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What to do about climate change?
A new Cato study, by Indur Goklany, suggests that instead of carbon taxes we should spend money on better water policy, drought prevention, anti-malarials, sea level protection, and so on. In general we should make the world as wealthy as possible. Here is the link, the piece is intelligent throughout and well worth reading.
Two questions suggest themselves. First, is the choice either/or? I don't see arguments against a revenue-neutral carbon tax. Second, is there really enthusiasm for the proposed measures or is the real intent to do little or nothing on carbon? Since this is both a Goklany piece and a Cato piece, an interesting question arises: who exactly is now obliged to push for anti-malarial foreign aid? Cato? Goklany? Either/or? Both? Or is it enough to just make the comparison once and leave it at that?
Posted by Tyler Cowen on February 7, 2008 at 07:01 AM in Economics | Permalink
Comments
Given that temperatures peaked in 1998 and have stalled out since then, at what point are you going to question whether the AGW hypothesis was correct?
Climate has always changed in the past and will continue to change in the future, but that does not indicate that CO2 emissions are responsible for those changes. . .
Posted by: Matthew at Feb 7, 2008 8:51:49 AM
Whether the choice is either/or depends, I imagine, on our resources. And so far as one course is better than another, it demands the resources available. Eventually, returns will diminish and the other option turns more attractive.
As to who is obliged, I agree that's a dilemma. So far as global warming can be framed as a violation of property rights, libertarian moral principles would kick in and Cato has a dog in the fight. But the other options--anti-malarialsm, et al--seem like distinctly unlibertarian policies. Seems to me it's easier to justify the carbon tax, on libertarian grounds.
The best way of looking at the stance is Cato believes both global warming action and the alternative options they list are both wrong choices. But though both choices are wrong, one's still better than the other. So Cato's not obliged to argue for either--only to throw the best choice down on the table when somebody brings up the worse one. Though they're not obliged to argue for either.
Posted by: Scott Scheule at Feb 7, 2008 8:57:40 AM
Given increasing marginal costs of most measures, it probably makes sense to work on all margins simultaneously.
That said, I would worry that many of the effects of climate change are unpredictable. Thus, we might want to put more effort into revenue neutral carbon taxes (at least to the pigovian level), as an insurance policy against some unknown catastrophe that might not be addressable with things like water policy.
Posted by: A student of economics at Feb 7, 2008 8:59:44 AM
I say investigate biochar. It may pack away carbon at much lower costs than most people expect.
Posted by: Floccina at Feb 7, 2008 9:30:28 AM
Are there "low hanging fruit" in GW response? A revenue neutral carbon tax seems like one example. And libertarians should favor a synchronized unwinding of all energy subsidies. The carbon tax is simple, efficient, and it should be enough to open the door to truly viable alternatives.
A carbon tax should also encourage energy efficiency and good design. We could probably do some simple things there as well ... though we might lose libertarian support. How many areas have minimum insulation standards in building codes?
Posted by: odograph at Feb 7, 2008 9:43:03 AM
Ignore it, it's over. Nanosolar is producing solar panels which produce electricity for a fraction of the price of coal fired power plants. Scale will only bring the price down further.
First coal goes.
Then we get this battery mess sorted out, and oil follows.
It's over. We should be killing what pathological incentives to remain on fossil fuels remain, and preparing to work on world poverty. CO2 emissions are going to start falling, entirely within the free market rationale, fairly soon. Once it starts, the economic flip will be rapid and final.
We got lucky.
Posted by: Vinay Gupta at Feb 7, 2008 9:52:51 AM
When I hear people discussing the issues of a carbon-tax with respect to the AGW hypothesis, it would seem that their numbers tend to be off. If the IPCC's AGW hypothesis is correct, the amount of carbon reduction required for any kind of real climate payoff is utterly enormous. You can't simply talk about 'increasing efficiency' as if this is something that can be achieved indefinitely. The laws of thermodynamics prevent this. Energy production processes have theoretical efficiencies, and there are already natural incentives in place to try to achieve those. Some common energy production processes simply don't have enough distance between where they are now and maximum theoretical efficiencies. The only way to reduce carbon meaningfully in those instances is to use significantly less energy - not through efficiency savings, but through lower consumption, and presumably, lower utility. Internal combustion engines are extremely good at what they do, the way to make cars produce less carbon is to make them smaller, lighter, and less powerful - thereby reducing their utility. The bottom line is that it is quite impossible to reduce our carbon output through efficiency gains in any meaningful way with respect to the AGW hypothesis without either swearing off carbon based energy sources entirely, or reverting to depression era levels (or, say, rural Indian levels) of energy consumption and standard of living.
