developing world

New Paper Shows Staggering Cost to Americans of Waxman-Markey

by Iain Murray on September 9, 2009 · 2 comments

in Economy, Environment, Global Warming, International, Politics as Usual

There’s a new cost:benefit study from New York University Law School’s Institute for Public Integrity that, its authors claim, shows that, “From almost any perspective and under almost any assumption, H.R. 2454 [Waxman-Markey] is a good investment for the United States to make in our own economic future and in the future of the planet.”  A good investment for the US? Really?

The authors recognize that the benefits they find are global, while the costs are located in the US.  So let’s see what benefits accrue to US citizens and at what cost. (I am working with the authors’ figures here, which derive from the EPA, and are significantly different from the figures provided by such groups as the Heritage Foundation or the American Council for Capital Formation, which find much, much higher costs.)

Highest possible benefit = $5.2 trillion / 6 billion people = benefits of $866 per person

Cost to US citizen = $660 billion / 300 million people = cost of $2200 per citizen

That means a best possible benefit to cost ratio for a US citizen of 0.4:1.

The report talks about thinking of the Waxman-Markey costs as a “highly effective, highly leveraged form of foreign aid.”  One has to doubt that, given that the benefits that accrue to the developing world do so mostly in the far future, while the developing world is in desperate need of greater wealth – and better access to energy – today.  Even if it were true, however, one wonders whether the American public will accept a de facto tax increase of around $1300 per person, or $400 billion total, to pay for such climate aid.

Yet that’s assuming that the “high end” benefits scenario is what occurs.  The global low end benefits are actually far outweighed by the American costs, leading to a benefit:cost ratio to America of something in the order of 0.05:1 (or a cost:benefit ratio of 20:1).

And, of course, there’s no guarantee that a reduction in American emissions will amount to a reduction in global emissions.  We have seen the response to European cap-and-trade schemes being the relocation of facilities to other jurisdictions.  If so, the effective foreign aid program of Waxman-Markey might actually be a loss of American jobs to be replaced by developing world jobs, with no emissions reduction at all.  That would be very generous of us, but not quite what the authors of this study have in mind.

To summarize, the authors of the study have conclusively demonstrated that the Waxman-Markey bill is actually a very bad deal for the United States, and their attempts to claim otherwise are just spin.

Dambisa Moyo: Zambian Author Takes on Foreign Aid

by Ivan Osorio on February 25, 2009

in Deregulate to Stimulate, Economy, International, Stimulus to Nowhere, Trade

The celebrity parade calling for more foreign aid to poor countries has become so ubiquitous — and accepted — these days that critiques of it are rare. So it’s refreshing to see just such a critique in no less vaunted an outlet than The New York Times Magazine. The magazine’s current issue features an interview with Dambisa Moyo, a native of Zambia and author of the book, Dead Aid: Why Aid Is Not Working and How There is a Better Way for Africa, to be released in the United States on March 17.

You argue in your book that Western aid to Africa has not only perpetuated poverty but also worsened it, and you are perhaps the first African to request in book form that all development aid be halted within five years.
Think about it this way — China has 1.3 billion people, only 300 million of whom live like us, if you will, with Western living standards. There are a billion Chinese who are living in substandard conditions. Do you know anybody who feels sorry for China? Nobody.

Maybe that’s because they have so much money that we here in the U.S. are begging the Chinese for loans.
Forty years ago, China was poorer than many African countries. Yes, they have money today, but where did that money come from? They built that, they worked very hard to create a situation where they are not dependent on aid.

What do you think has held back Africans?
I believe it’s largely aid. You get the corruption — historically, leaders have stolen the money without penalty — and you get the dependency, which kills entrepreneurship. You also disenfranchise African citizens, because the government is beholden to foreign donors and not accountable to its people.

If people want to help out, what do you think they should do with their money if not make donations?
Microfinance. Give people jobs.

Finally, in these times of economic turmoil she’s got great advice not only for developing countries, but for rich ones, too.

For all your belief in the potential of capitalism, the free market is now in free fall and everyone is questioning the supposed wonders of the unregulated market.
I wish we questioned the aid model as much as we are questioning the capitalism model. Sometimes the most generous thing you can do is just say no.

Amen, though I would add that there is a form of aid of sorts that does help those it’s supposed to: remittances, which are private and voluntary, and thus can respond to recipients’ needs better than any bureaucratically administered aid program ever could. Moreover, as the current issue of The Economist notes, they can reach those in most need during lean times, because they “are less dependent on the growth prospects of receiving countries than other kinds of flows, which seek profitable investment opportunities.”

Of course, remittances alone will not help struggling countries rise out of poverty — that is a job for sound economic policies, including secure property rights, flexible markets (including labor markets), and free flow of goods, services, and capital. And again, not just for the developing world. As the American government pretends to “stimulate” the economy with the biggest spending bill in history, Dambisa Moyo’s advice could not be more timely. (Thanks to Margaret Griffis and Jeremy Sapienza for the New York Times Magazine link.)

