Implications of agricultural elasticities

Michael Roberts summarizes one of his latest projects in three minutes (speaking time). For those not enamored of econometrics (e.g. why he uses weather as an instrument), his conclusion is:

Globally the demand elasticity for these crops combined is about 0.05 and the supply elasticity is about 0.10, perhaps a little larger. Both of these elasticities are far greater than they would be if estimated using traditional econometric methods that do not account for the joint-dependency of prices on supply and demand. If applied to US ethanol policy, they suggest US ethanol subsidies have caused about a 30% increase in prices for these key commodities and about a 35 million acre expansion of cropland worldwide. That's about the size of North Carolina, the state where I live.

A 30% price increase from biofuels alone is quite substantial. If I recall correctly, IFPRI estimated that biofuels accounted for 30% of the total recent rise in food prices (note the distinction from the absolute 30% implied by Michael's work). Other estimates varied widely, going up to 75% of the total rise in an unreleased but leaked World Bank report that caused quite a bit of controversy.

This also reminds me how inelastic demand makes farmers oppose climate change legislation.

Legislative update

Tyler Cowen thinks that:

If there's one lesson from the health care debacle, it is that Waxman-Markey was and is a dead end.

... and...

I believe the health care debacle should cause all of us to rethink our positions on preferred paths, sequences, and strategies. No matter what your opinion of the health care bill, it's not a pretty picture.

I hope he is wrong, but he is a very smart guy.

Also, via Morgan Downey, T. Boone Pickens is bullish on CNG legislation passing in Congress "by Memorial Day." I guess that would be good for the Pickens Plan, especially given that the wind farm leg hasn't been looking too healthy of late.

Does W-M promote energy efficiency?

My comment in response to Michael Roberts' concern that Waxman-Markey doesn't pass on higher electricity prices that would spur energy efficiency:

I like your "increasing marginal price" mechanism. Alternately, Waxman-Markey attempts to preserve the price signal by encouraging local distribution companies to rebate consumers through lump sums rather than lower prices. I'm not an authority on how it turned out - Stavins seemed to think it was going to be fine, whereas this Climate Progress post parses how "airtight" the language is (the answer seems to be "indicative, but not totally airtight.")

Update: Michael agrees in the comments. For those interested, here's the relevant passage in its entirety from Kerry-Boxer (passed by a friend - apparently it's on p664-665, but I don't have a link):

In general, an electricity local distribution company shall not use the value of emission allowances distributed under this subsection to provide to any ratepayer a rebate that is based solely on the quantity of electricity delivered to such ratepayer. To the extent an electricity local distribution company uses the value of emission allowances distributed under this subsection to provide rebates, it shall, to the maximum extent practicable, provide such rebates with regard to the fixed portion of ratepayers’ bills or as a fixed credit or rebate on electricity bills.

"Solely" and "to the maximum extent practicable" leave some wiggle room, but overall this looks pretty good.

Copenhagen in a sentence

Via Tim Haab at Environmental Economics:

Technologies to cut back carbon dioxide emissions from factories and vehicles that feed the global economy add costs to fuel, food and more, an option that appeals neither to industrial nations struggling with the global economic meltdown or developing nations trying to ramp up economic growth.

"Green jobs" preventing green energy?

Geoff Styles on the uproar over the proposed wind project in Texas involving Chinese investors...

The chief complaint about the project in question is that it might be eligible to take advantage of a key energy provision of the American Reinvestment and Recovery Act of 2009--this year's stimulus bill--that allows the developers of a qualifying renewable energy project to collect an up-front cash grant from the US Treasury equal to 30% of the cost of the project. In this case much of that money, along with the funds provided by the US and Chinese partners, would go to pay for wind turbines imported from China. As a result, most of the jobs this project would create would be in China, not the US. On the face of it, this looks like a colossal loophole that some high-profile legislators--who incidentally voted for the stimulus bill including this feature--are rushing to plug. However, this only looks like a nasty unintended consequence of a hastily-crafted law if you misunderstand the mechanics and purpose of the Treasury renewable energy grant program.

