Paul Krugman takes Jim Hansen to task over his arguments against cap-and-trade expressed in the NYT yesterday:
James Hansen is a great climate scientist. He was the first to warn about the climate crisis; I take what hHansen is right about cap-and-trade, but for the wrong reasons. It won't fail because of economics, but because of politics. Krugman is right that Hansen's economics are muddled, but wrong that cap-and-trade is "the only form of action against greenhouse gas emissions we have any chance of taking before catastrophe becomes inevitable." Debates like this help to explain why we need more not less voices in the climate debate.e says about coal, in particular, very seriously.
Unfortunately, while I defer to him on all matters climate, today’s op-ed article suggests that he really hasn’t made any effort to understand the economics of emissions control. And that’s not a small matter, because he’s now engaged in a misguided crusade against cap and trade, which is — let’s face it — the only form of action against greenhouse gas emissions we have any chance of taking before catastrophe becomes inevitable. . .
Things like this often happen when economists deal with physical scientists; the hard-science guys tend to assume that we’rewitch doctors with nothing to tell them, so they can’t be bothered to listen at all to what the economists have to say, and the result is that they end up reinventing old errors in the belief that they’re deep insights. Most of the time not much harm is done. But this time is different.
For here’s the way it is: we have a real chance of getting a serious cap and trade program in place within a year or two. We have no chance of getting a carbon tax for the foreseeable future. It’s just destructive to denounce the program we can actually get — a program that won’t be perfect, won’t be enough, but can be made increasingly effective over time — in favor of something that can’t possibly happen in time to avoid disaster.
9 comments:
Whoa! Krugman is one economist who likes cap'n'trade. Didn't the CSIRO economist, Clive Splash NOT like cap'n'trade? So it is not a science argument either way... it is climate scientists and economists weighing in on political feasibility which is the stock in trade of POLITICIANS.
Could scientists please defer to politicians on obviously political subjects? Is that too much to ask?
Krugman lives in a 1975 Keynesian Class Room. Krugman is afraid to come out of that classroom door as he knows Milton Friedman is laying for him just outside the door.
I think a good site to read about this is www.carbonfees.org. Their position generally follows Hansen, but with a lot more background. This site is produced by a couple of EPA lawyers on their own time.
Experts say Cap-n-Trade will be like carbon derivatives or credit default swaps that brought down the financial system into a recession.
http://www.washingtonsblog.com/2009/12/woman-who-invented-credit-default-swaps.html
The fascinating thing about Hansen is that the forces behind him (Gore and Soros) were more powerful than his employers (NASA) and the United States government of GW Bush. That's pretty powerful. I am willing to bet Krugman mixes in those circles too.
There is no climate debate, economic or scientific. Global warming is deadly and carbon trading will be used to 'solve' it. You have no voice and no vote on this matter. The forces, as I pointed out earlier, are much bigger than mere governments.
This is the list of companies in the International Emissions Trading Association :-
BP, Conoco Philips, Shell, E.ON AG (coal power stations owner, EDF (one of the largest participants in the global coal market), Gazprom (Russian oil and gas), Goldman Sachs !, Barclays, JP Morgan Chase, Morgan Stanley.
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In a move that will re-shape the fledgling emissions trading market, Rothschild Australia and E3 International today announced their intention to launch the Carbon Ring Consortium — an investment vehicle that will provide companies in the Asia Pacific Region with an innovative way of learning about and understanding their risks in the new carbon market.
http://www.prnewswire.co.uk/cgi/news/release?id=90090
What exactly is so difficult about a carbon tax? Sarko already did it. It's a lot simpler, more honest, and there aren't any bookies to get a cut. Governments raise taxes all the time. Apparently they've just extended a new inheritance tax in the US. The French are proposing a Tobin tax. It's easy!
This is the part where you have to conclude that the proposers of cap and trade must either be in the pocket of big finance, or that they don't really believe in thermageddon at all.
Just to clarify.. not that they (scientists) can't have opinions about politics and what is feasible and disagree, but rather Krugman seems to be claiming that if Hansen understood "the science" he would want cap and trade.
And one reason "the science" tells him that is because its politically feasible..
Anyone who suggests that "science" hardwires to one policy choice should call for a "science policy abuse" red alert.
Roger,
Your said, "It won't fail because of economics, but because of politics." I presume the "It" is cap-and trade. And in which case I don't understand.
I believe the Democratic Party, at least in the House, believes that a carbon tax, even a low one, would cost them many seats. The cap-and-trade, while labeled (and to a degree correctly) a "carbon tax" by the GOP, is easier to defend especially if the actual bill co-opts -- bribes if you like -- some significant economic interests. Were I a House Dem in a potentially contested seat, I might go with even a bad cap-and-trade, but I would never go with a carbon tax without large Republican support.
Now the actual cap-and-trade bills (Waxman-Markey, Boxer-Kerry, and whatever) have some major op-opts which reduce the bite. Hence, Hansen's ire. Would these be the politics you meant?
Note: in the 1989-90 debates over the "Bush-Dingell" Clean Air Act of 1990, the arguments against cap-and-trade had similarities to today's criticisms (from both sides). In that act the estimate costs put before Congress, even by the supporters, greatly overestimated the cost of compliance. I don't like cap-and-trade on carbon because the market is too disperse, the co-opt give-aways are too corrupting ("Yes Virginia, capitalist will drop all that free market talk ... if you pay them enough."), the administrative aspects too invasive, and the mechanism for carbon tax is essentially in place. Hence a preference for a (very low) carbon tax. But I don't have to run for Congress.
PS: Although Krugman doesn't say it, the cap-and-trade is more of a Coasean approach. It does settle the property rights: the federal government owns it and can sell it to whomever. What it doesn't settle is the transactions costs part.
-8-Martin
You are right, I should have been more precise.
When I said "fail" I meant from a policy perspective, that is, in achieving the goals set forth.
From a political perspective, it may well succeed, where succeed means -- become enacted as law.
I disagree that a carbon tax is a political non-starter. That is an assumption.
Thanks!
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