

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Let's assume it's a modern
tsar, not a denyist tsar.

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I'm going to argue
and try to indicate

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to you why, even for a tsar,
this would be a hard problem.

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This is the hardest
public policy

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problem I've ever come near.

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So today, we have a tsar.

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Wednesday and Friday, we don't.

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It's like the real world.

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And we will go through a
negotiation in which you

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will be, as you know, on teams.

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We'll talk a little bit
about that at the end

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because we're going to have
to do some adjustments.

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You all want to
be rich countries.

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You can't all be rich countries.

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Some of you have to be poor.

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It's like life.

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All right, so let me do a
very little bit of background

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on the science and then talk
about why it's a hard policy

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problem.

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You've probably seen this graph.

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This is from NASA.

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Global temperatures are rising.

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If you look at the
last few years,

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it looks like a slowdown.

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This has been much debated.

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The latest evidence
suggests this

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is because of La Nina
conditions in the Pacific,

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which tend to lower
the temperature.

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And solar radiation is at
a minimum in its cycle.

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Those who follow
these things closely

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expect, when we go to El Nino
conditions in the Pacific,

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that we will break
previous records.

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Nine of the 10 warmest
years on record

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have been in this century.

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So if you smooth,
and you see there's

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a lot of variability year
to year, if you smooth,

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the trend is reasonably clear.

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That's data.

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This is inference.

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There's strong evidence,
backed by theory,

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that human activity has
a lot to do with this.

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This is a global greenhouse
emissions by gas in 2004.

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You'll see, on the right,
CO2 from fossil fuel use

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is a big contributor,
not the only contributor.

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I think CO2 other is
probably cement manufacture.

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This is land use, deforestation,
biomass, agriculture,

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and so forth.

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Methane, nitrous oxide, which
is a nasty, long-lived gas,

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largely comes from agriculture.

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Methane comes, of course,
from a variety of sources.

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And then there are a
bunch of long-lived,

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very potent, but very small,
very low-concentration gases.

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This is by sector.

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And again, you can see
an awful lot of this

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is human activity obviously,
but generating electricity,

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manufacturing, transportation.

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And again, you get
land use and forestry.

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So it's a range.

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This is later data, but
it doesn't show it by gas.

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There are a wide variety
of activities involved

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that emit heat-trapping gases.

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And again, there's
evidence, there's

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theory that suggests that
this is really a driver.

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The changes in solar
radiation, the El Nino, La Nina

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is not big enough.

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Yeah?

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AUDIENCE: [INAUDIBLE] put the
carbon content [INAUDIBLE]

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RICHARD SCHMALENSEE: Largely.

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You also lose soil carbon.

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If you cultivate and till
the soil, you'll lose.

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You'll have an effect.

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You'll reduce what's
stored in the soil.

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So it's mostly deforestation.

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But it can also be just
agricultural practices.

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OK.

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But deforestation is crucial.

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We're going to talk mostly
about CO2 from fossil fuels

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because that's where
the policy action is

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and also deforestation.

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Mostly because you can
measure fossil fuel use

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relatively easily.

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Figuring out how agriculture
generates nitrous oxide

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is harder, much
harder to measure.

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But fuel use is relatively easy.

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Deforestation is
relatively easy to measure.

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So you can actually
imagine agreements

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that might be enforceable.

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So that's where the
policy action is.

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We also know-- whoops.

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Back.

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We also know that there
have been some clear impacts

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of climate change.

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This is everybody's seen this.

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This is the change in sea
ice since September of '79

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to September of 2007.

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And obviously, that continues.

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This is a projection.

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And it can only be a
projection, for reasons

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I want to talk about, of
days over 100 degrees.

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And you see, gee, there,
it gets hot in the desert.

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But the problem with this
is mainly human health.

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People who are fragile
in a variety of ways

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or who aren't air
conditioned don't deal well

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with large numbers of
days over 100 degrees.

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It happened in Europe
a couple of years ago.

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There were a number of--

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more than a number, a
fair number of deaths.

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So these are obvious impacts.

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If it gets warmer, you
have more hot days.

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If it gets warmer,
the sea ice melts.

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But that's a small part
of the story is warming.

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So why is this hard?

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Why is this a hard
policy problem?

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Step reason one is
the time scales.

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And the time scales, CO2 doesn't
come out of the atmosphere

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by simple exponential decay.

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The process is complicated.

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But if you think
about a half life,

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you want to think about
around a century, if you can

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think of it in half life terms.

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Not only does the stuff
stay up there a long time,

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but it takes a long
time for its effects.

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For the Earth to be in
equilibrium, depending

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on how much heat is coming
in and being trapped,

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you got to warm the deep ocean.

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The deep ocean is deep.

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Heat diffuses slowly.

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So it takes a while to warm.

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So we're not in equilibrium now.

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And the question of how far
out of equilibrium we are

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is kind of a serious one.

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So even if you cut
emissions sharply now,

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warming would
continue for decades.

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Given that we're not going
to cut emissions sharply,

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we're dealing with centuries.

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And in this literature,
people run out

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to 2100 and typically out
beyond 2100 in thinking

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about a variety of things.

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Most human problems don't
have time scales like that.

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It means that
actions taken today

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will affect your grandchildren.

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That's not true in
most areas of policy.

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You can do tax policy
lots between now

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and the time your
grandchildren vote.

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But CO2, it's still
going to be there.

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The CO2 emitted today will
still be there in large quantity

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when your grandchildren
are walking

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around blaming you for it.

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So if we have a
climate tsar, he has

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to think about how to
treat people not yet born

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because actions today will
affect people not yet born.

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I mean this is a
typical example.

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This is somebody's
story of what gets

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flooded in Florida if you get
about a meter sea level rise.

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A meter sea level rise is
sort of order of magnitude

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what might happen in a century.

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What's it worth today
to prevent that in 2112?

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For reference, my mother
lives there, more or less.

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So she's OK.

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On the other hand,
she's 90 years old.

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This doesn't apply to her.

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But it will apply, potentially,
to great-great-grandchildren.

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So timescales of
a century or more

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are hard because you
know you want a discount.

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But how do you do that?

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This is a live controversy.

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I'm not going to
give you an answer.

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Economists have nasty
arguments about this.

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There are three ways you
might want to think about it.

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The obvious way to
think about, what

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am I going to do about
a century from now,

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is to just think about
the private sector.

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Well, I could put it in a
bank, or I could invest it

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in a business, or
I could invest it

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in dealing with climate change.

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I make that choice.

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So I ought to be using the
same kind of discounting

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in both decisions, right?

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Because I don't want
to have an imbalance.

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You missed the science.

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You could have fixed it.

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This is Professor Solomon
who has forgotten more

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about climate science than I
could ever aspire to learn.

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At any rate, we're
talking about policy.

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And we're talking
about discounting

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and why this is hard.

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So one school of
thought says, you've

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got to use a private
sector discount rate.

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And one reason this
school of thought

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achieved prominence was the
Army Corps of Engineers, when

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deciding whether or
not to build dams,

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always used a very
low discount rate.

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Dams last a long time.

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So if you use a very
low discount rate,

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dams look pretty
promising economically.

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And it was a huge slog
in the '50s and '60s

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to get the Corps of Engineers
to use a private sector

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00:11:08,100 --> 00:11:11,070
rate, to say, you can
build this kind of plant,

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or you can build a dam.

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You ought to use the same
discount rate in both cases.

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You ought to use the private
sector rate to think about

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whether or not you build dams.

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There's a second school
of thought that says,

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wait a minute.

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This isn't really a
private sector decision.

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If you think about
optimal growth theory,

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00:11:29,010 --> 00:11:32,370
optimal growth
theory usually says--

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let me not do more than
wave my hands at that--

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00:11:35,580 --> 00:11:38,910
usually says there
are two reasons

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00:11:38,910 --> 00:11:40,980
you discount the future.

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00:11:40,980 --> 00:11:42,870
Forget the private
sector for the moment.

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If you're doing everything
optimally in the economy,

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00:11:45,070 --> 00:11:46,987
there are two reasons
you discount the future.

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One, there might be a pure rate
of time preference, whatever

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00:11:52,080 --> 00:11:54,150
that might mean.

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And you value benefits in the
future less than benefits today

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because people in the
future will be richer.

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00:12:01,320 --> 00:12:05,850
And, therefore-- being just
a little bit quick with

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the hands--

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00:12:08,100 --> 00:12:11,180
income on the
margin's worth less.

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00:12:11,180 --> 00:12:14,130
If I were in the future
and I were richer,

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00:12:14,130 --> 00:12:16,710
then $1 worth of benefit
would be worth less to me

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00:12:16,710 --> 00:12:18,600
then than it is now.

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00:12:18,600 --> 00:12:19,770
I'll take that into account.

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00:12:19,770 --> 00:12:21,960
I'll discount that second
term because people

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00:12:21,960 --> 00:12:26,118
will be wealthier says,
you make a judgment.

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00:12:26,118 --> 00:12:26,910
There are formulas.

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00:12:26,910 --> 00:12:28,470
I won't trouble you.

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00:12:28,470 --> 00:12:32,050
There are formulas that say,
here's how you deal with that.

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00:12:32,050 --> 00:12:35,430
And then you say, well,
I have a preference.

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00:12:35,430 --> 00:12:37,950
We all have preference
for today over tomorrow.

250
00:12:37,950 --> 00:12:40,950
That's a pure rate
of time preference.

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00:12:40,950 --> 00:12:45,030
The third approach that's
coming into the literature

252
00:12:45,030 --> 00:12:47,820
recently says, why do you have
a pure rate of time preference?

253
00:12:47,820 --> 00:12:49,380
What does that mean?

254
00:12:49,380 --> 00:12:52,850
That discriminates
between generations.

255
00:12:52,850 --> 00:12:56,080
The pure rate of time preference
says, even if my grandchildren

256
00:12:56,080 --> 00:13:00,270
are no richer than
I am, I'm going

257
00:13:00,270 --> 00:13:04,220
to value $1 to them
less than $1 to me.

258
00:13:04,220 --> 00:13:07,900
That doesn't make moral sense.

259
00:13:07,900 --> 00:13:11,280
So I would use a zero rate
of pure time preference

260
00:13:11,280 --> 00:13:15,540
and then make a judgment, if I
want to, about how much richer

261
00:13:15,540 --> 00:13:17,790
they will be and how
much that ought to matter

262
00:13:17,790 --> 00:13:20,460
when I think about benefits.

263
00:13:20,460 --> 00:13:24,990
Now, I present this not--

264
00:13:24,990 --> 00:13:28,080
those are very
different positions.

265
00:13:28,080 --> 00:13:29,940
And they have very
different implications

266
00:13:29,940 --> 00:13:31,750
for how you think
about the future.

267
00:13:31,750 --> 00:13:33,690
And I have to tell
you, depending

268
00:13:33,690 --> 00:13:37,710
on the day of the week and the
weather, I myself vacillate.

269
00:13:37,710 --> 00:13:42,790
But let me just give
you the implications.

270
00:13:42,790 --> 00:13:46,350
Let's take rates to
illustrate these.

271
00:13:46,350 --> 00:13:51,930
7% and 3% are used in federal
government decision making.

272
00:13:51,930 --> 00:13:55,730
The 7%, you might think of as
like a private sector rate.

273
00:13:55,730 --> 00:14:00,750
The 3% gets down to that second
category, the pure rate of time

274
00:14:00,750 --> 00:14:02,940
preference plus an adjustment.

275
00:14:02,940 --> 00:14:09,810
And 1% was used in an
influential report on climate

276
00:14:09,810 --> 00:14:13,920
change that takes the third
position, no pure rate of time

277
00:14:13,920 --> 00:14:18,360
preference, no discrimination
between generations.

278
00:14:18,360 --> 00:14:24,430
So let's apply that to
$1 million in 100 years.

279
00:14:24,430 --> 00:14:27,670
All right, if I use 1%,
that $1 million in 100 years

280
00:14:27,670 --> 00:14:30,430
is worth $368,000.

281
00:14:30,430 --> 00:14:32,410
So I'd spend a fair amount.

282
00:14:32,410 --> 00:14:34,300
I wouldn't spend
$1 million today.

283
00:14:34,300 --> 00:14:36,352
But I'd spend a fair
amount to avoid a 1 million

284
00:14:36,352 --> 00:14:37,435
dollar's worth of damages.

285
00:14:40,600 --> 00:14:43,480
3%, woo.

286
00:14:43,480 --> 00:14:45,370
I wouldn't spend
very much at all

287
00:14:45,370 --> 00:14:49,150
to avoid 1 million
dollar's worth of damages.

288
00:14:49,150 --> 00:14:53,440
And at 7%, we get what a
guy who used to work for me

289
00:14:53,440 --> 00:14:56,320
called the magic ray gun.

290
00:14:56,320 --> 00:15:01,690
You let me discount anything at
7% in the future, it goes away.

291
00:15:01,690 --> 00:15:06,190
It's a disappearing function.

292
00:15:06,190 --> 00:15:10,120
I would spend $9,000 today to
avoid 1 million dollar's worth

293
00:15:10,120 --> 00:15:13,900
of damages in 100 years if
I use that discount rate.

294
00:15:13,900 --> 00:15:16,160
It matters a lot.

295
00:15:16,160 --> 00:15:18,650
It matters a lot.

296
00:15:18,650 --> 00:15:21,640
And there's no
easy way to decide,

297
00:15:21,640 --> 00:15:24,670
I think, to decide
among these views.

298
00:15:24,670 --> 00:15:27,955
If you scratch most economists,
they come down here at 3%.

299
00:15:30,640 --> 00:15:32,830
But if you ask them,
well, wait a minute.

300
00:15:32,830 --> 00:15:34,790
Aren't you crowding out
private investments?

301
00:15:34,790 --> 00:15:36,040
They say, oh, well, maybe.

302
00:15:36,040 --> 00:15:37,780
Maybe not.

303
00:15:37,780 --> 00:15:40,240
And if you ask them, well,
why are you discriminating

304
00:15:40,240 --> 00:15:42,880
against future generations
with this pure rate of time

305
00:15:42,880 --> 00:15:44,080
preference?

306
00:15:44,080 --> 00:15:47,500
Where does that come from?

307
00:15:47,500 --> 00:15:50,770
Most people go, well,
yeah, that's a point.