You guessed it, the program was passed to stimulate renewable energy projects in the wake of Lehman's collapse. Which it seems to be doing... unless the green jobs argument gets in the way.

Here's Geoff's conclusion, with which I whole-heartedly agree:

The wind industry has already developed a globalized supply chain, similar to many other industries, and no one should be stunned if wind turbines from China show up in Texas, any more than China should be surprised that its nuclear power plant construction projects are creating jobs in the US. Our assessment of the value of renewable energy sources such as wind power should hinge on their efficacy at providing reliable and cost-effective energy supplies and reducing greenhouse gas emissions, not on domestic jobs creation--even in a recession.

Commodity risk premia

Here's a discussion I had with Michael Roberts in the comments of this post at Greed, Green and Grains. The themes of risk premia for natural resources commodities and the implications for asset pricing and discount rates are pretty interesting for someone with a finance nerd inside them.

Teaser/spoiler: this will also be of interest to anyone interested in arguing that climate policy cost-benefit analysis should use a low discount rate, i.e. should value the future almost as highly as the present, rather than discounting it heavily.

[end of original post]

My dissertation, which I never published, argued that these negative risk premiums help to explain why natural resource prices haven't trended up over time. A negative adjustment for risk means Hotelling's interest rate is probably close to zero.

I'm a little less confident than I used to be about this story. But I still think there is some truth to it. I really need to dust off that paper...

R:

Not sure I understand your dissertation thesis - I thought that for Hotelling's theory the relevant interest rate (/risk premium) was that available in broader financial markets? I.e. even if a resource extractor can't get a positive risk premium from holding natural resources, they could by buying a bond...

Michael:

Yeah, I could have been way clearer in this post. Sorry, this was really more of a note to myself than a genuine effort to communicate an idea.

I'll try to give the intuition briefly.

Take oil, for example, say back 10-30 years ago. Prices generally bounced around due to news about supply or potential supply in the future. The really big price spikes came from oil embargoes, wars, etc. If prices go up, those who own the oil are very happy. But the rest of economy is not so happy. A reduction in oil supply is a real shift inward in the productive capacity of the aggregate economy.

Now asset pricing theory tells us that in equilibrium we should expect the risk premium to depend on the covariance with the aggregate economy. So, if oil prices go up when the aggregate economy goes down, going long on oil is like buying insurance for a bad economy. Insurance, like buying and holding oil, has a negative risk premium--it's an investment that loses money on average but you're willing to do it because it pays off most when you need it most.

Assets like stocks are the opposite, they pay most when the economy is booming and you need the money least.

Now Hotelling is just asset pricing for natural resources. It says prices should generally go up at the rate of interest. The thing is, for some basic commodities, the risk-adjusted rate is about zero. So prices don't go up in the long run.

Today demand shifts are driving oil prices, and that changes things. But I think the story still holds for precious metals and natural gas where supply uncertainty remains significant.

The same idea applies to climate change discounting. Investment in curbing global warming reduces the chance of a bad thing happening. It is an investment that pays off a lot of climate change is a really bad thing and an investment that pays nothing if climate change really isn't so bad. This means the risk premium is negative.

Somehow many of my colleagues (especially environmental economists) seem to forget or overlook this essential fact. Weitzman gets it. So do the macro/finance guys who care about climate change. So does John Quiggin. Rank and file environmental economists don't get it, and it really shows in the literature.

R:

Ah, I understand now - thanks for the longer explanation.

So what are the practical implications of the negative risk premium for investing in climate change prevention? (e.g., what mistakes would policy made based on the work of the "rank and file" be prone to?)

And does the asset pricing analogy really hold for climate change or other environmental public goods, where the "proceeds" of investment are shared broadly, rather than captured by the investor alone?

Michael:

Yes, I think all of this matters a lot for climate policy. A big part of the debate in economic circles pertains to the discount rates that should be used in weighing the benefits and costs of regulation.

If someone naively things the risk premium is positive, then the future--where all the benefits of climate change mitigation reside--gets discounted heavily. If we see it is actually a negative risk premium, then we discount the future much less.

