Posted by: Barry Bickmore | November 19, 2012

Betting on Climate Change

Physicist Mark Boslough proposes a sort of climate futures trading market that carbon dumpers are required to participate in.  If climate doesn’t change much, they make money.  If it does, they lose money.  Seems like an interesting idea for a market-based alternative to a carbon tax.


  1. I like a carbon tax on consumers for fossil fuel usage (on gasoline and maybe on other products that use fossil fuels along the way) together with a tax credit for everyone (so everyone gets the same tax benefit whether they make 1 million or 10K and regardless of what they consume). Those who use fossil sources regularly end up being net payers and those who don’t make a little bit of money courtesy of those using it and which they can use to defray costs of the energy they do consume and on products made more responsibly.

    Independently of that, I like the idea of a tax on producers (like the video was stating) where the producers get a refund if the earth reacts well. A per barrel tax means that the giant firms with lots of volume cannot leverage economies of scale (there would be none on this tax) to put out of business the smaller firms, and it means there would be no advantage to the high volume producers. Of course, a problem with any of these approaches is that we would have to try to link it internationally. If a firm on the other part of the world is producing a lot, hopefully, the US tax arm could reach there. If not those firms being taxed would say that they are subsidizing the others and this would promote firms leaving the US market, which would take a toll on the US economy first and on elected officials after that (so an approach that fails to tax foreign producers could only be used when such a toll would be small).

    As long as it is so profitable (including tax breaks) to process oil here, there will be a huge amount of pressure and dependent jobs to keep investing in that industry.

    Also, I just read an email about a group asking investors to divest themselves of fossil fuel firm stock and other financial connections. This is important in that it will lower voter resistance and resistance by elected officials (if they pledge to also pull out) to passing these laws. It will also create pressure on those currently with a lot of stock in those firms if the public starts bailing out and not supporting the stock price (though keep in mind that the sector is very profitable currently and many who own lots and lots of such stock probably care more about dividends than about capital growth.. for example, there are a lot of private firms that (aren’t public and) indulge in profits). A problem here is that people are being asked perhaps to vote against their better financial interests. [The “right” way to do this is to scare people about how that industry might collapse and so help promote that future as people bail out of fear, making the prophesy come true.]

    • Anyway, I think I prefer the first option of the three mentioned:
      1: tax consumption AND a per capita tax credit
      2: tax producers conditionally on health of planet
      3: motivate public to abandon money-making fossil fuel firms.

      As goes a futures market on earth temp (details?), this ordinarily would be gambling of sorts, and, while interesting, wouldn’t by itself solve the problem, especially since future contracts and many types of gambling allow one to bet on the opposite position. It wouldn’t help UNLESS we, eg, did require all producers to take a hefty (per barrel) bet on the side of the planet (which they will try to offset with various hedging strategies.. but which should still help the cause).

      • Upon further thought and since it’s true that taxing something (higher) discourages growth of the thing taxed, I would tax consumption as well as development/production at various levels. If we want to preserve US fossil fuel resources (eg, for a rainy century), then we tax pulling the stuff out of the ground and related activities. If we want to discourage creating of gasoline, then we tax the refiners. There are many levels. Taxing pushes that activity offshore, but we can put tariffs at least at the final product. The point is that there are many ways to discourage use of fossil fuels and depending on what is being taxed and how much, it will push those activities out of the reach of the taxman.

        Because jobs are an issue, more so the more that industry grows, US leaders will not any time soon merely consider the climate question. The main hope is that enough jobs will grow elsewhere in the economy to make it palatable to reduce these jobs.

        [The main problem with government IMO is that it doesn’t represent the people well. That could be improved if we could divorce our elected reps whenever we want instead of staying married (sometimes from a forced marriage in the first place) for 4-6 years. We would switch our 1/100,000th of a vote contribution (or whatever the fraction) to a different elected rep on a per bill/amendment basis if we so chose. Technology and a few adjustments in rules can make this possible. Why have so many elected reps be tempted to pay extra attention to $$ when they instead would know that even one vote against the majority of their current constituents could cost them those constituents from that point onward?]

        • That would be a “pure democracy”. They never have worked on a large scale, and they never will.

          • If you are referring to the “divorce” bit, I wasn’t describing a pure democracy because the ultimate decision is still taken by the elected reps. Also, as a practical matter, most people would not change their associated-rep for months or more at a time.

            This idea can also be extended to lower levels of government (actually, it would have to find success locally in order to even have a shot nationally).

            Vs a direct democracy pre-Internet days:
            — It was not feasible in the past to cast a significant number of votes and get a tally within a short time or real-time or with minimal delay. Electronic costs are much lower than paper costs (naturally I worry about trustworthiness of any sort of electronic transaction).
            — Most people would not participate in a democratic vote on an hourly basis, but everyone would effectively participate when it’s the rep that is doing the actual voting and taking care of the numerous details. This is a bit like enrolling in one 401K plan (or medicare or …) vs another. The actual work within the economy is done by others but you put your weight behind who you generally trust to work while you sleep.