308
00:15:50,770 --> 00:15:54,040
So you can make arguments
for all three of these.

309
00:15:54,040 --> 00:15:55,870
And they have very
different implications.

310
00:15:55,870 --> 00:15:58,990
The tsar will have to choose.

311
00:15:58,990 --> 00:15:59,830
See the issue?

312
00:15:59,830 --> 00:16:01,390
I hope.

313
00:16:01,390 --> 00:16:03,670
If you're talking about
five years, 10 years,

314
00:16:03,670 --> 00:16:05,110
it doesn't matter that much.

315
00:16:05,110 --> 00:16:07,540
If you're talking about 100
years, which we are here,

316
00:16:07,540 --> 00:16:11,380
it does, or more.

317
00:16:11,380 --> 00:16:15,760
OK, that's hard.

318
00:16:15,760 --> 00:16:17,200
And it's hard for the tsar.

319
00:16:17,200 --> 00:16:18,987
It's not just hard politically.

320
00:16:22,090 --> 00:16:24,400
So that's one reason
why it's hard.

321
00:16:24,400 --> 00:16:28,000
The tsar is willing to
make sacrifices today

322
00:16:28,000 --> 00:16:33,160
for generations not yet
born or even thought of.

323
00:16:33,160 --> 00:16:36,250
Many other people, who aren't
as farsighted as the tsar,

324
00:16:36,250 --> 00:16:39,730
may have trouble doing
that or voting to do that.

325
00:16:39,730 --> 00:16:42,370
That's a tough trade off, right?

326
00:16:42,370 --> 00:16:45,460
We could reduce
emissions today sharply,

327
00:16:45,460 --> 00:16:47,800
and it wouldn't make
much difference to us,

328
00:16:47,800 --> 00:16:50,050
might not make much
difference to us,

329
00:16:50,050 --> 00:16:52,300
might make some difference
to our children,

330
00:16:52,300 --> 00:16:54,353
might make a lot of
difference to their children.

331
00:16:54,353 --> 00:16:56,770
You can't even imagine having
grandchildren at this point,

332
00:16:56,770 --> 00:16:57,100
right?

333
00:16:57,100 --> 00:16:57,600
All right?

334
00:16:57,600 --> 00:17:00,280
I hope.

335
00:17:00,280 --> 00:17:02,870
But you will.

336
00:17:02,870 --> 00:17:04,900
And so will they.

337
00:17:04,900 --> 00:17:06,640
OK, that's one
reason why it's hard

338
00:17:06,640 --> 00:17:08,829
because it's hard to think
in terms of a century

339
00:17:08,829 --> 00:17:13,520
when you're making
decisions today or more.

340
00:17:13,520 --> 00:17:15,940
A second reason why this
is hard even for the tsar

341
00:17:15,940 --> 00:17:19,534
is uncertainty.

342
00:17:19,534 --> 00:17:26,609
And one of the things Professor
Solomon and I have learned

343
00:17:26,609 --> 00:17:29,940
is you can't say uncertain
in public discourse.

344
00:17:29,940 --> 00:17:32,280
Because uncertain to the
public means, my god,

345
00:17:32,280 --> 00:17:34,110
I don't have a clue.

346
00:17:34,110 --> 00:17:36,960
What uncertain means
in this context is,

347
00:17:36,960 --> 00:17:39,060
I may not know the
probability distribution.

348
00:17:39,060 --> 00:17:42,130
But there is a
probability distribution.

349
00:17:42,130 --> 00:17:43,050
It's not oh my.

350
00:17:43,050 --> 00:17:47,910
And it's not
infinitely spread out.

351
00:17:47,910 --> 00:17:51,480
If you think about
elements of uncertainty,

352
00:17:51,480 --> 00:17:53,790
what will the atmosphere
look like in 100 years

353
00:17:53,790 --> 00:17:55,650
if we don't do anything?

354
00:17:55,650 --> 00:17:58,770
Well, you know, that
depends on population.

355
00:17:58,770 --> 00:17:59,820
Does China collapse?

356
00:17:59,820 --> 00:18:00,870
Does China not collapse?

357
00:18:00,870 --> 00:18:02,910
It depends on future
economic growth.

358
00:18:02,910 --> 00:18:04,650
It depends on the
mix of activity.

359
00:18:04,650 --> 00:18:07,140
What happens to manufacturing
versus services?

360
00:18:07,140 --> 00:18:09,930
It depends on new technologies.

361
00:18:09,930 --> 00:18:11,940
Somebody comes up
with cheap storage.

362
00:18:11,940 --> 00:18:13,470
The world moves to solar power.

363
00:18:13,470 --> 00:18:18,280
It's a very different world
than if that doesn't happen.

364
00:18:18,280 --> 00:18:20,030
Those are all big uncertainties.

365
00:18:20,030 --> 00:18:22,470
So we don't really know what
emissions will look like.

366
00:18:25,380 --> 00:18:28,290
There are uncertainties
about the climate system,

367
00:18:28,290 --> 00:18:30,480
serious uncertainties
about the climate system,

368
00:18:30,480 --> 00:18:32,670
not that we don't know anything.

369
00:18:32,670 --> 00:18:34,920
But as I mentioned,
there's this issue of,

370
00:18:34,920 --> 00:18:38,010
how fast will the
deep ocean warm?

371
00:18:38,010 --> 00:18:40,920
There are issues of
irreversibility and tipping

372
00:18:40,920 --> 00:18:42,150
points, potentially.

373
00:18:42,150 --> 00:18:44,670
Did you want to talk about
that and say a word about some

374
00:18:44,670 --> 00:18:46,620
of these uncertainties?

375
00:18:46,620 --> 00:18:48,090
Can I provoke you
into a comment?

376
00:18:52,880 --> 00:18:53,880
SUSAN SOLOMON: Possibly.

377
00:18:53,880 --> 00:18:56,213
I guess I'm not quite sure
where you want to go with it.

378
00:18:56,213 --> 00:19:00,720
RICHARD SCHMALENSEE: Oh, I just
want some illustrative detail

379
00:19:00,720 --> 00:19:05,010
or some examples of things
that might be a concern

380
00:19:05,010 --> 00:19:07,470
or that might be
nonlinearities or that might

381
00:19:07,470 --> 00:19:09,850
be like falling off a table.

382
00:19:09,850 --> 00:19:10,600
SUSAN SOLOMON: OK.

383
00:19:13,442 --> 00:19:15,400
RICHARD SCHMALENSEE: You
want to take a second?

384
00:19:15,400 --> 00:19:17,680
Just take a second.

385
00:19:17,680 --> 00:19:19,600
I hate to waste the resource.

386
00:19:19,600 --> 00:19:22,120
SUSAN SOLOMON: I'll do my best.

387
00:19:22,120 --> 00:19:24,250
This issue of tipping
points, in my mind,

388
00:19:24,250 --> 00:19:26,880
is actually a lot more
difficult than the issue

389
00:19:26,880 --> 00:19:28,510
of irreversibility.

390
00:19:28,510 --> 00:19:32,140
The irreversibility problem,
we can talk about a little bit

391
00:19:32,140 --> 00:19:34,180
more clearly.

392
00:19:34,180 --> 00:19:40,690
For example, if it were to
be the case that Arctic sea

393
00:19:40,690 --> 00:19:45,610
ice were to disappear,
you might imagine

394
00:19:45,610 --> 00:19:49,840
that that would be an
irreversible process.

395
00:19:49,840 --> 00:19:51,610
But I think we're
finding, more and more,

396
00:19:51,610 --> 00:19:53,920
that it actually isn't.

397
00:19:53,920 --> 00:19:56,890
Even though we had very
low Arctic sea ice in 2007,

398
00:19:56,890 --> 00:19:59,290
because we have
such cold winters,

399
00:19:59,290 --> 00:20:03,640
we have the ability to reform
the sea ice because it's thin.

400
00:20:03,640 --> 00:20:05,680
Even when you have
multiyear ice,

401
00:20:05,680 --> 00:20:07,060
it's still relatively thin.

402
00:20:07,060 --> 00:20:09,370
It's only a few
years that matters.

403
00:20:09,370 --> 00:20:12,370
But when we, for
example, do something

404
00:20:12,370 --> 00:20:14,860
that causes a big dent in
the Greenland ice sheet,

405
00:20:14,860 --> 00:20:17,950
now that truly is
something that you could

406
00:20:17,950 --> 00:20:21,430
think about as irreversible.

407
00:20:21,430 --> 00:20:23,790
It's going to take a
very, very long time.

408
00:20:23,790 --> 00:20:26,560
So on human timescales, it's
essentially irreversible

409
00:20:26,560 --> 00:20:30,160
if you lose a big piece of
the Greenland ice sheet.

410
00:20:30,160 --> 00:20:33,820
Is there a tipping point
beyond which the Greenland ice

411
00:20:33,820 --> 00:20:36,970
sheet might kind of
suddenly fall apart

412
00:20:36,970 --> 00:20:39,580
is something that's been raised.

413
00:20:39,580 --> 00:20:41,920
Much more of a
controversial issue.

414
00:20:41,920 --> 00:20:43,870
It's conceivable.

415
00:20:43,870 --> 00:20:47,500
But most scientists
who study the ice

416
00:20:47,500 --> 00:20:51,340
would argue that it's more
likely to be a slow process.

417
00:20:51,340 --> 00:20:52,550
But it's possible.

418
00:20:52,550 --> 00:20:56,950
And one of the
things that could be

419
00:20:56,950 --> 00:20:59,860
a tipping point for the
Arctic, that people have also

420
00:20:59,860 --> 00:21:02,890
talked about, of course,
is methane release

421
00:21:02,890 --> 00:21:08,920
from things like undersea
deposits of methane

422
00:21:08,920 --> 00:21:14,080
that are actually tied up in
formations called clathrates

423
00:21:14,080 --> 00:21:16,480
and also in permafrost,
which you're probably

424
00:21:16,480 --> 00:21:17,660
more familiar with.

425
00:21:17,660 --> 00:21:20,980
So there are ways
to trigger things

426
00:21:20,980 --> 00:21:25,210
that, in the tipping point
framework, usually involve ice.

427
00:21:25,210 --> 00:21:27,070
And you can sort of
see why that would be.

428
00:21:27,070 --> 00:21:28,540
It's either ice, or it's not.

429
00:21:28,540 --> 00:21:34,490
There is slow transition
from one to another.

430
00:21:34,490 --> 00:21:36,450
It's a real change of state.

431
00:21:36,450 --> 00:21:37,325
So that's some ideas.

432
00:21:37,325 --> 00:21:38,325
RICHARD SCHMALENSEE: OK.

433
00:21:38,325 --> 00:21:39,130
Thank you.

434
00:21:39,130 --> 00:21:40,330
Thank you.

435
00:21:40,330 --> 00:21:43,960
So that's hard.

436
00:21:43,960 --> 00:21:48,430
The tsar has to think about
those possibilities, which

437
00:21:48,430 --> 00:21:49,910
we know something.

438
00:21:49,910 --> 00:21:51,010
But we don't know.

439
00:21:51,010 --> 00:21:52,540
We can't tell when
that might occur,

440
00:21:52,540 --> 00:21:56,040
if those things might occur.

441
00:21:56,040 --> 00:22:02,100
Even climate models,
complex simulation models

442
00:22:02,100 --> 00:22:03,450
of the climate system--

443
00:22:03,450 --> 00:22:05,700
and there are a number of them--

444
00:22:05,700 --> 00:22:09,520
disagree on what
happens regionally.

445
00:22:09,520 --> 00:22:12,360
Will it be wetter or drier?

446
00:22:12,360 --> 00:22:15,310
Well, that matters a lot.

447
00:22:15,310 --> 00:22:18,240
It matters a lot whether
it'll be wetter or drier

448
00:22:18,240 --> 00:22:19,380
in particular areas.

449
00:22:22,110 --> 00:22:23,310
Well, let me just say that.

450
00:22:23,310 --> 00:22:25,680
Also, we don't have
good predictions

451
00:22:25,680 --> 00:22:33,090
for the impacts on hurricanes,
more, more intense,

452
00:22:33,090 --> 00:22:34,650
none of the above.

453
00:22:34,650 --> 00:22:36,840
More water goes into the
air because it's warmer.

454
00:22:36,840 --> 00:22:37,483
It comes down.

455
00:22:37,483 --> 00:22:38,400
How does it come down?

456
00:22:38,400 --> 00:22:40,680
Where does it come down?

457
00:22:40,680 --> 00:22:44,550
Very uncertain implications
for regional impacts.

458
00:22:48,300 --> 00:22:52,000
Regional impacts will
take us into new ground,

459
00:22:52,000 --> 00:22:55,290
particularly for ecosystems.

460
00:22:55,290 --> 00:22:59,670
We don't quite know how
ecosystems will respond

461
00:22:59,670 --> 00:23:01,200
because we haven't done it.

462
00:23:01,200 --> 00:23:04,020
It's not an easy experiment.

463
00:23:04,020 --> 00:23:08,970
So damages, effects like
rainfall are uncertain.

464
00:23:08,970 --> 00:23:14,550
The implications of those
effects are also uncertain.

465
00:23:14,550 --> 00:23:19,380
And finally, there's
little experience

466
00:23:19,380 --> 00:23:22,380
in sort of, how do human
civilizations react

467
00:23:22,380 --> 00:23:26,250
to large-scale environmental
changes of various kinds?

468
00:23:26,250 --> 00:23:28,170
I've been seeing, on
Google News, reference

469
00:23:28,170 --> 00:23:30,810
to small changes
in rainfall being

470
00:23:30,810 --> 00:23:33,390
the likely culprit in the
downfall of the Mayans,

471
00:23:33,390 --> 00:23:37,800
maybe 20%, 30% reductions,
not huge droughts.

472
00:23:37,800 --> 00:23:39,910
Sensitive enough.

473
00:23:39,910 --> 00:23:42,310
Are poor countries in the
tropics that sensitive?

474
00:23:42,310 --> 00:23:43,030
Probably not.

475
00:23:43,030 --> 00:23:45,850
How sensitive?

476
00:23:45,850 --> 00:23:48,370
All right, finally, the
cost of emissions reductions

477
00:23:48,370 --> 00:23:50,510
are also uncertain.