Strangely, depending on one's assumptions, all of which may seem reasonable, one can get discount rates anywhere from slightly negative to 10% or more. And these different assumptions lead to cost/benefit calculations for curbing C02 that range from HUGE, like approaching 100% of GDP to basically nothing.

This ambiguity is not inspiring for economists...

R:

Nice - as an advocate of something being done about climate change sooner rather than later, I like this argument for why the financial discount rate should be low (for those who don't believe a lower "social" discount rate is appropriate).

Back to the original point, the more I think about it, the more I struggle to believe that natural resource commodities (even aside from oil) have a negative beta. Natural gas, iron ore, copper, phosphate fertilizer, most ag crops - pretty much you name it, it spiked in mid-2008 and fell dramatically when the world economy nose-dived. I'm sure someone has actually run the numbers before, but it seems anecdotally that demand is a big driver for all of them and they're only occasionally countercyclical.

Unfortunately that's as far as the conversation got (unfortunately because I think there is more to be done to hash this out completely) - but hopefully this is a good starting point for exploring these issues further in the future.

P.S. For anyone confused by the asset pricing jargon, here's Wikipedia on the Capital Asset Pricing Model (CAPM). The key idea relevant here is that diversification is valuable, so investors are willing to accept lower rates of return for assets whose returns are less correlated with the overall market (and this correlation is called beta).

Cap-and-trade’s impact on refining

From Environmental Capital:

Energy and climate legislation in Congress will create plenty of winners and losers, but one group in particular looks to get battered: U.S. refiners.

That’s the finding of a new report by energy consultants Wood Mackenzie, which says that cap-and-trade legislation will cost U.S. refiners about $100 billion a year by 2015 and put them at a competitive disadvantage to refiners in Europe. (The refining industry’s already warned about pain from climate legislation.)

There are still plenty of uncertainties about how climate legislation would affect the refining industry. Wood Mac’s analysis, for instance, is of the House version of climate legislation; the Senate version has even tougher rules for refiners right now.

It’s also not clear if refiners would be able to pass on the cost of carbon legislation to consumers. If they do, it would add 45 cents to the price of a gallon of gas, Wood Mac says.

But refiners may not be able to pass on the additional costs because of the threat of a flood of cheap gasoline imports from Europe. Current legislation leaves a loophole in which imported gasoline wouldn’t be subject to the same restrictions.

Which means that the government’s environmental plans could end up undermining another administration goal—energy security—by increasing the share of imported fuels.

True (and others - such as Geoff Styles, repeatedly - have noticed) but this would be fairly easily fixed by a border tax on imported gasoline, no?

(Hmm, I have pretty vocally opposed "border adjustments" before – is this position inconsistent? I'm afraid it might be...)

More on green jobs

In addition to me, Tyler Cowen, and Bastiat, here are a few other credible voices weighing in on green jobs.

Environmental Economics:

“We’ve reached another milestone as we move to a clean energy future,” Mrs. Boxer said in a statement, “creating millions of jobs and protecting our children from dangerous pollution.”

Cap-and-trade won't create millions of jobs in the way that a naive reader might perceive that statement. Jobs will be created in certain industries and we'll be able to point a finger at those and count them up. Jobs will also be lost elsewhere as a result of regulation and these will be more difficult to point out and count up. The net effect will be minor noise in the symphony of cyclical, structural and frictional job market. In other words, don't expect the unemployment rate to fall as a result of cap-and-trade.

Styles:

When legislation like the Kerry-Boxer climate bill, which includes many provisions that would make energy more expensive for consumers and businesses, is marketed as a jobs bill it merits a skeptical reception. Stimulating jobs in the 6-10% of the economy devoted to energy seems unlikely to compensate for the loss of jobs that would ensue throughout the broader economy, if climate legislation caused energy costs to soar. That may, however, be a necessary evil, and the question we should really be asking is not how many green jobs such legislation will create, but whether on balance its provisions are truly justified in order to address climate change--even if they resulted in a net loss of employment, as I strongly suspect they would. Unless the answer is an unequivocal yes, we could be setting our long-term energy policy on the basis of a metric that is only a minor contributor to either energy costs or total economic activity, for reasons that seem unlikely to stand the test of time.

