Someone, somewhere, is making more CFC-11 than they should be – this illustrates neatly one of our major problems with climate change. Yes, it’s OK, I’m aware that CFCs, including cholrofluoromethane the one under discussion here, aren’t directly to do with climate change but with the ozone layer. However, the two are indeed intimately linked as they illustrate methods of dealing with either or both problem. And the illustration goes right to the heart of the basic economics of both problems. Just what is the correct system to be using to deal with our problems? That depends – as ever in economics, it depends is a good answer – on the exact details of the problem itself.
As ever when we’re discussing such things around here we’re not going to start by insisting that ozone layer problems are all inventions of the leaf eaters, nor that climate change is just an invention to kill off industrial society. Those two might even be true – certainly some use the second as an argument – but we’re going to assume that the science we’re being told is accurate and useful. In both cases we’ve a real problem, one that needs solving. The question then becomes, well, what’s the best solution?
At which point this about CFC-11:
A MYSTERIOUS rise in banned ozone-destroying substances could cause irreparable damage to the Earth’s UV protection layer, scientists are warning.
Researchers are now locked in a race against time to find the source of the emissions, which they believe are spreading from somewhere in East Asia.
Well, no, that’s all rather more than a little overdramatic. Sure, we’d like it to stop but what’s going on is a problem at the margin no more. The ozone layer is recovering, we’ve dealt with that, it’s just that it’s not recovering as fast as it should be given what we’ve already done.
CFCs were in wide use as refrigerants and propellants in aerosols and refrigerators until the 1980s, when emergency action by the UN saw a number of climate change treaties ratified by all member states – the first treaties to achieve this.
Despite all countries having ratified the Montreal Protocol, which seeks to reduce CFCs in the atmosphere, rogue polluters have seen emissions rise by 25% since 2012.
So, the underlying economics here, we’ve an externalities problem. Also known as a negative public goods one. The activities of various consenting parties – the makers and users of CFCs say – have costs to third parties, costs which are not being included in the costs and prices faced by those consenting parties. Those running fridges aren’t including that fraying of the ozone layer in their decision making process. We’d like them to do so of course.
This is all very closely related to the Tragedy of the Commons as outlined by Garrett Hardin. Who told us (Elinor Ostrom refining matters a little later, but that’s not relevant here) that we’ve basically two possible solutions, regulation and planning – government effectively – or prices, ownership and markets.
It’s also obviously closely related to climate change. My driving to lunch is going to cause costs to others by warming the planet and I’m not paying those costs nor considering them in my decision making. Well, actually, here in Europe I am, I pay gasoline taxes well above the rate of any sensible carbon tax so I’m already done on that but you still get the point. CFCs and CO2 are the same economic problem.
OK, we can plan stuff, issue regulations and we’ll be done, right? Well, no:
At the height of use in the 1980s, humans released 350,000 tons of CFC-11 each year—a number that dropped to 54,000 tons per year in the early 2000s. An additional 6,500 to 13,000 tons released each year in Eastern Asia would be enough to change the declining trend in just the way we’ve observed. An increase that large seems to require renewed production of CFC-11—violating the Montreal Protocol.
So, we’ve issued the regulations and someone, somewhere, isn’t obeying them. Hmm, that’s a bit of a problem if we decide to try and deal with climate change through the regulation route, isn’t it?
It gets rather worse too – or the only thing which produces CFCs is a CFC factory. OK, so we’re now looking for something, somewhere in SE Asia, which might be about the size of an office block. Good luck with that, eh? But think what happens if we’re trying to track down CO2 emissions? There are so many damn sources that it will be impossible. Quite literally, just not possible in the slightest. Everything from a rice paddy field through a car to making cement to having a steak means CO2 emissions. And we’re simply not, in any manner, going to be able to control 7 billion people doing all of those things and more.
Further, we’re not going to get to a cessation of emissions. We’ve a global ban on CFC-11 but someone’s making it. We might try to have a global ban on steaks but someone’s still going to try eating Daisy. That means that the wilder dreams of some, that we’ll regulate and control into zero emissions just aren’t going to happen. The obvious and visible things like plane flights maybe a proper dictatorship could get rid of those (although not for the dictators, obviously) but steaks and paddy fields? Pshaw!
This also means those wilder dreams of high carbon taxes – Hanson’t $1,000 a tonne CO2 for example – aren’t going to work. There will simply be a black market and the emissions from that will be entirely unregulated. This higher the tax the larger that black market will be. The best we can do is have a tax at some level which most to near all actually do pay, thereby affecting their emissions. We can, therefore, ameliorate to nearly deal with perhaps, but not entirely solve. Fortunately, as Stern has told us, the deal with price is some $50 to $80 a tonne CO2 which is the sort of number which most of us will pay and obey. As above I’ve pointed out near all of Europe already does with reference to gasoline.
The core of the point is this – we’ve a ban on production of CFC-11. Someone’s violating it. CO2 production has many more potential sources, a ban will be even more leaky. Thus we need to use the other method, prices and markets, and accept that even that will be leaky. A reasonable carbon tax it is then, that’s the best we can do.