Global Climate Change Policy:
Economics finally gets a cameo role
15 Jul 2007 in Regulatory Economics, Regulatory Policy
Most of the debate about global warming has been about science, with the economics and political economy tending to be ignored. Today's Washington Post carries a Page One article summarizing how the focal point of the debate seems to have shifted.
Most US legislative proposals to mitigate the future damages climate scientists predict have three significant problems:
- They are expected to be enormously expensive.
- They are expected to be insufficiently stringent to have a significant effect even if all major greenhouse gas emitting nations agree to be bound by them
- All major greenhouse gas emitting nations will not agree to be bound by them
Now comes a fourth problem: Congressional advocates of taking action appear to prefer the least effective policy instruments, and opponents are daring them to support policy instruments that would be much more effective but whose costs would be transparent.
The Post's Steven Mufson writes:
Because of the enormous cost of addressing global warming, the energy legislation considered by Congress so far will make barely a dent in the problem, while farther-reaching climate proposals stand a remote chance of passage.
Mufson says none of the legislative proposals advanced by advocates would be effective. The five Senate proposals are cap-and-trade programs in which the caps are too limited to make much difference. He says "meaningful" climate legislation requires radical action:The potential economic impact of meaningful climate legislation -- enough to reduce U.S. emissions by at least 60 percent -- is vast. Automobiles would have to get double their current miles to the gallon. Building codes would have to be tougher, requiring use of more energy-efficient materials. To stimulate and pay for new technologies, U.S. electricity bills could rise by 25 to 33 percent, some experts estimate; others say the increase could be greater.
Michigan Rep. John Dingell, who was first elected to the House in 1955, has long been opposed to imposing the burden of environmental policy on his constituents -- automakers and their employees. As chairman of the Energy & Commerce Committee, Dingell has jurisdiction over climate change legislation. He is an opponent of such legislation, yet ironically he is the one Member proposing legislative action that actually might be stringent enough to be effective (provided that other major greenhouse gas emitting nations followed suit; more on that problem later).
Dingell says he is doing this to determine which of the advocates of climate change mitigation is serious:
"I sincerely doubt that the American people are willing to pay what this is really going to cost them," John D. Dingell (D-Mich.), chairman of the House Energy and Commerce Committee, said in a recent C-SPAN interview, adding that he intended to introduce legislation that would impose a carbon tax "just to sort of see how people really feel about this." He said his proposal would boost the gasoline tax by 50 cents a gallon and establish a "double-digit" tax on each ton of all carbon-dioxide emissions.
Mufson says legislation is unlikely to be passed this year "because of the complexity of the likely proposals," but only the Senate cap-and-trade plans are complex. Dingell's gasoline and carbon tax bill be relatively simple. However, it also would be transparent. Consumers (and voters) would understand that their representatives were personally responsible for higher gasoline prices and electric and natural gas rates. Dingell appears to believe that if an effective climate change policy is transparent, it doesn't have the votes. Complexity per se thus is not the issue; Complexity is an attractive tool of political economy, and it may be necessary to avoid transparency.
Mufson also says that even if a policy sufficiently stringent to be effective could be enacted, it would not be effective in fact. That's because global problems require global solutions, and major greenhouse gas emitting nations will not agree to enforceable CO2 limits.
"The scope of the problem is really enormous," said Prasad Kasibhatla, associate professor of environmental chemistry at Duke University's Nicholas School of the Environment. Not only must Congress and the White House reach agreement on emissions limits, developing nations must also act to achieve temperature goals. "If the climate change bills go through Congress and could somehow be coupled to a multinational agreement, then things could really start to change," Kasibhatla said. "But I'd like to start seeing real agreements between countries before I call myself an optimist."
By hoping that bills "could somehow be coupled" to enforceable international agreements, Kasibhatla implicitly confesses that he knows an enforceable global agreement is essential but he has no idea how to achieve one. His position is akin to that of the scientist on the left in Sidney Harris' famous cartoon linked nearby.
This hints at a key defect in the global warming debate: Climate scientists might understand atmospheric chemistry well enough to predict the future a hundred years hence, but they know next to nothing about economics and political economy. Expecting chemists to devise a globally effective and economically eficient policy instrument is as sensible as asking economists to predict future trends in atmospheric chemistry. But they are happy to offer reporters their opinions about economics and political economy, and reporters seem pleased to misrepresent these opinions as scientifically authoritative statements. An excellent example is Mufson's reliance on MIT physical chemistry professor John Deutch as an expert in economics and political economy. Deutch says $30 per ton of carbon is "certainly affordable for our economy and our society." His expertise
appears to be attributable to his previous service as director of the Central Intelligence Agency, an organization more frequently in the news for predictive errors.
Unlike Deutch, John Dingell's expertise in political economy seems unasssailable. He's served the same district in the House of Representatives for 52 years. That he also would come up with an economically efficient proposal for mitigating global warming suggests that he's learned a lot of economics along the way, too.