P.S. Did not intend to back-handedly praise my "credibility" by association...

Obama’s speech conspicuously omits "cap-and-trade"

Obama has been fairly silent on climate change, much to the chagrin of those who decry his rhetoric gap. He gave a big speech at MIT today which excited Joe Romm, but as Environmental Capital points out, the focus on renewable energy to the complete exclusion of cap-and-trade or broader climate legislation is very concerning to those of us who believe that a comprehensive market-based system to limit emissions is an important – nay, indispensable – step toward stemming global warming. As I commented on Climate Progress:

Isn’t it a bit concerning that Obama’s speech seems to focus completely on renewable energy, to the exclusion of broader climate legislation and market-based mitigation strategies? Cap and trade wasn’t mentioned at all, and the word “climate” only appears once (whereas “energy” is all over the place). If he is indeed trying to stump for the cap-and-trade system which is the centerpiece of Congress’s current climate legislation, he’s doing it in an extremely roundabout way...

The green jobs argument, circa 1845

From Bastiat’s candlemakers’ petition against the sun, which I mentioned here but is too good not to excerpt on its own:

First, if you shut off as much as possible all access to natural light, and thereby create a need for artificial light, what industry in France will not ultimately be encouraged?

If France consumes more tallow, there will have to be more cattle and sheep, and, consequently, we shall see an increase in cleared fields, meat, wool, leather, and especially manure, the basis of all agricultural wealth.

If France consumes more oil, we shall see an expansion in the cultivation of the poppy, the olive, and rapeseed. These rich yet soil-exhausting plants will come at just the right time to enable us to put to profitable use the increased fertility that the breeding of cattle will impart to the land.

Our moors will be covered with resinous trees. Numerous swarms of bees will gather from our mountains the perfumed treasures that today waste their fragrance, like the flowers from which they emanate. Thus, there is not one branch of agriculture that would not undergo a great expansion.

The same holds true of shipping. Thousands of vessels will engage in whaling, and in a short time we shall have a fleet capable of upholding the honour of France and of gratifying the patriotic aspirations of the undersigned petitioners, chandlers, etc.

But what shall we say of the specialities of Parisian manufacture? Henceforth you will behold gilding, bronze, and crystal in candlesticks, in lamps, in chandeliers, in candelabra sparkling in spacious emporia compared with which those of today are but stalls.

There is no needy resin-collector on the heights of his sand dunes, no poor miner in the depths of his black pit, who will not receive higher wages and enjoy increased prosperity.

It needs but a little reflection, gentlemen, to be convinced that there is perhaps not one Frenchman, from the wealthy stockholder of the Anzin Company to the humblest vendor of matches, whose condition would not be improved by the success of our petition.

Hap tip to the inimitable Tyler Cowen.

The danger of the "green jobs" argument

“Green jobs” is, for better or worse, becoming the rallying cry and focal point of the fight over climate change legislation in Congress. I’ve generally had reservations over this approach because:

1. The point of the climate bill is climate, not jobs, and it is hard to do both at the same time
2. I worry that the green jobs argument is being oversold
3. If the case that the bill will create jobs is shown to be flawed, it tremendously weakens the public argument for the bill (even though it loses none of its urgency)

Given that preamble... Tyler Cowen links to a study on the cost of green jobs in Spain. Here are some choice quotes from the study:

Spain’s experience cited by President Obama as a model reveals with high confidence, by two different methods, that the U.S. should expect a loss of at least 2.2 jobs on average, or about 9 jobs lost for every 4 created, to which we have to add those jobs that non-subsidized investments with the same resources would have created.

The study calculates that since 2000 Spain spent €571,138 to create each “green job”, including subsidies of more than €1 million per wind industry job.