When the Irreversible Effects Meet the Immovable Policy

by Iain Murray on January 27, 2009

in Energy, Environment, Global Warming, International

Apparently, global warming is now irreversible. Or, at least, it is if you don’t consider any of the policy options that might, you know, reverse it. As Roger Pielke Jr points out, the study didn’t examine the potential for geoengineering:

Geoengineering to remove carbon dioxide from the atmosphere was not considered in the study. “Ideas about taking the carbon dioxide away after the world puts it in have been proposed, but right now those are very speculative,” said Solomon.

Then only reason geoengineering remains speculative is because the global warming industry is locked into one policy model: mitigation. If adaptation is the red-headed stepchild of global warming research, geoengineering is the unacknowledged bastard, kept tied up in the basement and fed only with a bucket of fish heads.

Meanwhile, the McKinsey Global Initiative has come out with version 2 of its “we can save the world very cheaply” report, which is available if you register and give them your email address via the links here. The fiendish consultants have disabled the ability to cut their charts out, so you’ll have to get a copy for yourself, but their Exhibit 1 shows that all the “affordable” options are to do with energy efficiency, not grand new green energy projects, which are much more expensive and require aggressive carbon pricing (and this needs to be born in mind as well). Furthermore, these are truly global initiatives – something has has to be done everywhere, around the world – as Exhibit 4 makes clear. Something we can do quite affordably may be a different kettle of fish heads for the developing world. If you can’t afford an incandescent lightbulb, you can’t afford an LED lamp, whatever the CO2 abatement potential is. I hope to provide a full response to the McKinsey paper soon.

Prediction 2009: No Agreement at Copenhagen

by Iain Murray on December 30, 2008 · 2 comments

in Energy, Environment, Global Warming

The global warming community have suggested for a while now that, given the almost-certain change in US administration policy on global warming (remember John McCain’s position), the conference of the Kyoto Treaty parties in 2009 at Copenhagen would result in a sea change in global action on greenhouse gas emissions. Copenhagen would produce a new treaty, son-of-Kyoto, that would have full US participation, set stringent and enforceable emission limits aimed at getting the world to the sort of emissions levels some scientists demand, and start to involve the developing world in emissions reductions.

This is not going to happen.

For a start, it looks like US policy is going to concentrate on getting a domestic settlement in place before agreeing to any international action other than the traditional “agreeing to agree.” Secondly, with the world in financial chaos, governments are going to look askance at any possibility of deep emissions cuts in the short term because they know how costly that will be (the recent EU agreement – in actuality an agreement for just 4% cuts by 2020 – is a great example). This will make the drastic emissions cuts supposedly necessary in the medium-term well-nigh impossible to achieve. Finally, developing countries have consistently stated that they will not take on any emissions reductions, demanding the developed world move first. Yet even if the developed world reduces its emissions to zero by 2050, the developing world will have to keep its emissions at around today’s levels to meet just a 50% global reduction by 2050. That represents a reduction from expected developing world emissions of 57%. To meet the 80% reduction demanded by most scientists will require a severe reduction in emissions from today’s levels that represent widespread energy poverty.

So despite the optimism, a genuine international agreement looks some way off. Copenhagen will doubtless be sold as a triumph, but in reality the world will be no closer to a genuine, binding international agreement than it was in 2001.

FT says “nay” to Hillary choice for State

by Fran Smith on November 24, 2008 · 1 comment

in International, Politics as Usual, Trade

As pundits bet that Sen. Hillary Clinton is a done deal for Secretary of State, today’s editorial in the Financial Times calls it a poor choice for a variety of reasons. In the piece extolling President-ele

ct Barack Obama’s picks for his economic team, the FT says that’s not the case for Hillary and hits her lack of experience, her ambitions, and her personality.

Economics aside, the biggest surprise among Mr Obama’s rumoured appointments is Hillary Clinton, whose selection as secretary of state is said to be “on track”. This is a far more questionable choice, since Mrs Clinton is so lacking in foreign policy experience. The appointment gives rise to unhelpful speculation about the new president’s motives. Is he attempting to bind his party’s wounds? His victory already did that, and governing well would assure a full recovery. Is he attempting to neutralise her as a rival for the presidency in 2012? If things go badly for him, it will take more than this to quell another Clinton bid.

Could Mrs Clinton subordinate herself to Mr Obama, and devote herself to making his presidency a success? That is doubtful and, with many far better qualified candidates available, is a risk there is no need to take.

CEI has criticized that choice for different reasons — Sen. Clinton, who has strong anti-trade, anti-globalization positions, would not temper the in-coming president’s lack of support for trade, which could cause not only more economic problems for the U.S. and the developing world but also geopolitical ones.

NEW VIDEO: Global Warming and Eco-Imperialism

by Richard Morrison on October 8, 2008

in Environment, Global Warming, Precaution & Risk, Sanctimony

Coming from the UK, CEI Senior Fellow Iain Murray knows a little something about the history of political empires. Today, however, we find ourselves faced with a new era of eco-imperialism, particularly in the field of global warming policy. Iain explains:

“Eco-Imperialism” = efforts by the developed world to impose its environmental priorities on the developing world. Developed countries seek to pressure the Third World into reduce greenhouse gas emissions “for the sake of the planet,” regardless of its impact on the standard of living and prospects for economic growth in those nations. Cost-effective energy use is critical for Third World people, and is the fastest path toward ending poverty.

This, and other great videos, are also available at the new online multimedia destination CEI On Demand.