478
00:23:50,510 --> 00:23:52,630
So the tsar is going to
have to deal with this.

479
00:23:52,630 --> 00:23:55,420
And the tsar is going to
have to deal with the fact

480
00:23:55,420 --> 00:23:57,920
that we will be
learning as we go.

481
00:23:57,920 --> 00:24:02,288
So this is I now go to my
favorite picture from the--

482
00:24:02,288 --> 00:24:04,330
so you can't do cost
benefit analysis because you

483
00:24:04,330 --> 00:24:05,163
don't know the cost.

484
00:24:05,163 --> 00:24:08,210
And you don't know the benefits.

485
00:24:08,210 --> 00:24:10,750
So the tsar can't
just do the arithmetic

486
00:24:10,750 --> 00:24:13,570
because he doesn't know
the cost or the benefits,

487
00:24:13,570 --> 00:24:16,180
even if he could
do the discounting.

488
00:24:16,180 --> 00:24:20,410
A problem like this needs
adaptive or iterative risk

489
00:24:20,410 --> 00:24:21,610
management.

490
00:24:21,610 --> 00:24:25,270
And you can read that in
the report of the Committee

491
00:24:25,270 --> 00:24:28,450
on America's Climate Choices,
on which Professor Solomon and I

492
00:24:28,450 --> 00:24:30,280
both served.

493
00:24:30,280 --> 00:24:34,210
If you think about steering a
ship in iceberg-infested waters

494
00:24:34,210 --> 00:24:41,490
at night before radar,
to avoid the Titanic,

495
00:24:41,490 --> 00:24:44,400
the elements of what a
sensible skipper does

496
00:24:44,400 --> 00:24:46,470
are the elements of
what the tsar would

497
00:24:46,470 --> 00:24:48,510
do to deal with climate.

498
00:24:48,510 --> 00:24:50,370
You slow down.

499
00:24:50,370 --> 00:24:51,220
Good plan.

500
00:24:51,220 --> 00:24:54,290
So you reduce emissions.

501
00:24:54,290 --> 00:24:56,840
You don't quite know
what the consequences

502
00:24:56,840 --> 00:25:01,070
are of having more emissions
or of going faster.

503
00:25:01,070 --> 00:25:03,740
But you know they're
probably not good on balance.

504
00:25:03,740 --> 00:25:05,420
So you slow down.

505
00:25:05,420 --> 00:25:09,410
You prepare for
something to happen.

506
00:25:09,410 --> 00:25:12,930
You prepare to adapt.

507
00:25:12,930 --> 00:25:14,100
You learn.

508
00:25:14,100 --> 00:25:15,420
You station lookouts.

509
00:25:15,420 --> 00:25:16,590
You study the system.

510
00:25:16,590 --> 00:25:19,140
You see what's going on.

511
00:25:19,140 --> 00:25:23,610
You develop options, new
technologies, geoengineering,

512
00:25:23,610 --> 00:25:25,710
which I'll talk about briefly.

513
00:25:25,710 --> 00:25:28,920
And you try to figure
out a system that enables

514
00:25:28,920 --> 00:25:31,690
learning to affect decisions.

515
00:25:31,690 --> 00:25:35,280
So you want to hear the lookouts
when they see something.

516
00:25:35,280 --> 00:25:37,560
So that's the sort
of thing the tsar

517
00:25:37,560 --> 00:25:42,920
is going to have to do because
we don't know probabilities.

518
00:25:42,920 --> 00:25:46,442
We don't know, really,
models and studies

519
00:25:46,442 --> 00:25:48,650
of what's going to happen
to the Greenland ice sheet.

520
00:25:48,650 --> 00:25:51,840
But we don't know for sure.

521
00:25:51,840 --> 00:25:53,245
We don't know for sure.

522
00:25:53,245 --> 00:25:54,870
And we don't know
for sure whether it's

523
00:25:54,870 --> 00:25:56,685
going to get wetter
or drier in Ethiopia.

524
00:26:01,200 --> 00:26:04,830
So just a word about
adaptation, the tsar

525
00:26:04,830 --> 00:26:08,250
will have to have
to do some of this.

526
00:26:08,250 --> 00:26:11,020
But as I said, the small scale--

527
00:26:11,020 --> 00:26:13,170
and we will adapt.

528
00:26:13,170 --> 00:26:16,260
That first line is one
of my favorite statements

529
00:26:16,260 --> 00:26:19,560
about adaptation, which is,
the default mode of adaptation

530
00:26:19,560 --> 00:26:21,290
is suffering.

531
00:26:21,290 --> 00:26:22,400
So we'll adapt.

532
00:26:22,400 --> 00:26:26,720
But the question is, will
we actually do any changes?

533
00:26:26,720 --> 00:26:31,430
Will we do any
proactive adaptation?

534
00:26:31,430 --> 00:26:34,790
As I said, problem one is that
the climate models differ.

535
00:26:34,790 --> 00:26:36,450
And I will give you an example.

536
00:26:36,450 --> 00:26:39,380
A colleague was called in by
the government of Ethiopia

537
00:26:39,380 --> 00:26:40,440
some years ago.

538
00:26:40,440 --> 00:26:42,890
And they said, all
right, we believe there's

539
00:26:42,890 --> 00:26:44,370
going to be climate change.

540
00:26:44,370 --> 00:26:46,040
What do we do?

541
00:26:46,040 --> 00:26:49,980
Half the climate models say
it's going to get drier.

542
00:26:49,980 --> 00:26:53,780
And half the climate models
say it's going to get wetter.

543
00:26:53,780 --> 00:27:00,410
How exactly do we prepare
for this uncertain future?

544
00:27:00,410 --> 00:27:04,300
Their answer was pave the roads.

545
00:27:04,300 --> 00:27:07,960
Because if it's drier,
OK, you have paved roads.

546
00:27:07,960 --> 00:27:11,620
If it's wetter, a problem that
Ethiopia traditionally has

547
00:27:11,620 --> 00:27:15,250
is that unpaved roads wash out
when there's heavy rainfall.

548
00:27:15,250 --> 00:27:19,610
And the whole process of getting
food to market breaks down.

549
00:27:19,610 --> 00:27:23,800
So if it gets wetter, you
will really need paved roads.

550
00:27:23,800 --> 00:27:26,170
And if it doesn't get
wetter, paved roads

551
00:27:26,170 --> 00:27:28,853
are not a bad thing to have.

552
00:27:28,853 --> 00:27:30,520
There are going to
be a lot of decisions

553
00:27:30,520 --> 00:27:34,310
like that, a lot of people
looking for robust policies.

554
00:27:34,310 --> 00:27:37,270
The second problem, of course,
is the tsar can't possibly

555
00:27:37,270 --> 00:27:39,530
make all these decisions.

556
00:27:39,530 --> 00:27:42,270
They're going to be made
at state and local levels.

557
00:27:42,270 --> 00:27:46,640
A number of cities and states
have now, already in the US

558
00:27:46,640 --> 00:27:48,860
and certainly foreign
countries, have now

559
00:27:48,860 --> 00:27:52,790
processes in place to think
about this, to try to think

560
00:27:52,790 --> 00:27:55,310
about things as Ethiopia did.

561
00:27:55,310 --> 00:27:57,900
What can we do that's robust?

562
00:27:57,900 --> 00:28:03,150
If we're going to have sea level
rise, how do we cope with that?

563
00:28:03,150 --> 00:28:04,920
What do we need to
do about hurricanes?

564
00:28:04,920 --> 00:28:07,440
How do we change
various policies?

565
00:28:07,440 --> 00:28:09,660
An awful lot of that is local.

566
00:28:09,660 --> 00:28:11,355
Awful lot of that
has to be local.

567
00:28:11,355 --> 00:28:15,260
An awful lot of that's going
to be in poor countries.

568
00:28:15,260 --> 00:28:18,230
So adaptation will happen.

569
00:28:18,230 --> 00:28:20,480
The tsar will try to do
something about that.

570
00:28:20,480 --> 00:28:23,240
But that, one hopes,
is not enough.

571
00:28:23,240 --> 00:28:25,430
No one doubts that will
be enough to really get us

572
00:28:25,430 --> 00:28:26,690
smoothly.

573
00:28:26,690 --> 00:28:28,520
New technologies,
you guys are going

574
00:28:28,520 --> 00:28:29,870
to develop new technologies.

575
00:28:29,870 --> 00:28:31,070
That's going to be terrific.

576
00:28:31,070 --> 00:28:33,060
What's the tsar going
to do about that?

577
00:28:33,060 --> 00:28:36,590
Well, we'll come back
to some of these issues.

578
00:28:36,590 --> 00:28:38,630
But governments have
a terrible record

579
00:28:38,630 --> 00:28:43,040
of pushing the development
of civilian technologies.

580
00:28:43,040 --> 00:28:45,440
Military technologies,
space technologies,

581
00:28:45,440 --> 00:28:48,320
where cost doesn't matter, fine.

582
00:28:48,320 --> 00:28:50,510
Basic research, fine.

583
00:28:50,510 --> 00:28:55,580
Getting stuff to market at a
reasonable price, bad record.

584
00:28:55,580 --> 00:28:58,430
So you can't adapt.

585
00:28:58,430 --> 00:29:02,800
And you can't solve
it with technology.

586
00:29:02,800 --> 00:29:06,190
You got to reduce emissions.

587
00:29:06,190 --> 00:29:08,310
Why is reducing emissions hard?

588
00:29:08,310 --> 00:29:12,160
Oh, well, let me
first fossil fuels.

589
00:29:12,160 --> 00:29:14,170
Another thing you might
think about doing,

590
00:29:14,170 --> 00:29:16,630
and you've probably read
about, is geoengineering.

591
00:29:19,170 --> 00:29:22,140
The simplest way to think about
that is artificial volcanoes.

592
00:29:22,140 --> 00:29:25,450
You might put sulfate.

593
00:29:25,450 --> 00:29:29,050
When Mount Pinatubo blew
up, as I understand it,

594
00:29:29,050 --> 00:29:31,670
there was a discernible cooling.

595
00:29:31,670 --> 00:29:36,680
Small particles, aerosols in the
stratosphere reflect sunlight.

596
00:29:36,680 --> 00:29:42,160
So why don't we just either burn
more coal or take the 16-inch

597
00:29:42,160 --> 00:29:44,230
guns from battleships that
aren't in use anymore,

598
00:29:44,230 --> 00:29:47,810
turn them up, and fire aerosols
into the stratosphere--

599
00:29:47,810 --> 00:29:51,830
this is a serious proposal--
to reflect sunlight?

600
00:29:51,830 --> 00:29:54,950
Well, you might want to have
that in your back pocket

601
00:29:54,950 --> 00:29:55,730
for emergencies.

602
00:29:55,730 --> 00:29:59,240
But, first of all, if you have
more CO2 in the atmosphere,

603
00:29:59,240 --> 00:30:00,650
the ocean becomes more acidic.

604
00:30:00,650 --> 00:30:02,150
And creatures die.

605
00:30:02,150 --> 00:30:03,590
Doesn't solve that problem.

606
00:30:03,590 --> 00:30:05,592
And second, if you
don't reduce emissions,

607
00:30:05,592 --> 00:30:07,550
you've got to keep doing
more and more of that.

608
00:30:07,550 --> 00:30:11,540
And that does not sound like
a long-term way forward.

609
00:30:11,540 --> 00:30:14,930
So CO2 is where
the policy focus is

610
00:30:14,930 --> 00:30:17,120
because, as we saw from
those earlier graphs,

611
00:30:17,120 --> 00:30:18,600
it's quite important.

612
00:30:18,600 --> 00:30:20,840
It lasts a long time.

613
00:30:20,840 --> 00:30:25,110
We can measure fossil
fuel use pretty easily.

614
00:30:25,110 --> 00:30:27,110
Think about countries
that import all their oil.

615
00:30:29,800 --> 00:30:32,830
You can measure
imports pretty easily

616
00:30:32,830 --> 00:30:35,800
at the ports where they happen.

617
00:30:35,800 --> 00:30:39,160
You may be wrong, plus or
minus inventory accumulation.

618
00:30:39,160 --> 00:30:41,110
But it's not easy
to carry and not

619
00:30:41,110 --> 00:30:45,500
cheap to carry inventories of
crude oil and refined product.

620
00:30:45,500 --> 00:30:49,270
So in terms of internationally
enforceable agreements,

621
00:30:49,270 --> 00:30:53,620
fossil fuel is pretty easy
compared to anything else

622
00:30:53,620 --> 00:30:56,230
you want to think about.

623
00:30:56,230 --> 00:31:01,000
Another reason you focus on it
is we talked about last week.

624
00:31:01,000 --> 00:31:05,110
Not only does it
involve durable assets

625
00:31:05,110 --> 00:31:09,100
that can last a long
time, that are expensive,

626
00:31:09,100 --> 00:31:12,950
and, thus, expensive
to replace early,

627
00:31:12,950 --> 00:31:16,170
but there are all these
other path dependencies

628
00:31:16,170 --> 00:31:18,360
that keep you down a path.

629
00:31:18,360 --> 00:31:20,610
So that if you want to--
so the energy system

630
00:31:20,610 --> 00:31:23,640
is a slow ship to turn.

631
00:31:23,640 --> 00:31:26,580
And if you need to turn
it because its impact last

632
00:31:26,580 --> 00:31:29,910
100 years and if you
can turn it because you

633
00:31:29,910 --> 00:31:33,840
can monitor and enforce, that's
a logical place to focus.

634
00:31:36,590 --> 00:31:38,790
Why is that problem hard?

635
00:31:38,790 --> 00:31:40,985
Why is it hard to
change emissions?

636
00:31:40,985 --> 00:31:42,110
Well, we talked about that.

637
00:31:42,110 --> 00:31:47,300
This is some color-coded,
not very well color-coded

638
00:31:47,300 --> 00:31:51,770
emissions trajectories
on the left matched

639
00:31:51,770 --> 00:31:55,340
with atmospheric CO2
concentrations on the right

640
00:31:55,340 --> 00:31:59,840
and matched down here, except
for the really aggressive

641
00:31:59,840 --> 00:32:05,480
reduction scenario, matched
with temperature increases.

642
00:32:05,480 --> 00:32:10,290
So the world runs on fossil
fuels to a first approximation.