And here is Tyler’s commentary:

To be sure, there are very real benefits from limiting climate change. But if it takes more jobs to produce "green energy," that is a net cost to the economy, not a benefit... We're dealing now with something beyond the Keynesian short run and so those extra jobs are a drain of resources from elsewhere. If you wish, sub out the word "energy" and sub in the word "agriculture" and then reevaluate the sentence from the vantage point of 1900. Would it truly create net jobs -- much less good jobs -- to trash tractors and industrial fertilizer? The ideal situation would be a technology where very few jobs were required to create and distribute the nation's energy supply.

The idea that directed government spending is important to private sector job creation in the long term flies in the face of most capitalist ideology and economic theory. It is, in effect, economic populism with socialist implications (and with all due respect to socialism, I don't think that's what most American voters would aim for if the argument were laid out transparently). But the green jobs meme is so attractive politically, given the state of the economy, that it’s lured lawmakers like a Siren... and I worry how things will turn out once the economic evidence is examined in the light of day.

Tyler also links to Bastiat's candlemakers' petition against the sun, which is both quite funny and quite apropos.

Why farmers oppose climate change legislation

Michael Roberts explains why bad for yields does not mean bad for farmers' profits.

So, in response to Grist and the position by the American Farm Bureau on climate change, one may wonder: Why would farmers oppose the climate bill if they have so much to lose from potential global warming?

There is a simple answer: a big hit to crop yields does not imply a big hit to farmers' profits. In fact, if the rest of the world is unable to make up for U.S. losses, a big hit to yields is probably a very good thing for farmers profits. At least for the corn-soybean guys in the Midwest.

You see, the demand curve for basic grains is very steep. We've estimated an elasticity of about 0.05 (also see this paper). So if yields worldwide get cut by 50%, and no additional supply comes online to replace that loss, prices will go up 1000%, and farmers revenues will go up 500%. Farmers' profits will go up by a lot more than 500%.

So, while climate change is looking bad for buyers of basic grains, like North Carolina hog farmers and the urban poor in developing nations, those who grow basic grains will do very well. The incentives are very clear: opposing climate change legislation is good for corn growers' pocketbooks.

Carbon tariff table-turning

Speaking of carbon tariffs:

One reason for skepticism is that I’m actually skeptical that a properly implemented set of worldwide carbon border adjustments would actually achieve its intended purpose of boosting American manufacturing... The EU, Canada, and Japan are in the aggregate much more significant trade partners than China/Mexico/Brazil. And the case for them charging us carbon tariffs seems about as good as the case for us charging the Chinese.

Yet another reason the “border tax” aspect of the Kerry-Graham compromise is a terrible idea.

From Matt Yglesias, via MR.

Thumbs up on cooperation, thumbs down on substance

The Kerry-Graham NYT op ed on climate policy is a welcome sign of collaboration across the aisle, but its substance is mixed. The five main points are:

1. "We agree that climate change is real and threatens our economy and national security." [good!]
   


2. "While we invest in renewable energy sources like wind and solar, we must also take advantage of nuclear power, our single largest contributor of emissions-free power." [fine]
   


3. "Climate change legislation is an opportunity to get serious about breaking our dependence on foreign oil." [i.e. we need clean coal and offshore drilling]


4. "We cannot sacrifice another job to competitors overseas." [i.e. we need carbon tariffs]


5. "We will develop a mechanism to protect businesses — and ultimately consumers — from increases in energy prices." [good]

As a friend points out, clean coal is nice, but it won't do much to displace oil imports, since the vast majority of oil is used for transportation fuel, whereas coal is entirely used for power. (NB: this could change if CNG or coal-to-liquids ever took off in the U.S., but the former is still a Pickens pipe dream for now, and the technology for the latter has bad economics even without carbon pricing, which would make it completely untenable).

But the worst point is clearly the nearly naked defense of climate-inspired trade protectionism. Kerry-Graham claim that such tariffs will incentivize other countries to adopt environmentally friendly policies; this is the best possible outcome, but sparking a global trade war is another one, and it’s not clear to me why the latter is any less likely.

Chamber of Commerce exodus continues

Exelon has followed PG&E and New Mexico's PNM out the door, following the Chamber's now-famous proposed Scopes Monkey trial for climate change. It is a telling sign of the public power the climate change message has attained that utilities, far from fighting the coming cap-and-trade legislation, are leaving industry groups in droves (don't forget Duke Energy) to avoid being seen as obstructing it.

