Cheng Yu Advocates for a Carbon Tax on Jet and Ship Fuel

According to AFP, the World Bank and the IMF are proposing a carbon tax on jet and ship fuel (AFP, 2011). If the proposal is passed, airlines and shipping companies will pay $25 for each ton of carbon dioxide released. This is a big step forward on the World Bank and IMF because they have finally acknowledged reality and are willing to break away from their ideological love affair with the “carbon market”. A carbon tax is also more cost-saving and effective than the alternative.

Not too long ago the World Bank and IMF were obsessed with the solution of the “carbon market”, as if that was the only way to save the world. Have you have heard about “cap-and-trade,” “CDM,” or “offsetting”? They all mean more-or-less the same concept: using market solutions to reduce the amount of greenhouse gases, specifically carbon dioxide. I am not going to argue whether carbon dioxide released by human activities causes global warming since all major political parties and scientific institutions around the world have acknowledged the fact, including the Communist Party of China. (For your information, the Republican Party of the United States is the only major party that still casts doubt on global warming.)

Why is the obsession problematic? The idea of carbon market is that if we set up a goal to make reduction on carbon emission, it doesn’t matter whether the reduction is made in a factory in New York or in a field outside Nairobi. Participants of the carbon market can trade between each other, and the market can determine how much one should pay for emitting a ton of carbon dioxide. According to Nobel Prize-winning economist Ronald Coase, the carbon market is more efficient than the carbon tax (Duval, 2006). However, many people forget the fact that in Coase’s paper, there is a condition: if the transaction cost is low.

However, according to the offsetting projects going on in Africa, transaction costs, defined as money that goes to a third party other than the carbon credit purchaser and carbon credit producer, is as high as 80% (Yu, 2011). According to introductory economics, the market can not function efficiently when the transaction cost is too high (Frank, 2008). For other problems that the carbon market causes, you can get a clear idea by reading Janet Redman’s research, “World Bank: Climate Profiteer”. Despite the problems, the World Bank pledged billions of dollars to set up at least 12 carbon funds, with the ambition to push forward a global carbon market by 2020. That decision is not based on economic efficiency, but based on their obsession in “market-oriented climate solutions”.

This is why a carbon tax is a much more cost-saving and effective way to climate change. Current technology is able to measure the amount of carbon emitted. There is no need to hire “professional carbon consultants” or “professional carbon accountants”; and there is no need to set up a trading and clearing center, as required in the carbon market, which creates a lot of cost savings because carbon accounting requires special training. Also, many carbon offsetting projects require using land where indigenous people live. Even though the World Bank has systematic Safeguard Policies, the monitoring cost of enforcing them is very high (Yu, 2011). Using basic microeconomic theory, a carbon tax is called a per-unit tax because it is charged based on per ton of carbon dioxide emitted. Therefore, it can effectively reduce the marginal benefit of using jet or ship fuel, thus reducing the quantity used.

However, some might be concerned that the extra carbon tax will be shifted to consumers, an example of which would be the consumers paying more for an airline ticket. However, economic theory tells us that the airlines don’t have the incentive to shift the full price to consumers because that will reduce their profit. Airlines are a relatively competitive market. Suppose Airline A shifts the carbon tax to their consumers, then consumers will choose Airline B, which decides raise the price only a little bit. Demand for an airline is somewhat elastic, using an economic term, because while airlines compete with each other in the market there are alternatives to planes such as high-speed rail, which is not taxed in the proposal. Since the airlines’ goal is to maximize their profit, they do not have the incentive to shift the tax completely to their consumers because doing so would cause them to lose customers. However, there is a possibility that airlines will shift more tax burden to consumers on their international routes, considering there is no alternative to flying from Beijing to Washington in 14 hours. In the case of cross-ocean international flights, the demand is relatively inelastic.

By the way, you market lovers should know that a carbon tax is also a market-based solution. Since the World Bank and IMF play leading roles in global affairs, the carbon tax has significant power to encourage countries around the world to impose carbon tax. However, whether the new tax can be successfully implemented remains a mystery. But if you care about the future of humanity, you should tell your family, neighbors and friends about this. The more people support a carbon tax, the more likely it is that the politicians will implement it, which definitely brings hope for a more sustainable world.

References:

1. Duval, D. T. (2006). Coasian economics and the management of international aviation emissions. International Journal of Innovation and Sustainable Development, 1(3), 201-213. Retrieved from www.scopus.com 
2. Frank, R. H. (2008). Principles of microeconomics New York, NY: McGraw-Hill/Irwin.
3. Yu, C. (2011). A review on the World Bank safeguard policies. (Unpublished paper). Institute for Policy Studies, Washington, DC.
4. Redman, J. (2008). World Bank: Climate profiteer. Institute for Policy Studies. Retrieved from www.ips-dc.org
5. AFP (September 24, 2011). IMF, World Bank eye carbon tax on fuels. Herald Sun. Retrieved from www.heraldsun.com.au

Cheng Yu is an economics student at the University of Illinois- Urbana-Champaign. His website is www.chengyuofficial.com. 