643
00:32:10,290 --> 00:32:15,530
You saw all those
Lawrence Livermore graphs

644
00:32:15,530 --> 00:32:19,370
of sources of energy.

645
00:32:19,370 --> 00:32:21,170
Most of it's fossil.

646
00:32:21,170 --> 00:32:23,480
The world runs on fossil fuels.

647
00:32:23,480 --> 00:32:25,610
Big emission cuts
are needed if you're

648
00:32:25,610 --> 00:32:27,110
going to reduce temperature.

649
00:32:27,110 --> 00:32:31,460
Take the you might think
of the orange kind of as

650
00:32:31,460 --> 00:32:35,870
an estimate of business as usual
maybe, somebody's estimate.

651
00:32:35,870 --> 00:32:39,050
The blue then is a
pretty aggressive cut.

652
00:32:39,050 --> 00:32:42,950
But look what and the blue
relative to the orange,

653
00:32:42,950 --> 00:32:45,230
at the end of the century,
has a pretty big impact

654
00:32:45,230 --> 00:32:48,870
on atmospheric concentrations.

655
00:32:48,870 --> 00:32:51,140
But the temperature
still goes up.

656
00:32:51,140 --> 00:32:53,340
The temperature still
goes up substantially.

657
00:32:53,340 --> 00:32:56,815
That's a two-degree or is
that a three-degree increase

658
00:32:56,815 --> 00:32:57,440
in temperature?

659
00:32:57,440 --> 00:33:00,950
Three degrees Fahrenheit
increase in temperature.

660
00:33:00,950 --> 00:33:03,110
The orange, much bigger.

661
00:33:03,110 --> 00:33:05,540
But that's a big
change, right, if you're

662
00:33:05,540 --> 00:33:08,160
going from here to here?

663
00:33:08,160 --> 00:33:13,770
China's not getting rich
burning coal on the blue path.

664
00:33:13,770 --> 00:33:18,450
We're not increasing our
energy at all probably.

665
00:33:18,450 --> 00:33:20,340
Europe is cutting
back even farther

666
00:33:20,340 --> 00:33:21,960
to get to that blue path.

667
00:33:21,960 --> 00:33:25,190
That's a big deal.

668
00:33:25,190 --> 00:33:26,720
So if it's the
easiest thing to do

669
00:33:26,720 --> 00:33:29,750
and it's an important thing
to do, it's a big deal.

670
00:33:29,750 --> 00:33:32,810
So that's one reason
why it's hard is

671
00:33:32,810 --> 00:33:34,860
we live on fossil fuels.

672
00:33:34,860 --> 00:33:37,910
So if you're going to cut
the use of fossil fuels,

673
00:33:37,910 --> 00:33:40,140
emissions from fossil fuels--

674
00:33:40,140 --> 00:33:42,800
it's emissions
from fossil fuels--

675
00:33:42,800 --> 00:33:44,240
you could do some
fuel switching.

676
00:33:44,240 --> 00:33:45,460
You can do some efficiency.

677
00:33:45,460 --> 00:33:47,210
You can do some this,
that, and the other.

678
00:33:47,210 --> 00:33:50,330
But you will have to do a lot.

679
00:33:50,330 --> 00:33:52,110
New technologies
will be essential.

680
00:33:52,110 --> 00:33:54,080
But they may or may
not appear in time.

681
00:33:56,620 --> 00:33:59,220
OK, so that's a big deal.

682
00:33:59,220 --> 00:34:00,610
So we all go to bicycles.

683
00:34:00,610 --> 00:34:02,440
That's great.

684
00:34:02,440 --> 00:34:03,690
We can do that.

685
00:34:03,690 --> 00:34:04,890
We can emulate the Dutch.

686
00:34:04,890 --> 00:34:08,179
And we can all bicycle to work.

687
00:34:08,179 --> 00:34:09,305
But we're not the problem.

688
00:34:12,179 --> 00:34:16,710
Any projection of the future
says the growth in emissions

689
00:34:16,710 --> 00:34:19,590
will come from countries
that are now poor.

690
00:34:19,590 --> 00:34:21,150
They have been
growing more rapidly

691
00:34:21,150 --> 00:34:23,489
than countries that are
now rich for some time.

692
00:34:23,489 --> 00:34:26,560
And all projections are
they will continue to do so.

693
00:34:26,560 --> 00:34:29,790
So this is from
BP's energy outlook.

694
00:34:29,790 --> 00:34:35,280
If you look up to 2010,
it's 1990 to 2010,

695
00:34:35,280 --> 00:34:40,170
you'll see OECD emissions, rich
country emissions, pretty flat.

696
00:34:40,170 --> 00:34:45,760
I mean, they'd be up a bit but
for the recession but not much.

697
00:34:45,760 --> 00:34:51,110
But dramatic growth in
the less rich countries,

698
00:34:51,110 --> 00:34:52,429
dramatic growth.

699
00:34:52,429 --> 00:34:55,940
Again, for the world as
a whole, energy and CO2

700
00:34:55,940 --> 00:34:59,060
have grown less
rapidly than GDP.

701
00:34:59,060 --> 00:35:04,700
That declining we saw in the
US is a general phenomenon.

702
00:35:04,700 --> 00:35:12,140
But if you try to
control global emissions,

703
00:35:12,140 --> 00:35:16,340
try to reduce global emissions
by reducing OECD emissions,

704
00:35:16,340 --> 00:35:24,370
you see if we go to zero by
2030 and the non-OECD proceeds

705
00:35:24,370 --> 00:35:30,670
on the track, global emissions
will be up, just by eye.

706
00:35:30,670 --> 00:35:31,810
So yeah, Sam?

707
00:35:31,810 --> 00:35:35,550
AUDIENCE: It says that's as soon
as [INAUDIBLE] policy changes.

708
00:35:35,550 --> 00:35:36,990
Any idea what those could be?

709
00:35:39,962 --> 00:35:41,670
RICHARD SCHMALENSEE:
You read the report,

710
00:35:41,670 --> 00:35:45,030
and you say, well,
what are they assuming?

711
00:35:45,030 --> 00:35:48,120
They're assuming tightening
restrictions in Europe.

712
00:35:48,120 --> 00:35:50,430
They're assuming
something in the US.

713
00:35:50,430 --> 00:35:54,270
They're assuming continued
efficiency increases.

714
00:35:54,270 --> 00:35:56,950
They're not assuming the
kind of global agreement

715
00:35:56,950 --> 00:36:00,180
you guys are going to
negotiate Wednesday and Friday.

716
00:36:00,180 --> 00:36:00,990
That's clear.

717
00:36:00,990 --> 00:36:05,550
They're not assuming a
second Kyoto Protocol

718
00:36:05,550 --> 00:36:07,980
ratified by the whole world.

719
00:36:07,980 --> 00:36:11,070
I think, and it's an
interesting assumption

720
00:36:11,070 --> 00:36:15,480
to assume that, absent anything
going on in these countries,

721
00:36:15,480 --> 00:36:17,220
that these countries
will continue.

722
00:36:17,220 --> 00:36:19,950
I mean, here, they're showing a
reduction, a positive reduction

723
00:36:19,950 --> 00:36:22,300
in emissions here
over that period.

724
00:36:22,300 --> 00:36:25,020
So that is-- and there's
growth, not huge growth.

725
00:36:25,020 --> 00:36:26,560
But there's growth.

726
00:36:26,560 --> 00:36:29,310
So they're assuming a
tightening in the OECD,

727
00:36:29,310 --> 00:36:31,830
continued efficiency
increases here.

728
00:36:34,580 --> 00:36:38,990
There's some discussion of
China becoming a bit less carbon

729
00:36:38,990 --> 00:36:39,500
intensive.

730
00:36:39,500 --> 00:36:41,930
But the main policy
action's here.

731
00:36:41,930 --> 00:36:44,424
And they do not assume
a global agreement.

732
00:36:47,150 --> 00:36:48,680
It's a short description.

733
00:36:48,680 --> 00:36:49,980
I invite you to read it.

734
00:36:49,980 --> 00:36:51,200
It's about two pages.

735
00:36:51,200 --> 00:36:54,560
See what you think
they assume, but that's

736
00:36:54,560 --> 00:36:55,670
what I get out of it.

737
00:36:55,670 --> 00:36:58,610
You can see they're continuing
to assume for the world,

738
00:36:58,610 --> 00:37:03,200
as a whole, efficiency
increases, right?

739
00:37:03,200 --> 00:37:06,920
The GDP grows much more
rapidly than energy use.

740
00:37:06,920 --> 00:37:09,290
And they're continuing
to assume for the world,

741
00:37:09,290 --> 00:37:13,890
as a whole, decarbonization,
presumably, presumably

742
00:37:13,890 --> 00:37:16,890
a switch out of coal into
natural gas and renewables.

743
00:37:16,890 --> 00:37:18,770
I'd have to go back
and check, but I think

744
00:37:18,770 --> 00:37:21,476
that's part of the scenario.

745
00:37:21,476 --> 00:37:22,190
Anything else?

746
00:37:22,190 --> 00:37:22,690
Yeah?

747
00:37:22,690 --> 00:37:26,640
AUDIENCE: How big is the impact
on emissions, like methane?

748
00:37:26,640 --> 00:37:30,750
I know that it keeps more heat.

749
00:37:30,750 --> 00:37:34,300
RICHARD SCHMALENSEE:
Methane has a--

750
00:37:34,300 --> 00:37:36,460
the reason for not
focusing on methane,

751
00:37:36,460 --> 00:37:42,010
even though it is a more
potent heat-trapping gas,

752
00:37:42,010 --> 00:37:43,810
it doesn't stay in the
atmosphere as long,

753
00:37:43,810 --> 00:37:49,060
A. So it's about 10 year half
life, ballpark, about 10 years.

754
00:37:49,060 --> 00:37:51,400
And, B, it's harder to figure.

755
00:37:51,400 --> 00:37:53,120
It has many sources.

756
00:37:53,120 --> 00:37:56,140
So it's got natural gas leaks.

757
00:37:56,140 --> 00:37:59,680
It's got landfill decomposition.

758
00:37:59,680 --> 00:38:01,270
It's got things rotting.

759
00:38:01,270 --> 00:38:04,540
So it's harder to control.

760
00:38:04,540 --> 00:38:10,870
And in fact, in 20 years,
30 years, less serious.

761
00:38:10,870 --> 00:38:11,440
Yeah?

762
00:38:11,440 --> 00:38:12,800
Please.

763
00:38:12,800 --> 00:38:15,250
SUSAN SOLOMON: I think part
of the confusion on methane

764
00:38:15,250 --> 00:38:18,640
is that, although every
molecule of methane

765
00:38:18,640 --> 00:38:22,390
is more potent than
a molecule of CO2,

766
00:38:22,390 --> 00:38:24,590
there is a lot more
CO2 in the atmosphere.

767
00:38:24,590 --> 00:38:24,910
RICHARD SCHMALENSEE: Yeah.

768
00:38:24,910 --> 00:38:26,590
SUSAN SOLOMON: So
actually, CO2 is

769
00:38:26,590 --> 00:38:28,870
doing three times
more warming right

770
00:38:28,870 --> 00:38:31,475
now than the total
of all methane

771
00:38:31,475 --> 00:38:33,100
because there's so
much more out there.

772
00:38:33,100 --> 00:38:36,860
Even though heat-trapping
molecules are stronger there.

773
00:38:36,860 --> 00:38:37,360
OK?

774
00:38:37,360 --> 00:38:39,100
RICHARD SCHMALENSEE:
Yeah, I didn't do that.

775
00:38:39,100 --> 00:38:39,380
SUSAN SOLOMON: So it's
not the main thing.

776
00:38:39,380 --> 00:38:40,480
RICHARD SCHMALENSEE:
Yeah, I didn't do that.

777
00:38:40,480 --> 00:38:41,200
I should have done it.

778
00:38:41,200 --> 00:38:42,310
SUSAN SOLOMON: This
is the main thing.

779
00:38:42,310 --> 00:38:44,102
RICHARD SCHMALENSEE:
I should have done it.

780
00:38:44,102 --> 00:38:49,720
Yeah, if you break down sources
of anthropogenic warming,

781
00:38:49,720 --> 00:38:51,420
CO2 dominates.

782
00:38:51,420 --> 00:38:53,962
SUSAN SOLOMON: When people get
to talking about methane being

783
00:38:53,962 --> 00:38:56,730
an effective greenhouse gas,
it can get very confusing

784
00:38:56,730 --> 00:38:57,267
for people.

785
00:38:57,267 --> 00:38:58,350
RICHARD SCHMALENSEE: Yeah.

786
00:38:58,350 --> 00:38:58,850
Yeah?

787
00:38:58,850 --> 00:39:01,590
AUDIENCE: So the point is the
graph is built on CO2 emissions

788
00:39:01,590 --> 00:39:05,408
by the OECD countries and
non-OECD countries, right?

789
00:39:05,408 --> 00:39:06,450
RICHARD SCHMALENSEE: Yep.

790
00:39:06,450 --> 00:39:07,950
AUDIENCE: But in
general population,

791
00:39:07,950 --> 00:39:09,202
I think the OECD countries--

792
00:39:09,202 --> 00:39:11,160
RICHARD SCHMALENSEE:
We're going to come there.

793
00:39:11,160 --> 00:39:12,660
We're going to break it down.

794
00:39:12,660 --> 00:39:13,990
Yes, you are.

795
00:39:13,990 --> 00:39:19,410
In terms of per capita, the
OECD countries are much higher.

796
00:39:19,410 --> 00:39:21,690
But the only point
to be made here

797
00:39:21,690 --> 00:39:25,920
is, if you want this
top graph to come down,

798
00:39:25,920 --> 00:39:28,230
you're not going
to get it all here.

799
00:39:28,230 --> 00:39:34,950
And you got to do something
up here somehow, somehow.

800
00:39:34,950 --> 00:39:37,350
We will come to questions
of fairness in about a half

801
00:39:37,350 --> 00:39:40,230
a second.

802
00:39:40,230 --> 00:39:43,680
So that's a reason.

803
00:39:43,680 --> 00:39:46,620
You're going to have
to deal with growth.

804
00:39:46,620 --> 00:39:51,120
And the growth is going to come
from countries that are now

805
00:39:51,120 --> 00:39:54,340
poorer than the OECD countries.