If you want to talk about shifting energy production away from carbon based sources, towards nuclear for instance - which, at this point, is really the only technologically viable option to produce the amount of energy we need, then there is a real possibility there to reduce carbon emissions.
Carbon sequestration technology may or may not be up to handling the task, I don't understand enough about it to comment.
Posted by: RMH at Feb 7, 2008 10:07:37 AM
The first question to ask regarding carbon tax is: What is the ideal carbon tax? (To complicate matters, the ideal tax level would change relative to the amount of off-setting activity taking place, but Tyler proposes revenue neutral which means no off-setting)
If anyone has info or links to an answer please let me know.
Without knowing the ideal tax level how do you know we haven’t already exceeded it.
I would agree that if there were a fixed amount of welfare maximizing concern available it would be better spent on other activities with more definable goals and benefits (deregulating water). But that is not the case, so let’s push for all improvements.
Surely it is better to have an inefficiently low level of pollution/gasoline consumption, than employment. However if off-setting activity is engaged in, and no ideal level is known, pollution levels may be driven below zero. This would be very inefficient, probably worse than leaving the beast alone.
How many areas have minimum insulation standards in building codes? Too many.
As for Nanosolar – That’s great, but on the off chance that solar power continues to not live up to expectations, let’s not ignore the problems of coal.
Posted by: Mason at Feb 7, 2008 10:12:09 AM
Not sure I follow the offsetting question above. The revenue neutral plans I've heard of cut social security or other taxes and use a carbon tax for (interim) funding.
The other question above was about how long carbon taxes can last ... I think we all hope for viable energy alternatives. If we don't get those we're in trouble anyway.
With cheap solar and electric SUVs we might need to start paying social security again ;-), but that would be success, wouldn't it?
Posted by: odograph at Feb 7, 2008 10:24:29 AM
Main problem is that none has slightest idea about causes of recent climate change. IPCC and other governmental bodies declare that human CO2 is to blame, but if you look carefully not only in various scientific papers, but in IPCC reports as well, you easily can see that they have no bloody idea to what cause to attribute recent warming. IPCC itself acknowledges tat 80% of factors significantly affecting climate are not well understood. Climate models are miserably unable to reproduce cloud cover and cloud forcing; aerosol forcing is o uncertain that even the sign is in question (IPCC declares low level of scientific understanding), solar forcing is basically unknown: volcanic forcing is omitted entirely from their research. So called attribution studies of IPCC are pure exercise, because most of the parameters in their model simulations are unknown, i.e. adjustable. Their attribution is worthless on their own criteria Therefore thesis that warming is manmade is unsupported by any scientific evidence so far, it is pure environmentalist dogma, trumpeted by left wing media, NGOs and politicians.
In such a situation it is completely irresponsible to impose draconian taxes or regulations in order to halt CO2 emissions. There is no reason to reduce Co2 emissions in the first place.
Posted by: Ivan at Feb 7, 2008 10:29:54 AM
CO2 isn't the only negative externality to come from burning fossile fuels. However I think most people here are arguing that while a carbon tax may be undesirable, it is more desirable than draconian pay roll taxes.
Posted by: Mason at Feb 7, 2008 10:41:18 AM
BTW Here is web page for biochar.
Posted by: Floccina at Feb 7, 2008 10:50:24 AM
If you are hesitant to accept the AGW science, please watch Ralph Cicerone, president of the National Academy of Science, discussing global warming.
I think the video captures the recent accumulation of knowledge ...
Posted by: odograph at Feb 7, 2008 11:14:33 AM
Ivan:, but in IPCC reports as well, you easily can see that they have no bloody idea to what cause to attribute recent warming.
From the technical summary of the 2007 ipcc assesment report, section TS6, "Robust findings and key uncertainties", TS6.1 "Changes in Human and Natural Drivers of Climate":
From new estimates of the combined anthropogenic
forcing due to greenhouse gases, aerosols and land surface
changes, it is extremely likely that human activities have
exerted a substantial net warming influence on climate
since 1750. {2.9}
Solar irradiance contributions to global average radiative
forcing are considerably smaller than the contribution of
increases in greenhouse gases over the industrial period.{2.5, 2.7}
Posted by: greatzamfir at Feb 7, 2008 11:16:23 AM
Wake me up when Americans like higher energy bills, then we can discuss what to do.