Giving Thanks and Doing Without

I haven't heard much about Occupy Wall Street since I'd glanced at the cover of The New York Post at my local newsstand and seen that the Occupiers planned to do something related to the transit system. Now, since I glanced at the front page and did not actually read an article on the issue, I'm not sure whether OWS planned to just protest near major train stations throughout the city or take concrete action to slow the system down.

Regardless of whatever they planned to do, I remember that my reaction was not supportive. The idea of me- a straphanger with an $104 30-Day Unlimited Metrocard- actually unable to use my Metrocard to get to work or appointments for any length of time was infuriating. I'm so dependent on the subway that I had no cares or worries about Hurricane Irene until I heard that MTA service was going to be shut down, so I care very deeply about public transit and my access to it, at least until I assume a position in society where I can get 24/7 use of a Town Car. After glancing at that front page, I felt the way many professional or upwardly mobile- but middle class- New Yorkers feel about Occupy Wall Street: I supported their broader message of greater equity in our society while I bemoaned a particular tactic or stunt as reported.

Driving on my way home from a Thanksgiving Eve function, my cousin happened to mention Occupy Wall Street. Being tired, I didn't say anything and listened inattentively. "My friend _______ says that Occupy Wall Street is (something not good)...He says that if those protesters really wanted to find jobs they'd be washing dishes because if you're desperate to work then you find a job...you have to start at the bottom. ______ says that they're not defending the working poor but bums." My ears by this point had perked up, but I was still tired, so I was in this odd state of being physically tired while feeling intellectually heated. My Uncle, who was either being diplomatic or was also tired, replied, "Yeah, I see how you could say that. A lot of teachers at my school feel that way about them too."

If I'd had the energy, I would have made a few counterpoints, but I wasn't terribly interested in debating the messenger of a viewpoint (as opposed to the one who holds it) and I immediately thought this would be a good topic for a post. I received an e-mail earlier today from someone who wrote, "We all have something to be thankful for- even the challenges, which often make us stronger and more clear-eyed about who we are and where we want to go." I can definitely say I have dealt with challenges over the years and have had to use those challenges as a means to reckon with important realizations I've made about myself, those around me, and our society in these turbulent times. Challenges can be useful and I have never met anyone who would deny their value, but we have to have a limit. The idea that all hardship builds character is a strain of thinking that I think has infected this person in a way that has infected many others, myself included. There is so much more hardship these days than there was in the early 2000s and 1990s and I wonder if our way of coping with it is rooted in some desire to move beyond the turbulence and try to take ownership of our lives in a way that has eluded us for too long.

Regardless of your political persuasion, I think every American can agree on a few basic things (even if Congress can't). The obstacles- of our mind, our circumstances, and our times- that we overcome are necessary engines of growth and innovation for how we live our lives. "Starting at the bottom" is not an uncommon story in this country so no one is really alien to the idea; from the existential to the financial, every problem presents an obstacle that can harden our resolve or break us. Unfortunately, what we're seeing today- in unemployment figures, international news, and the workings of Congress- leans toward breakdown more than resolve. And I think that is where any sympathy for Occupy Wall Street lies: in our bewilderment at how our public institutions have become so ineffective, shock at the amount of money this country produces, and sadness at the fact that for all the money we ALL make there are so few of us that get to keep it. Make no mistake, that waiter is making money as much as the stockbroker does; the only difference is that the waiter has less take-home pay and more back pain. Not to say that the stockbroker doesn't have her pains, just that she's more likely to afford a massage and a day off.

If you've graduated from college and your dream is to be the CEO of McDonald's, then working the cashier at a McDonald's is starting at the bottom, with your direction to be determined by your work ethic and savvy. However, if you graduated from college and your dream is to be a historian, then working at McDonald's is not starting at the bottom. It's starting underground.

No one should be desperate to get work. They should be eager for a job and qualified for the jobs they apply for, but they shouldn't be desperate. Desperation implies erosion of your senses and a vulnerability to negative influences. Desperate people become misguided people who become dangerous people and we don't need that. People shouldn't be desperate and they certainly shouldn't have reason to be desperate in this country. That's why the Occupy movement started here- not because our youngsters are crazier, but because they have an acute sense of the gap between what they're entitled to and what they're not getting. While the Occupiers should be thankful to have a city that sympathizes with them and some way of moving forward with their agenda and in their lives, they shouldn't be grateful for scraps. Simply put, people these days are not getting what they're working for and certainly not what they deserve.

So tomorrow, as you're stuffing your face, let's be thankful for what we have and who we have while hoping for more to come.

An Advocacy for the Nobel Prize as a Global Prize

I just read that three women- President Ellen Johnson Sirleaf of Liberia, Leymah Gbowee of Liberia, and Tawakul Karman of Yemen- have been awarded the Nobel Peace Prize. This is stupendous on a number of levels, so much so that I would have done a jump for joy if I wasn’t so tired (and in public). But on a more personal level, I have decided that this event is worth writing about for this site after several weeks of dealing with more “practical” (read: stressful) matters and doing more creative writing (mainly to distress). 