            The main point is that if you want a divorce (or never liked the marriage), you can change before the 4-6 year period is up.

            This would take political fighting and consequent burnt out neurons out of elections a fair amount. Who would win would not be that important as long as you found someone you generally liked among the whole body of elected reps. You could prefer different people for different policy issues and then actively manage your associated-rep or just stick with one trusted rep for years. The number of reps from a given party would not be too important if popular individuals could have super vote powers.

            And the professional politician with special access and dedicated staff would still serve as a buffer to prevent making every day “ice cream day” or something like that.

            Really. What is wrong with this idea? The pros will find ways around it to some degree, but I anticipate an improvement in representation. No?

            • What you suggest is pretty close to a pure democracy. The problem is that most of us (including me) are complete rubes on most issues. We are ignorant and easily manipulated, so having a bit of a buffer between the people and the actual decision-making is a good thing, in my opinion. Also, since most people don’t WANT to be constantly involved in day-to-day politics, your plan would likely make it so that politics would be controlled by extremist weirdos even more than it now is.

              In any case, it’s incredibly hard to change the Constitution, so what you suggest will never happen, anyway. 😉

            • Here is how I see it.

              Say at most 10% of the active voting population at least somewhat micromanages the associated rep so as to at least approach their desired vote (and many people have no preference on many issues). Say another 40% of the active voting public mostly picks a different rep one time and stick with it for the duration of the term. This leaves 50% of the voting public and 100% of the inactive public with the status quo. If the voting public and inactive public are each about 50% of the voting-eligible population. This means we would have 1 part “true democracy” averaged in with 4 parts “good rep” averaged in with 5+10 parts status quo. This is still a fairly long way from a full true democracy, and it’s still 95% representative (where your vote defaults to whatever a single rep picks for the full term).

              A benefit is that the citizenry will over time become more active and knowledgeable and be less frustrated and more empowered. A benefit is that those who want can have a little extra influence and also get their divorces. We will also see money lose some of its power over elected reps. For issues very important to many, we will get laws passed that come close to the popular will, except of course that the reps still sponsor the candidate laws+amendments and likely will never make the mistake to vote in each unbirthday as a national holiday.

              I wasn’t sure about the requirement for a Constitutional amendment, but you are probably right on that. I would disagree on the other part you said and do believe that amendments that are worthwhile and proven can get passed.

          • If you are interested in digging deeper, consider this hypothetical:

            Let’s say a group got together and decided they would sell the following great idea: remove all investments in academia/research and use that money to give every voter a Lamborghini. How might this play out under our actual system vs under this hypothetical system? Which system is more vulnerable to this kind of threat? Which system is more vulnerable to a militant crazy taking over this nation?


          • What might happen is that any rep that got too much power would become a target of attacks by many competing constituencies as a way to preserve balance since having too large of a vote could lead to surprises and increases risk for everyone else.

  2. Problem with a divident is that as everyone moves away from fossil fules, the revenue drops and therefore the payout.

    And every time something isn’t given out any more, an American INSISTS that it’s a tax increase…

    • This doesn’t seem like an insurmountable problem if we had politicians willing to make a deal.

      • “if we had politicians willing to make a deal.”

        And thereby hangs a tail…

        (really a problem because the loud nuts have an inexplicable power over the party. Most of the actual voters are no different from any other, but party loyalty and the whole “if you don’t vote for our guy, the other one will get in” ensures that it remains two-party no matter HOW dumb the leaders appear to the votes)

    • Every option we can come up with favors some groups more than others, and different people have different definitions of “fairness”. I say, let’s negotiate something that will be better for everyone than sitting on our butts.

      • I think the (powerful) interests that are hostile to climate forecasts don’t want to see easy money disappear and they rationalize that a warmer planet will simply adjust winners and losers but won’t be traumatic to their own personal interests or those of their (wealthier than average) heirs or others they care about.

        Many people supporting those (powerful) interests have for numerous reasons convinced themselves the situation is not dire, so the problem still has time to be solved later on and rapid action today might hurt their own short-term employment/comfort (or even political) interests.

        Opening up “fronts” to combat the naysayers is perhaps necessary work. Helping others learn and cast away doubts takes time. Many people just aren’t going to trust the pros if they are suspicious.

      • I’d say “life isn’t fair”. All you can do is avoid making the change crushing.

        Taxing the rich 99%: pretty crushing unless you’re talking multi-billionares). Taxing the poorest an extra 10%: pretty crushing because they don’t HAVE an extra 10%.

        But dead is unfair on everyone, lets minimise the unfairness.

  3. Barry you will love this video of His Lordship:

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