The advantages of autocracy

From Tom Friedman's latest NYT op ed:

One-party autocracy certainly has its drawbacks. But when it is led by a reasonably enlightened group of people, as China is today, it can also have great advantages. That one party can just impose the politically difficult but critically important policies needed to move a society forward in the 21st century.

In general I find Friedman lacks the nuance to push thinking on very complex issues, but he shines when driving home simple ideas in an accessible way. This is a great example. Many promoters of democracy don't seem to appreciate how it is (as a result of the same minority protections which enable it to preserve political rights) inherently bad at making hard societal decisions. You can see it in the need to pander to agriculture and coal special interests in order to pass climate legislation, and you can definitely see it in the current battle over healthcare and more broadly any political action around long-term fiscal issues like Social Security and Medicare entitlements. It is very easy for elected officials to kick hard decisions down the road, and as a result hard choices get put off and Social Security and Medicare end up as effective Ponzi schemes that dwarf Bernie Madoff.

Obviously these principles apply very directly to any sort of environmental sustainability issues, although rich-country democracies have actually done a pretty good job of non-climate environmental regulations (and China's track record is horrible).

There are probably other counterexamples waiting to be made of times when democracies did make hard, long-term decisions - readers?

Has China already done its part?

Speaking recently at Mr Porritt's Forum for the Future, a Chinese government official described the one child per family policy as having led to "400 million births averted" - which she then converted into the greenhouse gases those extra human inhabitants would have produced, and noted that no other country had done as much to curb climate change.

In this article which I'll blog more fully shortly. Opponents of climate legislation in developed countries criticize China for not doing more to curb its own emissions (although even that claim is becoming less defensible). But China has a formidable moral counterargument: not only were most of the greenhouse gases currently in the atmosphere emitted by rich countries, but China can stake a claim to having done more than and other country to reduce their own emissions.

Obama's "rhetoric gap" on climate

Climate Progress hosted a guest post by Grist's David Roberts on how Obama is not the magic solution to passing climate legislation

The president, even an extraordinarily popular president, can only do so much. Making one more speech won’t have any effect on Sens. Max Baucus (D-Mont.) or Ben Nelson (D-Neb.). It won’t reduce the money pouring from dirty energy companies into congressional coffers. It won’t change anybody’s mind at a teabagging rally or a dirty energy astroturfing event. This notion that Obama trying harder is the key to progressive success is just a siren song; it delays getting serious.

Obama can’t save progressives. They’ll save their agenda, if at all, with persistence and organizing. As it always was.

Joe Romm noted at the time that he only half agreed, but judging from his more recent writings (e.g. "The rhetoric gap: Can Obama give ‘em Hell (and High Water) before it’s too late?"), he's pretty firmly on the other side of this particular argument.

A Rooseveltian or Trumanesque campaign speech, addressing the concerns of the American majority, invoking the heroic history of American reform and naming the enemy, practically writes itself.

And today, commenting on Senator Maria Cantwell's quote that climate change legislation has a "50/50" chance of passing the Senate this year:

A 50-50 change is what I’ve been saying, but again, Obama — and only Obama — can increase those odds. As for the resolve of this country to make the transition to a low-carbon economy, we will find out in the next few months just how resolved we are.

I agree that the Obama administration's messaging has been quite cautious around climate change, perhaps inordinately so. But if you look at the landscape of the Senate at a very granular level as Nate Silver has done, it becomes very clear that it is a handful of individual senators and their constituencies that will swing this vote, not the national sentiment. Preaching to the choir in California and the Northeast will not make a difference. What the climate bill needs to pass the Senate is not soaring national rhetoric, but rather solid local organizing (as Roberts suggested) combined with pragmatic and savvy leadership and vote-counting by those guiding it through the Senate.

