Climate Change Legislation 2.0

Rather than view the recent failure of Cap and Trade as a defeat, I think liberals should view it as their opening jab or exploratory mission, and should learn lessons from it, so as to craft a stronger policy. The best way to do so is to listen to the smartest critics of cap and trade, to engage them, and to either confront their arguments directly, or to modify policy proposals such that specific criticisms don’t apply. Enacting climate change policy will be easier if Jim Manzi and Ross Douthat are backing a plan rather than rallying moderate conservatives and independents against it. I’ll highlight two key arguments that I think are worth engaging, and suggest approaches for dealing with each.

Think Global

Ross Douthat writes:

When it comes to actual mechanisms whereby Waxman-Markey becomes a model for the developing world, all I’ve heard from the left are neoconservative-style arguments about how “if the world’s leading power leads, everyone else will follow,” and visions of a carbon trade war between the West and China. Neither seems persuasive.

Adds a conservative-leaning reader of this blog (yes, this blog has readers):

I would go a step further and suggest that we will not have any meaningful climate change legislation in our lifetime because of the huge collective action problem and the discount rate for today’s economic gains/loss outweighs the future payoff enough to discourage effective action.

The arguments is as follows: Even if the United States could succeed in reducing American carbon emissions, so long as the developing world continues to rapidly increase carbon emissions as it develops, the global problem of climate change continues to grow. Climate change falls in the realm of foreign policy, not domestic policy.

I find this argument pretty compelling, although I don’t share my reader’s long-term skepticism. There is a collective action problem, but it’s not a huge one. The problem boils down to roughly two players. The West (Europe and the U.S.) has a greater sensitivity to climate change than does the Developing World (China, India, maybe Russia and Brazil). Though climate change effects all nations roughly equally, the Developing World has other pressing issues, such as poverty, which the West does not share to nearly the same extent. So in order for the West to persuade the Developing World to work to reduce carbon emissions, it will need to offer up concessions, at some cost to the West. The nature of the concessions, and the magnitude of the cost, is the crux of the collective action problem. If the U.S., Europe, China and India can agree on what that cost should be, I’d expect that smaller countries would follow suit.

Pass the Cost-Benefit Test

I’ve seen three approaches to refuting the cost-benefit analysis that Jim Manzi has used to attack climate change policy proposals: the first is to broadly question the applicability of cost-benefit to climate change policy; the second is to make specific criticisms of Manzi’s analysis without presenting an alternative analysis; and the third is to present an alternative cost-benefit analysis. I find the first approach to be highly uncompelling, and the second approach incomplete. The third approach, which requires digging into the technical nature of the problem, is the most convincing method. Public policy, broadly speaking, should be based on cost-benefits analyses, and if the case for action is as strong as many liberals believe, building a model to back a given policy should be doable.

In the comments to my earlier post on climate change policy, Joe writes:

The uncertainties aren’t just around how the climate will change, i.e. whether temperatures will go up by 2 degrees or 20 degrees, etc. (these are the uncertainties that he addresses). There are also uncertainties about the effects of climate change.

I think this is exactly right. Whether average temperatures rise 2 or 20 degrees is, in isolation, irrelevant. It’s the undesirable effects of temperature change that matter. My suspicion is that a probability distribution of projected future temperatures can safely use a normal distribution. Projecting the costs associated with these temperature increases probably does not; it may even make sense to use a Mandelbrot distribution, as I suspect Nassim Taleb is doing right now. As such, it’s probably reasonable to use an assumption set that’s further tilted towards extremely bad outcomes, rather than the baseline assumptions that Manzi points to in the IPCC. But someone needs to do the hard work of reading the IPCC’s report, deciding which assumptions to make, and building the case for policy action.

Neither of these objections is insurmountable, but both are real challenges. I suspect they’ll be overcome in time, but this policy debate is an open one, and those wanting to reduce carbon emissions have their work cut out for them.

would go a step further and suggest that we
will not have any meaningful climate change legislation in our
lifetime because of the huge collective action problem and the
discount rate for today’s economic gains/loss outweighs the future
payoff enough to discourage effective action.