806
00:39:54,340 --> 00:39:57,030
The other reason,
let me just briefly

807
00:39:57,030 --> 00:39:58,980
do a little economics
here as opposed

808
00:39:58,980 --> 00:40:01,950
to a little pseudo-science.

809
00:40:01,950 --> 00:40:08,070
Suppose you want to
reduce emissions.

810
00:40:08,070 --> 00:40:11,820
Say you want a total
reduction in emissions

811
00:40:11,820 --> 00:40:15,540
from business as
usual of capital R.

812
00:40:15,540 --> 00:40:17,160
And you want to do it worldwide.

813
00:40:17,160 --> 00:40:20,070
And the cost of getting
reductions in country I

814
00:40:20,070 --> 00:40:22,620
is given by this cost function.

815
00:40:22,620 --> 00:40:26,560
All right, so the tsar
cares about global cost.

816
00:40:26,560 --> 00:40:29,910
So what the tsar is going
to do is reduce emissions.

817
00:40:29,910 --> 00:40:33,330
He's going to minimize
the total cost

818
00:40:33,330 --> 00:40:36,940
subject to this constraint.

819
00:40:36,940 --> 00:40:41,820
And if you recall or
just use your intuition,

820
00:40:41,820 --> 00:40:44,730
you're going to have to have the
marginal cost, the derivative

821
00:40:44,730 --> 00:40:47,280
of this function with
respect to its argument

822
00:40:47,280 --> 00:40:50,010
equal across countries.

823
00:40:50,010 --> 00:40:53,330
If not, I can
rearrange reductions

824
00:40:53,330 --> 00:40:55,280
in a way that will lower costs.

825
00:40:55,280 --> 00:40:57,470
I'll do a little more
where marginal cost is

826
00:40:57,470 --> 00:40:59,780
low and a little less where
marginal cost is high.

827
00:40:59,780 --> 00:41:02,240
Get the same
reductions, lower cost.

828
00:41:02,240 --> 00:41:06,050
That's always true unless
the marginal costs are equal.

829
00:41:06,050 --> 00:41:08,510
Well, if marginal
costs are going

830
00:41:08,510 --> 00:41:14,990
to be equal, then unless it's
really hard to reduce emissions

831
00:41:14,990 --> 00:41:17,450
in poor countries, they
have to play if we're

832
00:41:17,450 --> 00:41:19,850
going to reduce total cost.

833
00:41:19,850 --> 00:41:23,150
It's not a question
of who pays for it.

834
00:41:23,150 --> 00:41:26,700
It's a question of
where it happens, right?

835
00:41:26,700 --> 00:41:31,050
Doesn't say that that Bangladesh
has to pay to reduce emissions

836
00:41:31,050 --> 00:41:32,340
in Bangladesh.

837
00:41:32,340 --> 00:41:35,070
It says that emissions
in Bangladesh

838
00:41:35,070 --> 00:41:37,620
will have to be reduced.

839
00:41:37,620 --> 00:41:39,380
So they're separate questions.

840
00:41:39,380 --> 00:41:41,450
But it says the poor
will need to be involved.

841
00:41:46,310 --> 00:41:50,450
If you recall 1401, if
you have a firm producing

842
00:41:50,450 --> 00:41:55,190
in multiple plants, this is
exactly the same principle.

843
00:41:55,190 --> 00:41:56,935
You want to equalize
on the margin.

844
00:41:59,810 --> 00:42:03,730
Normally, it means
everybody has to play.

845
00:42:03,730 --> 00:42:06,440
There are two
approaches that have

846
00:42:06,440 --> 00:42:07,940
been put on the table for this.

847
00:42:07,940 --> 00:42:11,330
And we'll come back
to both of them.

848
00:42:11,330 --> 00:42:14,150
The Parsons, et al,
piece on the reading

849
00:42:14,150 --> 00:42:18,800
list, which is optional,
talks about one of them.

850
00:42:18,800 --> 00:42:26,720
You could say, all right,
how about the tsar says

851
00:42:26,720 --> 00:42:29,570
there's a price of
$20 a ton for carbon

852
00:42:29,570 --> 00:42:33,150
emissions from fossil fuels?

853
00:42:33,150 --> 00:42:37,010
The tsar doesn't like
to do central planning.

854
00:42:37,010 --> 00:42:39,200
He's learned that lesson.

855
00:42:39,200 --> 00:42:40,880
But the tsar can
tinker with prices.

856
00:42:40,880 --> 00:42:45,690
So he'll put a price of
$20 a ton for emissions.

857
00:42:45,690 --> 00:42:49,860
Well, that means everybody
who's contemplating emissions

858
00:42:49,860 --> 00:42:54,330
is going to cut back until
the cost of cutting back rises

859
00:42:54,330 --> 00:42:56,410
to $20.

860
00:42:56,410 --> 00:43:01,700
And I'll get this marginal
cost of quality that way.

861
00:43:01,700 --> 00:43:03,670
All right, so I'll
just price the thing.

862
00:43:03,670 --> 00:43:05,060
We talked about this earlier.

863
00:43:05,060 --> 00:43:07,100
This is pricing the harm.

864
00:43:07,100 --> 00:43:08,050
So I priced the harm.

865
00:43:08,050 --> 00:43:10,840
People cut back on the harm.

866
00:43:10,840 --> 00:43:11,740
It's a tax.

867
00:43:11,740 --> 00:43:16,420
It'll show up as a tax, probably
show up as a tax on fuel.

868
00:43:16,420 --> 00:43:18,823
Tax much higher on coal
than on natural gas.

869
00:43:18,823 --> 00:43:19,990
But that's one way to do it.

870
00:43:19,990 --> 00:43:23,000
And the tsar can do that.

871
00:43:23,000 --> 00:43:25,820
The other way to do it--

872
00:43:25,820 --> 00:43:26,820
that makes sense, right?

873
00:43:26,820 --> 00:43:27,890
That's easy?

874
00:43:27,890 --> 00:43:28,890
We just price the thing.

875
00:43:31,750 --> 00:43:35,077
The other way to do it is a
little more convoluted but only

876
00:43:35,077 --> 00:43:35,660
a little more.

877
00:43:35,660 --> 00:43:37,118
And we'll return
to the equivalence

878
00:43:37,118 --> 00:43:44,370
later on is the tsar prints
up certificates, drops

879
00:43:44,370 --> 00:43:51,380
from helicopters, and
says, to emit a ton of CO2,

880
00:43:51,380 --> 00:43:55,560
you have to give
me a certificate.

881
00:43:55,560 --> 00:43:58,580
Limited number of certificates
equal to the total amount

882
00:43:58,580 --> 00:44:04,670
of CO2 the tsar wants to
permit, you get a market, right?

883
00:44:04,670 --> 00:44:06,410
I go around looking
for certificates.

884
00:44:06,410 --> 00:44:08,040
I'm willing to pay
20 bucks for it.

885
00:44:08,040 --> 00:44:10,260
I'm willing to pay some price.

886
00:44:10,260 --> 00:44:12,630
The market will
determine what price.

887
00:44:12,630 --> 00:44:15,570
In this case, if I fix
a price, the market

888
00:44:15,570 --> 00:44:17,760
will determine the quantity.

889
00:44:17,760 --> 00:44:21,480
If I fix a quantity, the market
will determine the price.

890
00:44:21,480 --> 00:44:24,850
But I can go either way.

891
00:44:24,850 --> 00:44:26,430
And if the tsar
knows all, it doesn't

892
00:44:26,430 --> 00:44:29,040
matter which way he goes.

893
00:44:29,040 --> 00:44:30,930
We'll talk a little
later, I think,

894
00:44:30,930 --> 00:44:34,060
about when and where
and how it might matter.

895
00:44:34,060 --> 00:44:39,796
But that's what the
tsar might want to do.

896
00:44:39,796 --> 00:44:43,630
But do those make sort
of top of the head sense

897
00:44:43,630 --> 00:44:50,130
as a way to do it without having
to do central planning for all

898
00:44:50,130 --> 00:44:52,900
the nations of the world?

899
00:44:52,900 --> 00:44:57,060
But if you say it's
$30 a ton or $40 a ton

900
00:44:57,060 --> 00:45:02,040
for everybody and poor
countries have to pay it,

901
00:45:02,040 --> 00:45:04,030
how do they do that?

902
00:45:04,030 --> 00:45:06,770
How do they do that?

903
00:45:06,770 --> 00:45:11,900
So you know that they're going
to have to do some reduction.

904
00:45:11,900 --> 00:45:17,080
Because if you think
about it, they're

905
00:45:17,080 --> 00:45:20,590
building buildings,
facilities, et cetera.

906
00:45:20,590 --> 00:45:24,980
It's a lot cheaper to
insulate a new house

907
00:45:24,980 --> 00:45:31,160
when it's being built than to go
back and retrofit an old house.

908
00:45:31,160 --> 00:45:34,220
It's a lot cheaper to make
a new power plant efficient

909
00:45:34,220 --> 00:45:37,660
than to repower an
old power plant.

910
00:45:37,660 --> 00:45:41,020
So if the poorer
countries of the world

911
00:45:41,020 --> 00:45:43,960
are growing more
rapidly, they have

912
00:45:43,960 --> 00:45:47,050
a lot more relatively
inexpensive investment

913
00:45:47,050 --> 00:45:49,920
opportunities.

914
00:45:49,920 --> 00:45:52,800
They also may not have
built Los Angeles yet.

915
00:45:52,800 --> 00:45:55,830
So they're in a position
to decide more easily

916
00:45:55,830 --> 00:45:59,520
on a different urban
structure, less spread out,

917
00:45:59,520 --> 00:46:00,930
less reliant on cars.

918
00:46:00,930 --> 00:46:05,280
So there are a set of
choices that are being made.

919
00:46:05,280 --> 00:46:08,740
There are also, if you
look at retrofit options,

920
00:46:08,740 --> 00:46:14,760
there's a lot of energy use
now that is polluting as well

921
00:46:14,760 --> 00:46:17,230
as inefficient.

922
00:46:17,230 --> 00:46:22,470
So modernizing some
of the plants now

923
00:46:22,470 --> 00:46:25,780
will create a double benefit.

924
00:46:25,780 --> 00:46:28,780
If you can do something besides
little kerosene generators,

925
00:46:28,780 --> 00:46:31,330
for instance, for electricity
in a lot of places,

926
00:46:31,330 --> 00:46:35,110
you will not only save
energy, but you clean the air.

927
00:46:35,110 --> 00:46:38,890
So there's a benefit
to be had in bringing

928
00:46:38,890 --> 00:46:46,420
these countries closer to the
frontier with what they already

929
00:46:46,420 --> 00:46:47,750
have.

930
00:46:47,750 --> 00:46:48,250
OK.

931
00:46:50,780 --> 00:46:56,630
So this is a hard
problem for the tsar.

932
00:46:56,630 --> 00:47:00,620
The tsar has to figure
out how she's going to--

933
00:47:00,620 --> 00:47:02,270
or the tsarina, how
she's going to deal

934
00:47:02,270 --> 00:47:07,560
with the distant future and
great-great-grandchildren,

935
00:47:07,560 --> 00:47:12,450
how to deal with
uncertainty today

936
00:47:12,450 --> 00:47:17,730
and to learn to deal with a
tomorrow as learning happens.

937
00:47:17,730 --> 00:47:21,210
The tsar is going to have to
figure out what, if anything,

938
00:47:21,210 --> 00:47:24,120
could be done about
technologies, how to get people

939
00:47:24,120 --> 00:47:27,300
and able to adapt.

940
00:47:27,300 --> 00:47:30,990
If the tsar focuses
on fossil fuel,

941
00:47:30,990 --> 00:47:33,810
the tsar has to
make big changes.

942
00:47:33,810 --> 00:47:37,420
And the tsar has to
involve the poor.

943
00:47:37,420 --> 00:47:39,250
The tsar has to
involve the poor.

944
00:47:39,250 --> 00:47:42,070
It can't be done
by rich countries.

945
00:47:42,070 --> 00:47:44,060
If rich countries
alone try to do it,

946
00:47:44,060 --> 00:47:48,400
if you go back to something like
this, you want to slow growth.

947
00:47:48,400 --> 00:47:50,890
You want to eliminate
growth in emissions

948
00:47:50,890 --> 00:47:53,290
by only the rich
countries, they'd

949
00:47:53,290 --> 00:47:56,120
have to go to zero
to have a big impact.

950
00:47:56,120 --> 00:47:57,650
It isn't going to happen.

951
00:47:57,650 --> 00:48:01,320
So the pole need to be involved.

952
00:48:01,320 --> 00:48:06,930
And the first question that
comes up, already came up,

953
00:48:06,930 --> 00:48:07,615
is that fair?

954
00:48:11,140 --> 00:48:14,090
This is emissions per capita.

955
00:48:14,090 --> 00:48:18,500
This is Annex II North
America is US and Canada.

956
00:48:18,500 --> 00:48:22,620
This is Australia,
New Zealand, Japan.

957
00:48:22,620 --> 00:48:26,100
EIT, or Economies In
Transition, that's

958
00:48:26,100 --> 00:48:28,200
Russia and Eastern Europe.

959
00:48:28,200 --> 00:48:29,790
There's the Middle East.

960
00:48:29,790 --> 00:48:33,900
Annex II Europe or rich
European countries,

961
00:48:33,900 --> 00:48:37,755
China, other countries, Latin
America, the rest of Asia,

962
00:48:37,755 --> 00:48:38,255
Africa.

963
00:48:41,530 --> 00:48:45,710
Is it fair to involve them?

964
00:48:45,710 --> 00:48:47,360
My golly.

965
00:48:47,360 --> 00:48:49,520
You're going to go to Cambodia.

966
00:48:49,520 --> 00:48:53,060
You remember I put up the
Cambodia energy diagram

967
00:48:53,060 --> 00:48:54,260
some while ago.

968
00:48:54,260 --> 00:48:58,390
Cambodia imports some oil
and burns a lot of wood.

969
00:48:58,390 --> 00:48:59,670
That's the energy system.

970
00:49:02,950 --> 00:49:05,020
And they mostly ride motorbikes.

971
00:49:05,020 --> 00:49:08,350
And you can't get them
much smaller than the ones

972
00:49:08,350 --> 00:49:09,090
they have.

