Wednesday, May 27, 2015

How to Maximize the International Impact of US Climate Mitigation Policy

A recent post by David Bailey and David Bookbinder on the Niskanen Center blog Climate Unplugged addresses a common Conservative criticism of unilateral climate mitigation efforts by the United States or other developed countries. As the critics point out, emissions from developing countries are expected to grow so rapidly that even if the US or EU reached zero carbon, it would reduce global temperatures in 2100 by only a few one-hundredths of a degree.

Bailey and Bookbinder acknowledge that developed countries cannot do the job by themselves. However, they argue that our mitigation efforts are not wasted, since US leadership is needed to induce others to act in concert:
Without the industrialized countries acting to—as the developing nations would say—put their own houses in order, it is impossible to believe that developing countries will act on their own. Action by the industrialized nations is thus necessary in order to secure the required collective action, while being insufficient on its own.
They make a valid point, but I would like to add that in order to maximize the effectiveness of US leadership, we need to pursue the right kind of mitigation policy. A comment on the Bailey-Bookbinder post by the Cato Institute’s Chip Knappenberger explains why. Knappenberger agrees that that unilateral US emissions reductions have little if any direct impact. He says that their purpose, instead,
is to attempt to spur technological innovation and set an example as to what can be done to reduce emissions—with Americans serving both as the experimenters and the  guinea pigs. It is not the climate impact of our experiment that is of any significance, but instead it is the tools that we may develop in attempting to achieve major emissions reductions. For the only truly effective course of action we have available to us in attempting to control the future course of global climate is to tell the rest of the world what to do and how to do it.
What we see here is that there are two mechanisms by which unilateral US efforts could induce others to act in concert, one diplomatic and one technological. The two have different implications for the kind of policy that would be most effective. >>>Read more

Wednesday, May 13, 2015

A Case Study in Natural Monopoly: China's Fading Dominance of Rare Earths

Rare earth elements (REEs) are a group of seventeen elements with exotic names like neodymium and yttrium that are key ingredients in many high-tech products, many important for national defense. Imagine the consternation of Western officials when they woke up one morning in September 2010 to learn that China held a near-monopoly in the production of these vital materials. In retaliation for the collision of a Chinese fishing boat with a Japanese Coast Guard vessel near a group of disputed islands in the East China Sea, China threatened an embargo. Prices of REEs soared.

How did China become the world’s leading producer of REEs? Did the 97 percent market share it held in 2010 represent a true natural monopoly? At the time, I wrote that its hold on the market was more fragile than it appeared. The erosion of China’s dominance of REEs holds important lessons for all supposed natural monopolies.

The first clue should have been that rare elements are not really rare. All seventeen rare earth elements are more abundant in the earth’s crust than gold, and some of them are as abundant as lead. The thing that makes them hard to mine is the fact that they do not occur in highly concentrated deposits like gold and lead. Even the best REE ores have very low concentrations. On the other hand, such ores exist widely throughout the world. Until the 1960s, India, Brazil, and South Africa were the leading producers. From the 1960s to the 1990s, the Mountain Pass Mine in California was the biggest source. China’s began to dominate of REE production only in the late 1990s. >>>Read more

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