I'm in the zone. My hands are flying above my computer keys like the hands of a mad pianist. It's exhilarating. Thirty minutes later, and I'm done with my environmental resource economics homework. I sit back to survey my handiwork. The task was to uncover the potential flaws in the arguments presented by Sunrise PDX, a youth-led movement to stop climate change. They opposed the Oregon Senate Bill 1530, which was a cap & auction system that was meant to mitigate in-state greenhouse gas emission. Here's a quick crash course on cap & trade: it is a system that distributes permits to polluting firms (i.e., fossil fuel electricity plants), allowing them to pollute up until a certain point. The total number of permits distributed establishes the limit or the cap. Firms are permitted to trade among one another, depending on how much they need to pollute. Annually, permits are removed from the system, incentivizing polluting firms to seek alternative energy sources or better technology. Perfect. You're an expert now!
One of the desires of Sunrise PDX was "banning fossil fuel expansion and creating a 'cap' without a 'trade.'" In theory, this is an admirable goal. In practice, things are much more complicated from an economic standpoint. Using the concepts learned in class, it became apparent that the group didn't take into consideration the price elasticity of demand for energy, which is price inelastic. What does this mean? It means that if they were to ban fossil fuels without enough of a transition to alternative energy sources (i.e., renewables), then prices for energy will rise, and demand for energy won't change very much (because it is a necessity). As a consequence, the cost of energy will eat up a greater proportion of disposable income, especially for lower-income earners. The result is a "regressive" policy" that would surely receive public backlash.
I think deconstructing arguments like the one above is an incredibly valuable exercise in applying concepts and developing critical thinking skills. By deploying my knowledge in this way, I feel more confident in reading policy prescriptions to judge whether they make sense from an economic standpoint. At the same time, however, I empathize with Sunrise PDX because they are arguing for something commendable and significant in the context of our fight against climate change. If anything, maybe my analysis could be of value to them in the future!
One of the desires of Sunrise PDX was "banning fossil fuel expansion and creating a 'cap' without a 'trade.'" In theory, this is an admirable goal. In practice, things are much more complicated from an economic standpoint. Using the concepts learned in class, it became apparent that the group didn't take into consideration the price elasticity of demand for energy, which is price inelastic. What does this mean? It means that if they were to ban fossil fuels without enough of a transition to alternative energy sources (i.e., renewables), then prices for energy will rise, and demand for energy won't change very much (because it is a necessity). As a consequence, the cost of energy will eat up a greater proportion of disposable income, especially for lower-income earners. The result is a "regressive" policy" that would surely receive public backlash.
I think deconstructing arguments like the one above is an incredibly valuable exercise in applying concepts and developing critical thinking skills. By deploying my knowledge in this way, I feel more confident in reading policy prescriptions to judge whether they make sense from an economic standpoint. At the same time, however, I empathize with Sunrise PDX because they are arguing for something commendable and significant in the context of our fight against climate change. If anything, maybe my analysis could be of value to them in the future!