973
00:49:09,090 --> 00:49:14,870
So this is an enormous
disparity, right?

974
00:49:14,870 --> 00:49:16,300
North America is running--

975
00:49:16,300 --> 00:49:17,320
I don't know--

976
00:49:17,320 --> 00:49:19,970
16 metric tons per capita.

977
00:49:19,970 --> 00:49:23,200
Africa is running less than one.

978
00:49:23,200 --> 00:49:23,980
Big disparity.

979
00:49:23,980 --> 00:49:24,910
Huge disparity.

980
00:49:24,910 --> 00:49:25,930
Very different.

981
00:49:25,930 --> 00:49:27,250
Very different systems.

982
00:49:27,250 --> 00:49:29,590
So if you're going
to change, you're

983
00:49:29,590 --> 00:49:31,030
going to look
people in the face.

984
00:49:31,030 --> 00:49:33,640
And those of you who want
to be developing countries

985
00:49:33,640 --> 00:49:36,550
or developed countries
on Wednesday and Friday

986
00:49:36,550 --> 00:49:39,970
are going to look your poor
brethren in the face and say,

987
00:49:39,970 --> 00:49:43,300
you, Latin America,
rest of Asia, Africa,

988
00:49:43,300 --> 00:49:45,560
boy, you've got to take steps.

989
00:49:45,560 --> 00:49:47,930
We'll do what we can.

990
00:49:47,930 --> 00:49:49,580
But you've got to take steps.

991
00:49:49,580 --> 00:49:52,760
Say, we have path
dependence up here.

992
00:49:52,760 --> 00:49:54,315
We're kind of stuck on a path.

993
00:49:54,315 --> 00:49:55,940
And you know, what
are you going to do?

994
00:49:59,330 --> 00:50:04,400
So fairness is also in one
response might be, yeah, well,

995
00:50:04,400 --> 00:50:07,280
let's look not per capita.

996
00:50:07,280 --> 00:50:12,457
But you're low because
you're really, really poor.

997
00:50:12,457 --> 00:50:14,040
And we're really,
really sad about it.

998
00:50:14,040 --> 00:50:19,890
But per dollar of GDP, the
differences are less stark.

999
00:50:19,890 --> 00:50:24,120
The winners now are the
Middle East, Soviet Union,

1000
00:50:24,120 --> 00:50:27,990
and Eastern Europe
because those were really

1001
00:50:27,990 --> 00:50:30,570
manufacturing-intensive
technologies.

1002
00:50:30,570 --> 00:50:34,220
They ran on cheap
Russian oil, which

1003
00:50:34,220 --> 00:50:38,360
was made available at low
cost, and Russian natural gas.

1004
00:50:38,360 --> 00:50:41,090
They still have an anomalous
amount of inefficient capital

1005
00:50:41,090 --> 00:50:44,240
stock running.

1006
00:50:44,240 --> 00:50:47,240
And China, which has a
manufacturing-intensive economy

1007
00:50:47,240 --> 00:50:48,350
and uses a lot of coal.

1008
00:50:51,460 --> 00:50:55,120
So per unit of GDP, Africa is
right in there with everybody

1009
00:50:55,120 --> 00:50:56,320
else.

1010
00:50:56,320 --> 00:50:59,960
They just happen to have
not much GDP per capita.

1011
00:50:59,960 --> 00:51:03,850
So you say, well, per dollar
of GDP, we can make cuts.

1012
00:51:03,850 --> 00:51:06,480
You can make cuts.

1013
00:51:06,480 --> 00:51:10,530
And one response might be, yeah,
but we'd like our GDP to grow.

1014
00:51:10,530 --> 00:51:13,510
Thank you very much.

1015
00:51:13,510 --> 00:51:18,720
So this is another nice example.

1016
00:51:18,720 --> 00:51:20,930
This is if you do
the cumulative,

1017
00:51:20,930 --> 00:51:25,460
you do what's in the air,
which was the point Professor

1018
00:51:25,460 --> 00:51:28,020
Solomon was making, if
you do what's in the air,

1019
00:51:28,020 --> 00:51:29,030
this is just CO2.

1020
00:51:29,030 --> 00:51:32,240
But it shows,
cumulatively, what's

1021
00:51:32,240 --> 00:51:37,837
in the air now based on a model
of the carbon cycle, what's

1022
00:51:37,837 --> 00:51:39,420
in the air now and
where it came from.

1023
00:51:39,420 --> 00:51:41,570
Blue is the rich countries.

1024
00:51:41,570 --> 00:51:44,940
This is kind of middle
income developing countries.

1025
00:51:44,940 --> 00:51:47,750
And that's the very poor.

1026
00:51:47,750 --> 00:51:55,860
So in terms of who
caused the problem, who

1027
00:51:55,860 --> 00:51:58,560
put the stuff in the
air, it's not China.

1028
00:51:58,560 --> 00:52:00,540
Who's putting it in the
air and who's growing?

1029
00:52:00,540 --> 00:52:01,260
Yeah.

1030
00:52:01,260 --> 00:52:04,340
But who put it there?

1031
00:52:04,340 --> 00:52:05,850
It's us.

1032
00:52:05,850 --> 00:52:06,350
OK.

1033
00:52:12,630 --> 00:52:16,980
A little bit of sort of how
the international conversation

1034
00:52:16,980 --> 00:52:21,680
on all of this has gone,
just by way of background,

1035
00:52:21,680 --> 00:52:23,430
and then we'll see
what questions you have

1036
00:52:23,430 --> 00:52:27,360
because I've gone through
this much too rapidly.

1037
00:52:27,360 --> 00:52:31,320
As I mentioned, the Framework
Convention on Climate Change

1038
00:52:31,320 --> 00:52:38,050
was drafted in 1992,
ratified by everybody.

1039
00:52:38,050 --> 00:52:41,350
There have been 17 conferences
of the parties referred

1040
00:52:41,350 --> 00:52:46,690
to as COPs, large
gatherings of diplomats,

1041
00:52:46,690 --> 00:52:53,410
nongovernmental organizations,
demonstrators, hangers on,

1042
00:52:53,410 --> 00:52:56,500
cocktail parties, receptions.

1043
00:52:56,500 --> 00:52:59,720
There have been 17 of them.

1044
00:52:59,720 --> 00:53:00,740
You will be the 18th.

1045
00:53:03,260 --> 00:53:06,880
The third produced
the Kyoto Protocol.

1046
00:53:06,880 --> 00:53:11,230
The Framework Convention
divided the world

1047
00:53:11,230 --> 00:53:14,530
into Annex I countries
and everybody else.

1048
00:53:14,530 --> 00:53:17,680
Annex II, which was on some
of those earlier graphs,

1049
00:53:17,680 --> 00:53:23,560
is a subset of Annex I. It's
the richer Annex I countries.

1050
00:53:23,560 --> 00:53:32,200
The Kyoto Protocol called
for Annex I countries only.

1051
00:53:32,200 --> 00:53:34,480
And by the way, it's
not all rich countries.

1052
00:53:34,480 --> 00:53:38,140
South Korea is not
Annex I. Singapore

1053
00:53:38,140 --> 00:53:42,680
is not Annex I. Saudi Arabia
is not Annex I and so forth.

1054
00:53:42,680 --> 00:53:45,433
So it's industrialized
countries.

1055
00:53:45,433 --> 00:53:49,250
OECD, roughly, OECD.

1056
00:53:49,250 --> 00:53:53,540
Annex I countries were
to make reductions that

1057
00:53:53,540 --> 00:53:55,640
were negotiated reductions.

1058
00:53:55,640 --> 00:53:58,640
The rest of the
world, which I just

1059
00:53:58,640 --> 00:54:02,270
said has to participate if
something's going to happen,

1060
00:54:02,270 --> 00:54:07,180
refused to even promise
making promises in the future.

1061
00:54:07,180 --> 00:54:09,450
So there wasn't
even a commitment

1062
00:54:09,450 --> 00:54:11,340
to make a commitment.

1063
00:54:11,340 --> 00:54:14,210
They would not commit to commit.

1064
00:54:14,210 --> 00:54:18,120
And if you think about that,
that's really resisting.

1065
00:54:18,120 --> 00:54:19,890
We'll be happy to come
to these meetings.

1066
00:54:19,890 --> 00:54:24,060
But we do not now promise
ever to commit to do anything,

1067
00:54:24,060 --> 00:54:25,960
unless, of course,
it's paid for.

1068
00:54:25,960 --> 00:54:30,450
So the Kyoto Protocol
called for Annex I countries

1069
00:54:30,450 --> 00:54:32,310
to make reductions.

1070
00:54:32,310 --> 00:54:39,760
It was ratified by the members
of the European Union, Japan,

1071
00:54:39,760 --> 00:54:43,980
Australia, Canada,
lots of other folks.

1072
00:54:43,980 --> 00:54:46,620
We did not.

1073
00:54:46,620 --> 00:54:51,720
The history of that is roughly
that President Clinton,

1074
00:54:51,720 --> 00:54:55,530
in the run up to
those negotiations,

1075
00:54:55,530 --> 00:54:58,410
there was a lot of noise
in the air about how

1076
00:54:58,410 --> 00:54:59,220
this will be free.

1077
00:54:59,220 --> 00:55:01,813
It'll be a great benefit
to the US economy.

1078
00:55:01,813 --> 00:55:02,730
This will be fabulous.

1079
00:55:02,730 --> 00:55:03,730
We can reduce emissions.

1080
00:55:03,730 --> 00:55:05,100
It'll be no cost.

1081
00:55:05,100 --> 00:55:08,688
Every economist not working
for the administration stood up

1082
00:55:08,688 --> 00:55:10,980
and said, well, it's not
going to cost that much money,

1083
00:55:10,980 --> 00:55:13,570
but it will cost.

1084
00:55:13,570 --> 00:55:17,170
Congress passed a resolution
95 to nothing saying,

1085
00:55:17,170 --> 00:55:18,970
we won't ratify anything that--

1086
00:55:18,970 --> 00:55:21,100
basically, slightly
different language--

1087
00:55:21,100 --> 00:55:23,980
that doesn't require the
Chinese to do something now.

1088
00:55:23,980 --> 00:55:25,970
95 to nothing.

1089
00:55:25,970 --> 00:55:28,570
So Al Gore went to Kyoto.

1090
00:55:28,570 --> 00:55:32,680
The US said, this is fabulous.

1091
00:55:32,680 --> 00:55:33,910
We made an agreement.

1092
00:55:33,910 --> 00:55:38,690
The treaty was not sent to
the Senate for ratification.

1093
00:55:38,690 --> 00:55:42,820
And President George
W. Bush formally

1094
00:55:42,820 --> 00:55:46,330
declared the horse dead
in 2001 when he said,

1095
00:55:46,330 --> 00:55:48,470
we're not going to play.

1096
00:55:48,470 --> 00:55:51,190
So the EU has
established-- and again,

1097
00:55:51,190 --> 00:55:54,460
you can read the Parsons, et
al, article if you're interested

1098
00:55:54,460 --> 00:55:55,210
in it--

1099
00:55:55,210 --> 00:55:57,130
established an emissions
trading scheme.

1100
00:55:57,130 --> 00:56:01,000
They did the certificates
dropped from the air that

1101
00:56:01,000 --> 00:56:03,100
lets you emit carbon dioxide.

1102
00:56:03,100 --> 00:56:04,840
I mean, it's not
a perfect system.

1103
00:56:04,840 --> 00:56:07,150
You'll see some glitches.

1104
00:56:07,150 --> 00:56:09,760
But it may work.

1105
00:56:09,760 --> 00:56:12,910
And they may actually
meet their commitments.

1106
00:56:12,910 --> 00:56:15,740
It doesn't appear
anybody else will,

1107
00:56:15,740 --> 00:56:18,440
even those that
ratified the treaty.

1108
00:56:18,440 --> 00:56:20,450
Australia's walking away.

1109
00:56:20,450 --> 00:56:23,700
I think Canada has walked away.

1110
00:56:23,700 --> 00:56:27,230
Japan may because of
the incredible disaster

1111
00:56:27,230 --> 00:56:33,830
they've gone through but
would not have absent it

1112
00:56:33,830 --> 00:56:36,710
and may not since they now
say that they will replace

1113
00:56:36,710 --> 00:56:38,990
the nuclear plants with coal.

1114
00:56:38,990 --> 00:56:40,220
So we'll see.

1115
00:56:40,220 --> 00:56:47,290
But at any rate,
nothing will happen.

1116
00:56:47,290 --> 00:56:51,550
The subsequent
agreements, there was

1117
00:56:51,550 --> 00:56:55,540
Copenhagen. There was a lot of
fuss around Copenhagen. You'll

1118
00:56:55,540 --> 00:56:59,800
see the run up discussed
in The Economist reading.

1119
00:56:59,800 --> 00:57:03,280
You will see the most
recent Doha discussed

1120
00:57:03,280 --> 00:57:05,110
in the second very
short Economist

1121
00:57:05,110 --> 00:57:07,120
reading, happened in December.

1122
00:57:10,840 --> 00:57:14,110
There's no global
agreement in place.

1123
00:57:14,110 --> 00:57:19,673
What happened in Doha, and it's
on my slides for Wednesday,

1124
00:57:19,673 --> 00:57:20,590
but I'll tell you now.

1125
00:57:20,590 --> 00:57:24,160
What happened in
Doha was basically

1126
00:57:24,160 --> 00:57:27,960
the Europeans
agreed to continue.

1127
00:57:27,960 --> 00:57:31,890
There was a promise of money
to go from the rich countries

1128
00:57:31,890 --> 00:57:34,080
to the poor countries,
a much smaller promise

1129
00:57:34,080 --> 00:57:36,460
than you will consider
Wednesday and Friday.

1130
00:57:36,460 --> 00:57:38,160
But there was a promise.

1131
00:57:38,160 --> 00:57:40,830
We'll see if it's kept.

1132
00:57:40,830 --> 00:57:45,230
And the developing
world promised

1133
00:57:45,230 --> 00:57:48,080
to consider making promises.

1134
00:57:48,080 --> 00:57:50,780
That is to say the
refusal to commit ever

1135
00:57:50,780 --> 00:57:52,910
to commit is off the table.

