The American Clean Energy Act, Global Warming and the Position of China and India

The American Clean Energy and Security Act (Waxman-Markey) was recently approved (narrowly) by the U.S. House of Representatives. The bill now goes to the U.S. Senate for consideration.

There are several provisions of the bill -- some are bold and others modest, some progressive and others status quoist. With respect to Global Warming and Carbon emission reduction, the Act mandates, "Starting in 2012, ACES establishes annual tonnage limits on emissions of carbon and other global warming pollutants from large U.S. sources like electric utilities and oil refiners. Under these limits, carbon pollution from large sources must be reduced by 17% below 2005 levels by 2020 and 83% below 2005 levels by 2050. To achieve these limits, ACES establishes a system of tradable permits called “emission allowances” modeled after the successful Clean Air Act program to prevent acid rain. This market-based approach provides economic incentives for industry to reduce carbon emissions at the lowest cost to the economy."

So, per ACES Act, the United States is using 2005 as the benchmark, and hoping to reduce the carbon emissions by about 17 percent in 2020. 

On China and India: Governance and Economic Institutions

In addition to the democratization of its polity, and liberalization of its economy, the autonomy and democracy of India’s financial institutions and corporations make India a more alluring investment destination. The norms and regulations of the financial markets, and the enforcement and supervision by Securities Exchange Board of India of these regulations are credible, if not perfect. They have made the Indian stock and bond markets transparent and investor-friendly (Swamy 2005). India’s stronger infrastructure in terms of far more efficient and transparent capital markets is enabling the growth of entrepreneurship and free enterprise (Huang 2006).

Empirical research (Khanna, Kogan and Palepu, 2006) now shows that each successful society develops its own set of governance institutions, standards and practices. While there may some de jure similarity in standards, there is no de facto convergence. India has evolved fairly robust and indigenous governance institutions and standards (e.g., dispute resolution bodies such as courts, recognition and protection of private and intellectual property rights, a well-developed private sector, and a modestly better score on corruption and rule of law in World Bank’s governance indicators) over the last 50-60 years (Swamy 2005, Wolf 2006). It may take China the next 30-40 years to develop its own institutions and standards (North and Thomas 1971, Swamy 2005).

Evidence of Voter Switching Behavior in Indian Electorate

India is celebrating the establishment of robust and vibrant democracy. The country has begun a month-long voting process for the composition of the 15th term of the Lok Sabha -- Indian parliament. Over 700 million Indians are eligible to vote, and over 300 million voters are likely to be citizens with household income of less than $2 (US dollar) per day. Almost 60 percent of the electorate is expected to express its preference, and the ballots are printed in at least 25 different languages in different parts of the country.

Time and again, Indian electorate has shown resilience and maturity. The aspirations of the Indian citizens has been rising rapidly, and no political party or grouping is able to (and can) keep pace with such rising expectations. Therefore, a natural outcome has been discontent of the Indian electorate with the ruling political grouping.

Over the years, with the certitude of democracy and fundamental rights (particularly, after the refutation of imposition of internal emergency and suspension of habeas corpus in mid-1970s) the Indian electorate has become confident. Mobility caused by rise in income and freedom to relocate has also loosened the casteist and feudal constraints and fears.

So, the Indian electorate with rising hopes and confidence have been changing the ruling political grouping on every occasion that they go to the polls since 1984 i.e. for the last 25 years.

In 1984, the Indian electorate gave an overwhelming to the Congress party led by Rajiv Gandhi (this came at the heels of sad assassination of Mrs. Indira Gandhi). Then in 1989, it was a political grouping (led by V.P. Singh) opposed to Congress party. Subsequently, it was Congress party and its allies in 1991; non-Congress party, non-Bharatiya Janata Party political grouping in 1996; Bharatiya Janata Party and its allies in 1998 and 1999 (those elections came too close to be considered different mandates); and then Congress party and its allies in 2004.

So the empirical generalization suggests that a non-Congress political grouping will secure a mandate. This political grouping may or may not be lead by Bharatiya Janata Party, and it is likely to be as short-lived as the political groupings of 1989 and 1996 (both of which lasted only for about two years).

The role of framing in assessments in public policy

As learned from extensive research in social sciences and experimental economics (such as Tverskey and Kahneman), we make assessments/evaluations from a reference point or an anchor point. Put it differently, our frame of reference matters and forms the basis for our assessments.

Look at Federal Reserve Chairman Ben Bernanke's assessment by the public. The reference frame/anchor is the party affiliation of the President. Optics is important --

Percent Expressing Great Deal/Fair Amount of Confidence in Ben Bernanke:

      Democrats Independents  Republicans
2008     40          43            61
2009     64          44            36

Greetings, and Return to Writing and Reporting

Greetings.

Belated as it may be, I wish you a prayerful Passover, Easter, and New Year (various parts of India celebrate New Year in the months of March and April such as Baishaki, Vishu).

I got very busy with some personal and professional matters, and hence I have not written and/or reported for the last eight months or so. However, I am returning to writing and reporting.

Thank you for your understanding.