The Waxman-Markey "windfalls" myth

In social conversations about climate legislation, one objection that often comes up to the Waxman-Markey bill that passed the House is that, contrary to Obama's campaign promise to auction 100% of the permits, 85% are "given away" in Waxman-Markey, representing a "windfall" to those companies that receive then. This is a perception issue, not a substance issue. As I showed before, ~80% of the free permits will be effectively rebated to consumers, and most of the balance going to clean tech, energy efficiency, international purposes (e.g. avoiding deforestation) and adaptation.

In a recent conversation, a good question came up - what about the 5% of the permits which are allocated to merchant power generators? Won't that constitute a windfall, as they are not required to pass on savings like a regulated utility?

My answer at the time was that merchant generators will have to use the permits for power they end up generating (except for renewable power, but they should receive cash value for renewable power they generate), so the only windfall would be if they do not generate enough to require their 5% allowance allocation and the rest can be sold on the open market.

Here is a related post on Climate Progress by two electricity market experts on why W-M doesn't create windfall profits for utilities. However, I didn't see any mention of the merchant (unregulated) generators in the post, so I'm not sure whether they are meant to be included in the argument, or were omitted. If the latter, and the authors are hiding behind "the bulk of free allowances", I'd like to hear their thoughts on whether the merchant generators could in fact capture a windfall from the current allowance allocation structure.

My provisional conclusion is that the upper bound on profit windfalls is quite low, but I'm not yet completely convinced that merchant generators can't benefit at all.

Scopes Monkey Trial for climate change

Via Environmental Capital (and basically every other news source), the U.S. Chamber of Commerce has challenged the EPA to a 21st-century Scopes Monkey Trial for the science of climate change.

Joe Romm is already on the warpath:

Who ever could have imagined that the U.S. Chamber of Commerce would publicly — and proudly — equate climate science with evolution and their denial with a belief in creationism? Time now for the the major businesses on the Chamber’s board to speak up since many of them publicly claim to support strong climate action (see here). It might also be time for advocates to start boycotting those brand-name companies if they don’t act swiftly to stop.

This will never actually happen, which is good for climate change legislation, regardless of the eventual outcome; the spectacle of a public trial would implicitly reinforce in the public's mind the alleged inconclusiveness of existing climate science (a brilliant use of framing).

The issue is a difficult one - in my mind the science underpinning the mainstream view of the ultimate effects of anthropogenic climate change is probably at 80% or 90% or 99%, but definitely not at 100%. The fact that man has contributed to global warming is more like 99% (all the circumstantial evidence points to it, we just lack the ability to create a counterfactual to prove it), but the eventual effects are still highly uncertain, particularly due to our limited understanding of nature's many feedback loops, positive and negative. I don't think an intellectually honest climate change supporter could look me in the eye and say with 100% certainty that the earth has no self-regulating feedback loops which might dampen the effects of humans on the earth's temperature. Not that we know what they are, but like a black swan, the fact that we haven't seen them doesn't prove they don't exist.

So with less than 100% certainty, what is the government to do? It boils down to the difference between science and business, in a sense. In science, something is not true until 100% proved, which can take decades, and that is OK; in business, on the other hand, decisions are made under uncertainty all the time - anyone who waited for 100% certainty would be ten steps behind his or her competitors at every turn. So the philosophical question is, should a government make policy like an objective scientist, or like a business? I would argue it's closer to the latter, but I think reasonable people can disagree on this issue in the abstract. In practice I strongly support climate change legislation in the U.S. and elsewhere in the world, because I believe there is a very high chance it is the right thing to do, but I don't profess scientific 100% certainty of this, and I don't find it morally repugnant for people to disagree with this on philosophical grounds.

Update: Ars Technica explains why putting climate change on trial is a terrible idea.

It's one thing for the Chamber to try to reopen a policy debate that has been kicked around for close to a decade and made its way all the way to the Supreme Court; it's a lobbying group, and that's more or less its job. But to suggest that a courtroom setting and media frenzy are the best way to bring some clarity to the science is ludicrous. The sort of arguments that make for good courtroom statements tend to obscure the details of science, and the specific example proposed by the Chamber clearly indicates that they do nothing for the public's understanding of science.

Of course, it may be possible that the group really is that cynical, and this is precisely the outcome it is hoping for.