Posted by: Yancey Ward at Feb 7, 2008 12:02:11 PM
But if you carefully read their report you can find following:
Level od scientific understanding of:
solar forcing - LOW
aerosols -LOW
Clouds- LOW
water vapor - LOW
Volcanoes - NOT EVEN CONSIDERED, "due to their episodic nature"
Co2 and methane - GOOD
Here you can read why so called "attribution" of IPCC is completely worthless, having in mind very low level of scientific understanding of climate.
http://www.independent.org/publications/article.asp?id=1714
and here http://www.climate-skeptic.com/2007/09/chapter-5-skept.html.
Posted by: Ivan at Feb 7, 2008 12:06:26 PM
"Wake me up when Americans like higher energy bills"
It's true that they don't like them. They lobby congress for lower gasoline prices and shallow congressmen pander. But, the revenue neutral thing is supposed to buy them off ... noting that they like lower taxes too.
Posted by: odograph at Feb 7, 2008 12:26:23 PM
Odograph,
If I believed that such a tax would actually be revenue neutral, I would support it myself. Having observed how government actually behaves, I think you would end up with a significant tax increase. I have much the same argument against the so-called "Fair Tax".
Posted by: Yancey Ward at Feb 7, 2008 1:37:39 PM
I don't view current debt and deficit patterns to be sustainable. I think something will have to give ... but I could be wrong.
I hold a little hope that "getting real" will allow us to drop stupid subsidy and incentive programs, as we shift tax revenues.
On the whole energy thing I've complained that we are all carrot and no stick. We hose everybody down with cash. Anybody who buys a hybrid, promises clean coal, or distills ethanol gets a reward ... but we do nothing that would take the feed bag away from energy consumers.
This is really degenerate democracy, when we borrow from the future to bribe ourselves to do the right thing now.
Posted by: odograph at Feb 7, 2008 2:27:13 PM
Read Bjorn Lomborg's "Cool It" - his recommendations and arguments are in line with the Cato study. He's an economist, too, which should make it even more appealing. ;)
Posted by: Ben at Feb 7, 2008 3:35:28 PM
If global warming is a problem and if CO2 is a significant cause of it, then a carbon tax should increase economic efficiency. Since other taxes are understood to result in a deadweight loss, a revenue-neutral carbon tax should have positive economic effects -- a free lunch.
Posted by: John Kunze at Feb 7, 2008 6:36:14 PM
Tax shouldn't be used to effect policy and policy needs shouldn't complicate the tax code. Use taxes to raise revenue and expenditures to effect policy. There is hubris about how taxes can incent behavior, and its unwarranted.
Posted by: From inside the sausage factory at Feb 7, 2008 6:46:40 PM
Ben:
Lomborg is a social scientist, not an economist.
Vinay Gupta:
"Nanosolar is producing solar panels which produce electricity for a fraction of the price of coal fired power plants,"
but "price of coal" = _current_ price, not accounting even for the entry of solar power itself into the market, inter alia.
Posted by: effell at Feb 8, 2008 2:01:40 AM
Well called out. It is a cheap rhetorical trick to point out that whatever one's opponent advocates, it has less social benefits than providing anti-malarials, childhood vaccines, and so on to the world's poorest. Following this logic, the US federal and state governments should be abolished, since nothing they do meets this standard.
This has not, of course, stopped Bjorn Lomberg making extensive hay out of the approach.
Posted by: jonm at Feb 8, 2008 8:11:08 PM
I think you miss the central point of this paper: AGW just isn't expected to be that bad. The benefits of massive abatement don't justify the costs (in the expected or pdf risk-adjusted cases). As a second point, there are some cost-justified actions that can be taken under the heading of 'adaptation'.
What this doesn't address is the non-quantifiable chance of a truly 'out-of-pdf' catastrophe. This is the basis of Wetzman's much more sophisticated argument for emissions reductions, research, adaptation and so forth.
If anybody's interested, there is an ealier MR post reacting to my paper crticizing Weitzman's analysis. For what it's worth, you can see my reaction to the reaction in the comment string.
http://www.marginalrevolution.com/marginalrevolution/2008/01/06/index.html
Posted by: Jim Manzi at Feb 8, 2008 9:35:47 PM
