Ross Douthat’s case against cap-and-trade

I prefer to call it a carbon tax, while admitting the two are sometimes equivalent.  Here is Ross's key passage:

Spending 1 percent of our G.D.P. as a hedge against catastrophe might make sense; spending the same amount without any prospect of actually getting that insurance policy seems like idealistic folly. And so far, 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.

That's a strong argument, but the case for a carbon tax remains threefold:

1. Even if we cut government spending a lot, some taxes will have to go up.  This seems like the least bad tax to raise or create, since it has some chance of producing a better outcome.  It's hard to say that about most of the other potential tax boosts.  I'd also cut the tax deduction for mortgage interest, of course.  That too could improve the quality of outcomes.

2. Given that American policies are contributing to a (probabilistic) climate-based "attack" on Bangladesh and numerous other countries, there is a deontological case for trying to stop that attack.  It is a libertarian rights violation issue, driven by all of us in our role as consumers.   

It is a practical response — but to me a morally weak one — to argue "We Americans are the wealthiest country in the world but we're not competent enough to stop our contribution to the problem, so we're not going to try."  I get the logic, and I even agree with the predictive pessimism, but I'm not comfortable staying put with that as my final position.

3. A carbon tax might lead to a new green technology, with high upfront costs and low marginal costs.  Some of the rest of the world might then adopt the technology, even if those countries don't ever adopt a carbon tax.  In the short run this seems a little pie-in-the-sky, but in the longer run is it so crazy?  Haven't the Chinese adopted most of our other technological innovations?

That all said, I still don't like Waxman-Markey and in that regard I agree with Ross.  The bill seems to bureaucratize the energy sector, forgo most of the revenue opportunities, produce massive time consistency problems (postpone real adjustment and then give out more permits over time), and all without getting public buy-in to the idea of higher carbon prices. 

I'll also stress — again — that a carbon tax needs to be combined with the strong deregulation of the energy sector, and the weakening of NIMBY, in particular for wind power.

p.s. I hear less often these days about the "global cooling trend."


Comments for this post are closed