Monday, August 04, 2014

A Western Coastal Liberal State Blockade Limiting Exports of Coal to China?

This article suggests that a coalition of liberal Vancouver, Washington, Oregon and California may all limit the ability of Montana and Wyoming of shipping their coal to China.  In Econ 101, we teach that boycotts don't work because somebody will have an incentive to purchase the good at a low price and violate the boycott.  But, this Econ 101 logic abstracts away from geography and ideology. Permit me to explain.  Look at a map and you will see that the cheapest way to get coal from Wyoming to China is through some liberal states. If these states refuse to build a port to allow such shipments then the transportation costs of a mutually beneficial trade between Wyoming and China go way up.  Will the coal be shipped through Mexico?  Liberals clustering on coasts has been a favorite research topic of mine but now it appears to have implications for trade in natural resources and endogenous impediments to such trade.  Why would liberal areas engage in such a boycott? To reduce the threat of climate change, we need to burn less coal and keep it in the ground.  By erecting barriers to world trade in coal (i.e not building ports for shipping coal between nations), this may increase the likelihood that the coal stays in the ground.