1136
00:57:52,910 --> 00:57:56,750
They now say they will consider,
in subsequent negotiations

1137
00:57:56,750 --> 00:58:03,220
beginning in 2015,
participating in a global regime

1138
00:58:03,220 --> 00:58:08,180
of some sort, not
fully spelled out.

1139
00:58:08,180 --> 00:58:11,330
So the poor countries,
as I say, need

1140
00:58:11,330 --> 00:58:16,830
to participate, have managed
to be excluded so far.

1141
00:58:20,030 --> 00:58:24,410
The task you will face on
Wednesday and Friday is to,

1142
00:58:24,410 --> 00:58:27,920
and I hope do it
with a straight face,

1143
00:58:27,920 --> 00:58:31,370
is to make proposals that have
some hope of being accepted

1144
00:58:31,370 --> 00:58:35,270
when you go back to your
capitals of emissions

1145
00:58:35,270 --> 00:58:38,040
reductions that will get
the job done globally.

1146
00:58:38,040 --> 00:58:40,340
OK, I've covered a lot.

1147
00:58:40,340 --> 00:58:43,480
And I'm going to pause here.

1148
00:58:43,480 --> 00:58:45,330
I hate to quit this early.

1149
00:58:45,330 --> 00:58:48,510
But let me see if you have
questions or comments.

1150
00:58:48,510 --> 00:58:49,790
How do we do this?

1151
00:58:53,730 --> 00:58:56,140
Have you all read the
briefing materials?

1152
00:58:56,140 --> 00:58:56,640
No?

1153
00:58:56,640 --> 00:58:58,510
They're up for
Wednesday, I guess.

1154
00:58:58,510 --> 00:58:59,010
Yeah?

1155
00:58:59,010 --> 00:59:05,982
AUDIENCE: [INAUDIBLE]
$1 billion per year

1156
00:59:05,982 --> 00:59:10,065
to stay within that 2
degrees Celsius rise?

1157
00:59:10,065 --> 00:59:11,690
RICHARD SCHMALENSEE:
2 degrees Celsius,

1158
00:59:11,690 --> 00:59:13,648
which is what we're
working with because that's

1159
00:59:13,648 --> 00:59:20,350
how the exercise was set, is
really ambitious at this stage.

1160
00:59:20,350 --> 00:59:23,110
I mean, it is the
goal that was adopted

1161
00:59:23,110 --> 00:59:28,730
in Copenhagen. It's a very
ambitious goal at this stage.

1162
00:59:28,730 --> 00:59:32,170
It might not have been so
ambitious 20 years ago.

1163
00:59:32,170 --> 00:59:34,410
But now more stuff in the air.

1164
00:59:34,410 --> 00:59:35,760
Stuff going to stay a long time.

1165
00:59:35,760 --> 00:59:37,680
Steeper reduction is called for.

1166
00:59:37,680 --> 00:59:40,720
Yeah, I mean, who knows
what it's going to take?

1167
00:59:40,720 --> 00:59:42,960
But it's not going to
be a walk in the part.

1168
00:59:42,960 --> 00:59:44,642
It's going to be serious money.

1169
00:59:44,642 --> 00:59:47,142
AUDIENCE: I thought that was
interesting because $1 trillion

1170
00:59:47,142 --> 00:59:50,425
is less than a percent of
the entire world's GDP.

1171
00:59:50,425 --> 00:59:51,550
RICHARD SCHMALENSEE: It is.

1172
00:59:51,550 --> 00:59:53,120
It is.

1173
00:59:53,120 --> 00:59:57,260
But as they say in Washington,
you've got only 100

1174
00:59:57,260 --> 00:59:59,350
of those percents to play with.

1175
00:59:59,350 --> 01:00:05,900
And so less than 1% sounds
small until you start saying,

1176
01:00:05,900 --> 01:00:08,010
what does that mean we don't do?

1177
01:00:08,010 --> 01:00:10,580
1% of the household
budget, easy.

1178
01:00:10,580 --> 01:00:18,440
But 1% of-- moving 1% of world
GDP from purpose A to purpose B

1179
01:00:18,440 --> 01:00:21,620
requires governments
to do serious things.

1180
01:00:21,620 --> 01:00:23,703
Deciding to cut
back 1% yourself,

1181
01:00:23,703 --> 01:00:24,620
yeah, you can do that.

1182
01:00:24,620 --> 01:00:25,730
It's nothing.

1183
01:00:25,730 --> 01:00:29,750
But deciding that US is going to
increase spending on something

1184
01:00:29,750 --> 01:00:33,650
by 1%, A, that's a
bigger percentage

1185
01:00:33,650 --> 01:00:35,600
of government activity.

1186
01:00:35,600 --> 01:00:39,650
And, B, you're going to
have to tax, spend, torque,

1187
01:00:39,650 --> 01:00:43,190
regulate, do significant things.

1188
01:00:43,190 --> 01:00:45,830
So yeah, it's only 1% of GDP.

1189
01:00:45,830 --> 01:00:48,350
And all the models
say that's sort

1190
01:00:48,350 --> 01:00:51,110
of the right order of magnitude
for the kinds of things you'll

1191
01:00:51,110 --> 01:00:55,670
need to do, 1%, maybe 2%.

1192
01:00:55,670 --> 01:00:59,450
But that sounds
easier than it is.

1193
01:00:59,450 --> 01:01:01,930
Let me just say that.

1194
01:01:01,930 --> 01:01:02,488
Yeah, David?

1195
01:01:02,488 --> 01:01:04,530
AUDIENCE: You're talking
about the Kyoto Protocol

1196
01:01:04,530 --> 01:01:06,570
and how basically the
EU is the only one

1197
01:01:06,570 --> 01:01:08,880
who even had a chance of
meeting what they promised.

1198
01:01:08,880 --> 01:01:12,840
What's been proposed to kind
make sure that people actually

1199
01:01:12,840 --> 01:01:14,130
meet what they said?

1200
01:01:14,130 --> 01:01:17,340
So say, I'm the EU and I
spent all this money trying

1201
01:01:17,340 --> 01:01:19,433
to control our CO2 emissions.

1202
01:01:19,433 --> 01:01:20,100
We did our part.

1203
01:01:20,100 --> 01:01:20,962
And no one else did.

1204
01:01:20,962 --> 01:01:22,920
And it's really not going
to make a difference.

1205
01:01:22,920 --> 01:01:25,020
RICHARD SCHMALENSEE:
Well, there's

1206
01:01:25,020 --> 01:01:29,490
no enforcement mechanism
in the protocol.

1207
01:01:29,490 --> 01:01:31,560
I don't know that the
Framework Convention even

1208
01:01:31,560 --> 01:01:34,140
allows for the possibility
of an enforcement mechanism.

1209
01:01:34,140 --> 01:01:35,370
I'd have to go back and look.

1210
01:01:37,930 --> 01:01:41,320
For simple international
agreements ,

1211
01:01:41,320 --> 01:01:43,330
it hasn't mattered much.

1212
01:01:43,330 --> 01:01:47,890
The Montreal Protocol to phase
out ozone-depleting substances,

1213
01:01:47,890 --> 01:01:51,950
widely ratified not perfect.

1214
01:01:51,950 --> 01:01:55,030
There are some illegal
manufacturing here and there.

1215
01:01:55,030 --> 01:01:58,210
But basically, it's tiny.

1216
01:01:58,210 --> 01:02:01,540
So most governments can
afford to just do it.

1217
01:02:01,540 --> 01:02:03,640
Most countries can
afford to do it.

1218
01:02:03,640 --> 01:02:06,430
It's a rich countries
use those chemicals more

1219
01:02:06,430 --> 01:02:09,430
than poor countries.

1220
01:02:09,430 --> 01:02:11,710
Rich countries can
afford substitutes,

1221
01:02:11,710 --> 01:02:14,740
not perfect, but cheap.

1222
01:02:14,740 --> 01:02:15,580
This, not so cheap.

1223
01:02:15,580 --> 01:02:18,550
And so no enforcement mechanism
there either, as far as I know.

1224
01:02:18,550 --> 01:02:19,870
I don't think there was.

1225
01:02:19,870 --> 01:02:23,740
In any case, it was
never seriously deployed.

1226
01:02:23,740 --> 01:02:27,290
Here, what would you do?

1227
01:02:27,290 --> 01:02:30,740
I mean, the Europeans
are ready to go.

1228
01:02:30,740 --> 01:02:32,000
Everybody was very excited.

1229
01:02:32,000 --> 01:02:33,810
Al Gore flew to Kyoto.

1230
01:02:33,810 --> 01:02:35,900
It was high times.

1231
01:02:35,900 --> 01:02:41,510
And to say the US has always
talked about monitoring.

1232
01:02:41,510 --> 01:02:43,580
No matter who the
president's been,

1233
01:02:43,580 --> 01:02:49,250
we always talk about monitoring
in these kinds of discussions.

1234
01:02:49,250 --> 01:02:51,320
Nobody listens to us much now.

1235
01:02:51,320 --> 01:02:53,270
But we always say,
gee, you ought

1236
01:02:53,270 --> 01:02:59,390
to actually know if somebody
is obeying the agreement.

1237
01:02:59,390 --> 01:03:03,650
That's resisted by
a lot of countries.

1238
01:03:03,650 --> 01:03:04,760
So no.

1239
01:03:04,760 --> 01:03:07,880
And you can now
imagine the beginnings

1240
01:03:07,880 --> 01:03:10,237
of a European reaction.

1241
01:03:10,237 --> 01:03:10,820
Wait a minute.

1242
01:03:10,820 --> 01:03:12,710
We're doing all this?

1243
01:03:12,710 --> 01:03:15,380
And what are all these
other people doing?

1244
01:03:15,380 --> 01:03:16,580
They're smiling at us.

1245
01:03:19,280 --> 01:03:22,310
It raises the cost of
our heavy industry,

1246
01:03:22,310 --> 01:03:24,500
our energy-intensive industry.

1247
01:03:24,500 --> 01:03:26,450
And wait a minute.

1248
01:03:26,450 --> 01:03:28,400
Why are we doing this again?

1249
01:03:28,400 --> 01:03:31,010
Because it's not going to
have any effect, right?

1250
01:03:31,010 --> 01:03:33,170
I mean, Europe is a relatively--

1251
01:03:33,170 --> 01:03:36,140
relative to those
big charts, the kind

1252
01:03:36,140 --> 01:03:38,240
of reductions that
Europe's making

1253
01:03:38,240 --> 01:03:42,180
are hard to see
on the aggregate.

1254
01:03:42,180 --> 01:03:43,110
If I go back to--

1255
01:03:46,245 --> 01:03:46,870
that's the one.

1256
01:03:46,870 --> 01:03:51,990
If I go back to this one,
Europe might be the width

1257
01:03:51,990 --> 01:03:57,060
of this down at some cost.

1258
01:03:57,060 --> 01:03:59,280
So you can imagine
the European public

1259
01:03:59,280 --> 01:04:03,930
being less and less excited just
as they've begun to phase down

1260
01:04:03,930 --> 01:04:05,610
subsidies for renewable energy.

1261
01:04:08,190 --> 01:04:11,580
So yeah, that's
part of the problem.

1262
01:04:11,580 --> 01:04:13,380
The tsar can enforce.

1263
01:04:13,380 --> 01:04:15,300
We do not have a tsar.

1264
01:04:15,300 --> 01:04:16,788
We do not have a tsar.

1265
01:04:16,788 --> 01:04:18,580
AUDIENCE: So the Senate
passed a resolution

1266
01:04:18,580 --> 01:04:19,997
saying they won't
approve anything

1267
01:04:19,997 --> 01:04:23,790
that doesn't force China to
also have emissions reductions?

1268
01:04:23,790 --> 01:04:26,910
RICHARD SCHMALENSEE:
Didn't say force.

1269
01:04:26,910 --> 01:04:30,120
You can't use force because
none of these agreements--

1270
01:04:30,120 --> 01:04:33,090
unless it requires,
which is to say

1271
01:04:33,090 --> 01:04:36,490
that China signs on to something
that says it will do x.

1272
01:04:36,490 --> 01:04:36,990
Yeah.

1273
01:04:36,990 --> 01:04:38,740
AUDIENCE: But it doesn't
specify that they

1274
01:04:38,740 --> 01:04:41,132
have to actually be monitored?

1275
01:04:41,132 --> 01:04:42,840
RICHARD SCHMALENSEE:
Oh, I can't imagine.

1276
01:04:42,840 --> 01:04:46,710
I This country's
got a long history

1277
01:04:46,710 --> 01:04:48,483
of strategic arms reduction.

1278
01:04:48,483 --> 01:04:50,400
Do you remember-- well,
you wouldn't remember.

1279
01:04:50,400 --> 01:04:54,500
But you may have heard
people say trust but verify.

1280
01:04:54,500 --> 01:04:57,080
We've always had that
view internationally.

1281
01:04:57,080 --> 01:04:58,940
We want to make sure
if we're going to obey,

1282
01:04:58,940 --> 01:05:00,920
we're going to make sure
other people do too,

1283
01:05:00,920 --> 01:05:02,510
at least monitor.

1284
01:05:02,510 --> 01:05:04,050
You may not be able to enforce.

1285
01:05:04,050 --> 01:05:07,460
So I can't see us signing
something, ratifying

1286
01:05:07,460 --> 01:05:11,720
something that doesn't have at
least monitoring provisions.

1287
01:05:11,720 --> 01:05:19,290
Enforcement, look at attempts
to take action against Syria.

1288
01:05:19,290 --> 01:05:23,000
The world community doesn't
lightly enforce stuff.

1289
01:05:23,000 --> 01:05:27,390
But every so often, Syria,
Iran, something gets done.

1290
01:05:27,390 --> 01:05:28,578
But doesn't get done easily.

1291
01:05:28,578 --> 01:05:29,870
Doesn't get done automatically.

1292
01:05:29,870 --> 01:05:31,130
It's a big political deal.

1293
01:05:31,130 --> 01:05:31,820
David?

1294
01:05:31,820 --> 01:05:35,310
AUDIENCE: How is this not led
to a stronger partnership laws?

1295
01:05:35,310 --> 01:05:40,400
In that, I see it as a place
where a more developed nation

1296
01:05:40,400 --> 01:05:42,770
that has high technology
institutions like MIT

1297
01:05:42,770 --> 01:05:46,160
could come in and talk
to a place like that.

