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My liberal friends are up in arms about cap-and-trade failing. I understand the frustration–climate is a hot topic, the Obama administration is (theoretically) strong right now, and the proposed solution is fairly moderate in nature, one that fiscal conservatives and libertarians (theoretically) should support. Furthermore, the there’s very little intelligent criticism that’s been offered publicly; the failure reads as political obstructionism rather than actual an actual policy disagreement. I’ll address two related questions: first, why did the bill fail, and are there valid policy objections to the policy? Second, why am I not that upset?

This column by thinking conservative Ross Douthat, frames the decision to postpone action in policy terms. Douthat’s argument presents a thinking conservative position on climate change, including a link to thinking conservative Jim Manzi, who should be required reading for any thinking liberal who cares about climate change. Read Manzi, read the responses and comments to his posts, and read his responses to the responses and comments. If I were to summarize Manzi’s position briefly, it would be: “There are serious costs both to acting too late and too soon on climate change. Most commentators are more concerned with the prior, when really the latter is a greater concern.” or, “Yes, climate change is an issue. Let’s not rush to enact bad policies.”

I’m not entirely sold on Manzi’s argument, but I’m enough influenced to be skeptical of the current legislation. Generally speaking, I’d rather have a good bill in 5 or 10 years than a bad one now. Just as conservatives should prefer Obama’s health care bill to Clinton’s–even those who oppose it–so should they prefer a future second iteration of climate change policy to the existing attempt. Not because the legislation is more moderate, but because it’s better one; it incorporates the strongest criticisms from the last round of debate. Climate change is a pressing issue, but it’s also a young one, at least with regard to serious policy proposals. More introspection may prove valuable–note that even the question of whether cap-and-trade is preferable to a simpler carbon tax policy is largely unresolved.

I also want to explore the designed effects of climate change legislation. Both cap-and-trade and a carbon tax are designed to add the price of carbon emission, a negative externality that affects everyone, into the price of actions that emit carbon. I see three main effects of this price adjustment:

  1. It signals information–in this case, that carbon emission is costly, more so than we previously thought, and should be held in check.
  2. It creates incentives, to reduce energy usage, especially when the energy source involves high levels or carbon emission, and to discover new means of clean energy production.
  3. It whacks people upside the head. Anyone who currently produces unclean energy, or consumes unclean energy, is offered two choices: either make costly behavior adjustments, or lose a lot of wealth.

At this point, I believe legislation only accomplishes the third effect. The first two are already occurring, due to the strength of the green movement. Everyone knows that global warming is an issue to be taken seriously, and there’s considerable social pressure encouraging energy conservation and clean energy initiatives. If a carbon-tax increases gasoline prices such that more drivers would buy hybrids and fewer would buy SUVs; homeowners install better installation and more efficient lightbulbs; and more entrepreneurs invest time and money in green technology initiatives, social pressure has the same effect. The magnitudes of each force can vary, and are somewhat difficult to measure, but I’m not convinced that the current pace of innovation is sub-optimal. Going green may not have all the economic effect it should, but it has added social benefits with real value: prestige, esteem, personal satisfaction, helping you get laid.

The third effect I list above–whacking the producers and users of unclean energy–causes significant pain. Factory workers lose their jobs; consumer products such as gasoline become more expensive, adding to the burden on the poor; and the economy as a whole suffers. I believe this is necessary pain, but I also think the pain can be delayed and dampened. As we improve our ability to produce clean energy, and to conserve overall energy usage, the pain associated with shifting energy production away from fossil fuels declines.

There are serious costs both to acting too late and too soon on climate change. Most commentators are more concerned with the prior, Jim Manzi’s more concerned with the latter. I’m somewhere on the fence.

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One Comment

  1. There are a lot of uncertainties around climate change that demand action, and Manzi’s reply to these uncertainties is unconvincing: http://theamericanscene.com/2010/04/20/krugman-on-climate-iii-resorting-to-pascal-s-wager

    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.

    Additionally, Manzi undermines his credibility with ad hominem attacks: first by overstating the significance of the “hacked” emails here: http://theamericanscene.com/2009/11/25/hacked-climate-science-emails and calling Krugman’s analysis “Pascal’s Wager.” I’m not convinced.

    With your analysis, you’re claiming that social pressure is good enough at accomplishing the second bullet point you’ve laid down. Let’s talk about degree of effect from the social pressures. You can feel good about buying energy efficient light bulbs, but those aren’t nearly enough to do something about climate change. Cap-and-trade, or a carbon tax, would reveal whether it’s cheaper for society to be driving to Wal-Mart, getting overnight shipping from Amazon, or walking to the convenience store. I have no idea which is cheapest for society.

    Many would argue that current government spending on green energy is being misallocated; potentially so badly that subsidized ethanol is crowding out investment in other alternatives.

    We haven’t even covered the security costs of more alternative fuel (the sticking it to the Saudis argument).

    This really seems like a place to get the market involved, no?


3 Trackbacks/Pingbacks

  1. […] in Climate change 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 […]

  2. […] while back, I argued in favor of a wait-and-see approach to Climate Change, a position that would be supported by this […]

  3. By The Sky Is Falling « Contrarian Moderate on 17 Jun 2011 at 3:10 pm

    […] Raising awareness of the problem will lead to it being solved, without taking any policy action.  I’ve argued that this may be how climate change plays out. […]

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