President Johnson Sirleaf is the first women elected head of state of an African country, so it’s not shocking that she would be a contender for the prize. I imagine that the Committee has had her on a longlist for a while and was waiting to see how she would perform as president before finally deciding on her. Notably, she is the second African woman to win the prize (after the recently departed Wangari Muta Maathai) and the first sitting African head of state to win (F.W. deKlerk shared the prize with Mandela in 1993while he was in office, but does that count? And Mandela won it several months before he was elected President of South Africa in 1994). Regardless of your opinions on who bears responsibility for the political environments in sub-Saharan Africa- Is it the colonialists? The banks? The dwindling middle class?- President Johnson Sirleaf’s election as President of Liberia almost a decade ago marked a milestone in African history (yes, there is one) and a challenge to leaders across the continent and around the world. Would the West be more forgiving, in debt and other matters, of a female-led country? Would President Johnson Sirleaf’s counterparts in other countries give her due respect? And would this President, recipient of instantaneous international adoration, be able to maintain a base in her own country that she could use to get things done? In a struggling country where former warlords and perpetrators hold Senate seats and Charles Taylor walked free, the learning curve for the newly-elected president was steep. Today, President Ellen Johnson Sirleaf is still in office, still leading the recovery of her country, and still the toast of international policymaking circles, although she is facing an election on Tuesday. If she loses, any positive appraisal of her efforts will die down, but regardless of what happens next week, today the Norwegian Nobel Committee selected a personality who should inspire passionate debate- among academics, politicians, and her own people- about her worthiness for the prize, and her efforts as president. In contrast to the snooze-inducing choices the Committee has made in the past, I welcome such debate. 

The Committee’s choice to choose three woman also makes a statement that should resonate with citizens around the world: that nonviolent movements can succeed, and that the cause of women’s rights are not separate from, but a part of, any human rights agenda we have. Disparities in income, educational attainment, access to medical care, physical security, and domestic obligations affect women adversely, but considering that these affected women are our mothers, sisters, wives, and daughters, these disparities hurt us too. I remember once hearing that if you educate a woman, you educate a family, so for those of you skeptical of high ideals and noble causes, remember who taught you to count, write, and read. And after you remember that, remember why. 

"Children of Invention": You didn't see it in theaters, but you can see it on Hulu (for free)!

I have an appetite for independent and foreign films that is rarely satiated by actually going to a theater and seeing them. Since I'm from New York City, I can't claim that the film isn't showing in my city since almost every film shows in New York, so I suppose the reason I don't support these low-budget films by paying for a movie ticket is because I'm cheap. In my defense, I will say that I tend to borrow the DVDs from the New York Public Library when they're available (there can be a long wait, depending on the momentary popularity of the film) and I watch the Sundance Channel, which means that I can watch newly acquired foreign and independent films in the comfort of my own home (and while checking my e-mail). It is through the Sundance Channel that I have seem some great films like "The Lives of Others" and "Four Months, Three Weeks, Two Days"; I almost saw "Maria Full of Grace"once, but my mother preferred not to watch a film about drug mules so I had to change the channel.

I haven't seen an indie in some time, and since I'm also too cheap to see a more mainstream movie like "True Grit", I have been making do with fond memories of seeing "The Social Network" and watching whatever movies cable networks choose to show. I didn't think I would see a good arthouse film until I was back in New York, but I found one a few hours ago...on Hulu. Yes, that Hulu, the Hulu that doesn't show every episode of "30 Rock" anymore and whose Movies section is chock full of trailers, Lifetime Movies, and feature films you wouldn't admit to seeing in polite company. The film I saw is called "Children of Invention". It premiered at the 2009 Sundance Film Festival (the one dominated by news of "Precious" and "The September Issue"), was released in eight theaters early in 2010, and was released on DVD in August 2010, but if you hurry you won't have to pay a dime to see it.

Mark Zuckerberg as Time Magazine's Person of the Year?

Time magazine these days doesn't tend to capture my attention much. Although I occasionally visit its website, the print magazine doesn't serve as appointment reading for me anymore; the variety of news sources that exist today, and the limits on my time, make that impossible. My disaffection with the magazine in the past several years has also been related to its misguided efforts to distinguish itself from other magazines. This has come in the form of a redesign and what has seemed like an increase in the number of pictures and graphics- at the expense of valuable text- a reader will see in the magazine.

Despite my fraught relationship with the magazine today (only as a reader of course), I have maintained an interest in its selections for Person of the Year. It defines Time and promotes the magazine the way that educational rankings make U.S. News relevant. In a dramatically changing media landscape, people do look to Time for an authoritative sense of the people who have the most influence on the events and changes in our world. The Person of the Year issue presents the best opportunity for Time to take attention away from more hip or fashionable magazines like Vanity Fair, The New Yorker, or The Atlantic. Time seemed to have forgotten that when choosing last year's Person or it wouldn't have chosen Mark Zuckerberg.