1298
01:05:46,160 --> 01:05:49,115
There's already a fair amount
of infrastructure investment

1299
01:05:49,115 --> 01:05:49,880
that's made.

1300
01:05:49,880 --> 01:05:52,610
And a lot of it can be in the
terms of low-interest loans

1301
01:05:52,610 --> 01:05:56,720
or provide experts to help
build up the infrastructure

1302
01:05:56,720 --> 01:05:58,380
because your cost is lower.

1303
01:05:58,380 --> 01:06:00,020
And you're developing
something new.

1304
01:06:00,020 --> 01:06:03,560
And you're fostering global
investment here in the States

1305
01:06:03,560 --> 01:06:05,180
by making that part of your--

1306
01:06:05,180 --> 01:06:05,870
RICHARD SCHMALENSEE: Available.

1307
01:06:05,870 --> 01:06:06,500
AUDIENCE: --value add.

1308
01:06:06,500 --> 01:06:07,595
You're also helping
internationally.

1309
01:06:07,595 --> 01:06:08,678
How is that not happening?

1310
01:06:08,678 --> 01:06:11,060
RICHARD SCHMALENSEE: Well,
it happens to some extent.

1311
01:06:11,060 --> 01:06:15,170
There's a problem of
measurement, right?

1312
01:06:15,170 --> 01:06:20,680
The European system--
the Kyoto Protocol

1313
01:06:20,680 --> 01:06:27,220
provides for joint
implementation.

1314
01:06:27,220 --> 01:06:29,330
Well, I forget the
exact language.

1315
01:06:29,330 --> 01:06:29,830
Hmm?

1316
01:06:29,830 --> 01:06:32,740
The Clean Development
Mechanism, CDM.

1317
01:06:32,740 --> 01:06:36,700
If you're a European
company, you

1318
01:06:36,700 --> 01:06:40,240
can meet some of
your obligations

1319
01:06:40,240 --> 01:06:44,450
by reducing emissions
in a poor country.

1320
01:06:44,450 --> 01:06:51,230
So you can go to China and do a
deal, bring in new technology,

1321
01:06:51,230 --> 01:06:54,890
do something that
will reduce emissions.

1322
01:06:54,890 --> 01:06:56,140
And that will give you credit.

1323
01:06:56,140 --> 01:06:59,950
And that's exactly
that kind of thinking.

1324
01:06:59,950 --> 01:07:02,770
Even though China
isn't participating,

1325
01:07:02,770 --> 01:07:05,300
it's still cheaper to
do reductions there.

1326
01:07:05,300 --> 01:07:09,310
So let's find a way to give
countries in Europe credit

1327
01:07:09,310 --> 01:07:11,888
for reductions in China.

1328
01:07:11,888 --> 01:07:13,180
There are a couple of problems.

1329
01:07:16,840 --> 01:07:19,500
Well, it all boils
down to one problem

1330
01:07:19,500 --> 01:07:22,920
really, which is, how
do you measure it?

1331
01:07:22,920 --> 01:07:27,270
Because you're reducing
over what would have been.

1332
01:07:27,270 --> 01:07:29,850
So you modernize a factory.

1333
01:07:29,850 --> 01:07:32,040
So would that factory
have been running forever

1334
01:07:32,040 --> 01:07:33,360
with old technology?

1335
01:07:33,360 --> 01:07:34,920
Or would it have been torn down?

1336
01:07:34,920 --> 01:07:37,500
Or would it have been
modernized anyway?

1337
01:07:37,500 --> 01:07:43,390
So either you're real
light on how you do this,

1338
01:07:43,390 --> 01:07:46,690
and you don't impose
real tough restrictions

1339
01:07:46,690 --> 01:07:49,210
and then you're not
getting real reductions.

1340
01:07:49,210 --> 01:07:51,880
Or you make it really
hard to document.

1341
01:07:51,880 --> 01:07:53,770
In which case, you
kill the market.

1342
01:07:53,770 --> 01:07:55,180
So it happens.

1343
01:07:55,180 --> 01:07:56,560
And it happens to some extent.

1344
01:07:56,560 --> 01:07:58,518
The Europeans have gotten
a little tired of it,

1345
01:07:58,518 --> 01:08:01,850
as I recall, thinking that
it's been a little too easy.

1346
01:08:01,850 --> 01:08:08,960
But one of the features of the
Waxman-Markey bill in the US,

1347
01:08:08,960 --> 01:08:12,200
which was the cap and trade
bill-- it was killed--

1348
01:08:12,200 --> 01:08:13,385
it allowed for that.

1349
01:08:16,529 --> 01:08:18,990
It covered only fossil fuels.

1350
01:08:18,990 --> 01:08:22,470
But it allowed
companies to get credit

1351
01:08:22,470 --> 01:08:26,100
for things done in agriculture.

1352
01:08:26,100 --> 01:08:28,490
So you could change land use.

1353
01:08:28,490 --> 01:08:33,710
And it was a giveaway
to agriculture

1354
01:08:33,710 --> 01:08:36,680
basically because the standards
were going to be pretty easy.

1355
01:08:36,680 --> 01:08:39,229
But it was that
same notion that I

1356
01:08:39,229 --> 01:08:42,920
want to reach out beyond
places that I can price

1357
01:08:42,920 --> 01:08:45,620
to give people incentives.

1358
01:08:45,620 --> 01:08:49,399
But it's really hard because
you can measure what is emitted.

1359
01:08:49,399 --> 01:08:54,020
You can never measure
what would have been.

1360
01:08:54,020 --> 01:08:56,840
You could see the same
problem with forests

1361
01:08:56,840 --> 01:08:58,700
if you think for just a minute.

1362
01:08:58,700 --> 01:09:00,663
If I pay you not to
cut down a forest,

1363
01:09:00,663 --> 01:09:02,330
does that mean the
guy across the street

1364
01:09:02,330 --> 01:09:07,310
cuts his down to provide
the timber or what?

1365
01:09:07,310 --> 01:09:11,300
And you would never have cut
it down or you would have?

1366
01:09:11,300 --> 01:09:15,109
So it's a natural model.

1367
01:09:15,109 --> 01:09:19,880
If there were a common regime,
a cap and trade or a tax regime,

1368
01:09:19,880 --> 01:09:22,520
that would happen
automatically, easily.

1369
01:09:22,520 --> 01:09:24,529
And you wouldn't have
a measurement problem.

1370
01:09:24,529 --> 01:09:27,109
It's just hard to do it
without such a thing.

1371
01:09:27,109 --> 01:09:30,319
US companies, there's some
sort of informal trading

1372
01:09:30,319 --> 01:09:31,550
in carbon credits in the.

1373
01:09:31,550 --> 01:09:35,479
US and companies will
do stuff like this

1374
01:09:35,479 --> 01:09:37,340
and take credit for it.

1375
01:09:37,340 --> 01:09:38,899
Perfectly fine activities.

1376
01:09:38,899 --> 01:09:42,326
It's socially
responsible and all that.

1377
01:09:42,326 --> 01:09:43,534
But it's just hard to assess.

1378
01:09:43,534 --> 01:09:46,531
AUDIENCE: Where's the
developing nation resistance?

1379
01:09:46,531 --> 01:09:50,190
They're getting investment,
why would they not want to?

1380
01:09:50,190 --> 01:09:51,990
Besides the
measurement problem, I

1381
01:09:51,990 --> 01:09:53,930
would see it as someone
who's trying to get

1382
01:09:53,930 --> 01:09:55,082
foreign investment anyway.

1383
01:09:55,082 --> 01:09:59,240
And you take out full-page
ads in [INAUDIBLE]..

1384
01:09:59,240 --> 01:10:00,920
RICHARD SCHMALENSEE:
Well, what they're

1385
01:10:00,920 --> 01:10:03,890
worried about is
you guys got rich.

1386
01:10:03,890 --> 01:10:04,797
We want to get rich.

1387
01:10:04,797 --> 01:10:06,380
You guys got rich
burning fossil fuel.

1388
01:10:06,380 --> 01:10:08,510
And you're telling us--

1389
01:10:08,510 --> 01:10:10,310
I assume I'm going to
hear a bunch of this

1390
01:10:10,310 --> 01:10:13,160
on Wednesday and Friday
from the developing world.

1391
01:10:13,160 --> 01:10:16,220
You're telling us that
you got to do that.

1392
01:10:18,800 --> 01:10:21,110
And you're now leaning on us.

1393
01:10:21,110 --> 01:10:25,130
The fear isn't that
boatloads of investment

1394
01:10:25,130 --> 01:10:27,680
will come in and
modernize their factory.

1395
01:10:27,680 --> 01:10:30,290
The fear is that you're going
to raise the price of fuel

1396
01:10:30,290 --> 01:10:32,150
to my poor people.

1397
01:10:32,150 --> 01:10:35,900
A lot of these countries
subsidize fuel.

1398
01:10:35,900 --> 01:10:39,380
And I don't want to
take the political heat

1399
01:10:39,380 --> 01:10:45,248
from something that
restricts my ability to grow.

1400
01:10:45,248 --> 01:10:47,040
If you're telling me
that the Europeans are

1401
01:10:47,040 --> 01:10:49,457
going to come in and modernize
my factories, that's swell.

1402
01:10:49,457 --> 01:10:50,670
I love it.

1403
01:10:50,670 --> 01:10:52,650
If you're telling me
that I have to change

1404
01:10:52,650 --> 01:10:57,600
my policies in a way that
might slow growth and keep

1405
01:10:57,600 --> 01:11:01,690
my people poor, I'm
not real excited.

1406
01:11:01,690 --> 01:11:06,820
And you can say
I've been talking

1407
01:11:06,820 --> 01:11:09,700
about your grandchildren
and great-grandchildren.

1408
01:11:09,700 --> 01:11:13,100
Well, I mean, if your
kids are starving today,

1409
01:11:13,100 --> 01:11:15,980
that's a pretty
abstract argument.

1410
01:11:15,980 --> 01:11:17,630
That's real abstract.

1411
01:11:17,630 --> 01:11:26,920
So other comments, reactions,
questions, thoughts?

1412
01:11:26,920 --> 01:11:28,015
Oh, yeah?

1413
01:11:28,015 --> 01:11:32,710
AUDIENCE: So mostly we've been
talking about greenhouse gases.

1414
01:11:32,710 --> 01:11:34,360
Is there any
international discussion

1415
01:11:34,360 --> 01:11:37,570
about other like
climate-changing courses,

1416
01:11:37,570 --> 01:11:41,718
like the black carbon or other
like aerosols, or is that not?

1417
01:11:41,718 --> 01:11:43,510
RICHARD SCHMALENSEE:
Not that I'm aware of.

1418
01:11:43,510 --> 01:11:43,980
Is there some?

1419
01:11:43,980 --> 01:11:44,290
SUSAN SOLOMON: Yes.

1420
01:11:44,290 --> 01:11:45,720
RICHARD SCHMALENSEE: OK.

1421
01:11:45,720 --> 01:11:46,247
Say.

1422
01:11:46,247 --> 01:11:47,830
SUSAN SOLOMON: Well,
I mean, the State

1423
01:11:47,830 --> 01:11:52,770
Department, just a few weeks
ago, announced that we would--

1424
01:11:52,770 --> 01:11:55,740
RICHARD SCHMALENSEE: So
they will capture you on--

1425
01:11:55,740 --> 01:11:58,420
you didn't sign a release
form, but never mind.

1426
01:11:58,420 --> 01:12:00,198
SUSAN SOLOMON: I release you.

1427
01:12:00,198 --> 01:12:02,490
RICHARD SCHMALENSEE: And
everyone is released out there

1428
01:12:02,490 --> 01:12:03,282
in television land.

1429
01:12:03,282 --> 01:12:03,960
OK.

1430
01:12:03,960 --> 01:12:05,460
SUSAN SOLOMON: Just
a few weeks ago,

1431
01:12:05,460 --> 01:12:08,950
the State Department announced
that we would be part of,

1432
01:12:08,950 --> 01:12:11,100
and I guess the
leader of, an effort

1433
01:12:11,100 --> 01:12:14,310
to try to reduce
emissions of soot

1434
01:12:14,310 --> 01:12:17,310
and other short-lived
gases, stuff

1435
01:12:17,310 --> 01:12:21,520
like methane and
tropospheric ozones as well.

1436
01:12:21,520 --> 01:12:25,200
So that's a voluntary program.

1437
01:12:25,200 --> 01:12:27,690
But there are movements
in that direction.

1438
01:12:27,690 --> 01:12:29,790
And there is
actually quite a bit

1439
01:12:29,790 --> 01:12:37,890
of investment in providing
very much more efficient stoves

1440
01:12:37,890 --> 01:12:41,760
to people in very
poor countries,

1441
01:12:41,760 --> 01:12:47,160
so that they can avoid using
things like dung and coal

1442
01:12:47,160 --> 01:12:49,528
and stuff like that, which
generates an enormous amount

1443
01:12:49,528 --> 01:12:50,070
of pollution.

1444
01:12:50,070 --> 01:12:53,880
So it has both a health benefit
and an efficiency benefit.

1445
01:12:53,880 --> 01:12:56,250
And it also cuts
carbon a little but.

1446
01:12:56,250 --> 01:12:58,650
But realistically,
the main motivation

1447
01:12:58,650 --> 01:13:01,380
is much more grounded in soot.

1448
01:13:01,380 --> 01:13:05,340
RICHARD SCHMALENSEE: I mean,
one reason, not the main reason

1449
01:13:05,340 --> 01:13:08,250
necessarily, to be concerned
with black carbon emissions is

1450
01:13:08,250 --> 01:13:10,710
the effect on the reflectivity.

1451
01:13:10,710 --> 01:13:13,980
If you have a lot of sea
ice, ice tends to reflect.

1452
01:13:13,980 --> 01:13:15,840
Black carbon tends to absorb.

1453
01:13:15,840 --> 01:13:18,600
So it does matter for
climate, but it also

1454
01:13:18,600 --> 01:13:20,190
matters when you breathe.

1455
01:13:23,190 --> 01:13:25,930
There are lots of international
environmental treaties.

1456
01:13:25,930 --> 01:13:28,700
Most don't have anything
to do with climate.