TT's Lost in Tokyo — by TokyoTom

Libertarian law professor Jonathan H. Adler, of Case University, The Volokk Conspiracy law blog and NRO contributing editor,  has a post up at NRO explaining why conservatives ought to be pushing for  a “revenue-neutral carbon tax” as the best way to head off what he sees as a looming train wreck of damaging regulatory actions by the EPA, that he argues are mandated by a recent Supreme Court ruling that. 

Here is Jon’s summary of his post:

I have an article up today explaining how the EPA is required to begin regulating greenhouse gases as a consequence of Massachusetts v. EPA.  Of potential note, the new EPA Administrator agrees, telling EPA staff in a memo that she will fulfill the agency’s “obligation” to regulate GHGs under the Clean Air Act while the Obama Administration develops new climate legislation.

Regulating greenhouse gases under existing law will be a disaster, but what’s the alternative?  I’ve endorsed the idea of a revenue-neutral carbon tax.  My friend Chris Horner thinks this is preemptive surrender, but what’s his alternative?  Absent new legislation, EPA is poised to regulate cars, trucks, factories, power plants, and much, much more.  The number of facilities covered by the PSD program alone will increase ten-fold or more without a legislative fix.  I know Horner would like a clean Clean Air Act revision, simply excising greenhouse gases.  But assumig that’s impossible — or, perhaps, once that measure fails — what is his Plan B?

Adler has posted slightly longer summary at The Volokh Conspiracy.

[Update at bottom.]

Neocons, conservatives, libertarians and Exxon`s Rex Tillerson have recently joined arch-warmer Jim Hansen in calling for rebated carbon taxes in lieu of massive cap/trade rent-seeking and industrial planning.

I`ve blogged extensively on the reasons why I and others view carbon taxes – particularly if rebated to citizens – as a far better alternative to a domestic cap and trade program.

With the Obama inauguration looming, starting late last month a wide range of voices on the right have started to weigh in – each with their own reasons – in support of carbon or similar taxes, in order to shift the debate away from cap and trade and other extensive industrial policy.  Is it too late?  In any case, it`s worth taking a look at what people are saying recently:

Climate scientist Jim Hansen, who with his wife rather boldly sent to Barack and Michelle Obama a personal letter and background paper (with a discussion draft first made public in November).

Neocon Charles Krauthammer proposed a substantial “net-zero” gas tax in the December 27 (now updated to January 5) Weekly Standard, with intentions in part to cut off the flow of oil money to unfriendly (and Muslim) regimes abroad.

Republican Congressman Bob Inglis and economist Arthur Laffer argued in the December 28 New York Times  for a carbon tax coupled with tax-cut stimulus.

On January 9, the Wall Street Journal reported on ExxonMobil CEO Rex Tillerson`s recent speech in DC calling explicitly for Congress to enact a tax on greenhouse-gas emissions as a “more direct, a more transparent and a more effective approach” than cap and trade.  This is not as new as the WSJ would have it; as I note on an earlier post, ExxonMobil came out rather explicitly in favor of carbon taxes a year ago.

Libertarian and natural resources law prof – and NRO and Volokh Conspiracy blooger – Jonathan Adler applauds and explains these developments for various reasons, noting particularly that a train wreck seems headed our way, and that Congressional action is needed to avoid having the Obama EPA attempt to implement climate change policy via the Clean Air Act (for which a Supreme Court case last year paves the way).

Of course there is reasoned (both reasonable and passionate) disagreement, such as from businessman Jim Manzi at NRO on December 30 and blogger Tony Quain in response to Krauthammer, and by Chris Horner of the Competitve Enterprise Institute on January 7.

All are worth a look.

[Update:  Although liberal economists and commentators have tended to diss a carbon tax as a political non-starter, I note that in a December 27 New York Times op-ed, Thomas Friedman voiced support for a revenue-neutral carbon tax or gas tax on roughly the same grounds as Krauthammer.

Friedman and the others noted above join a long list of economists and political commentators on both sides of the political spectrum (including AEI, George Will and Barbara Thoring on the right) who strongly prefer carbon taxes over cap and trade.

I note that I do not buy all of the arguments for a carbon tax, particularly the argument that a gas tax would be an effective foreign policy tool.  However, I summarized previously some economists’s discussions of using a domestic tax to limit the flow of revenues to oil-exporting countries.

Dan Rosenblum of the Carbon Tax Center (which is a great complier of information on carbon taxes vs. cap and trade policies) has an excellent summary on recent developments in the December 30 Huffington Post.

My view is that a carbon tax would be much preferable to a cap and trade system and, if rebated or offset by reductions in income or other taxes, may improve incentives for savings and investment.  Further, it would undercut arguments and justifications for other obviously counterproductive market inverventions like the CAFE standards and subsidies for supposedly “green” sources of energy (including ethanol). 

Of course the fact that a carbon tax is much more transparent than a cap and trade and other policies interventions is one of the chief reasons that politicians and rent-seekers prefer more complex and obscure ways to provide favors to various industries and interest groups.]

[Further update:　I note that Cato devoted its August 2008 edition of Cato Unbound to a debate over climate change, anchored by an essay by Jim Manzi that specifically advocated substantial government in improved global climate prediction, carbon capture and storage, and  geo-engineering
projects.

In addition, libertarians Ed Dolan, Gene Callahan and Sheldon Richman all feel that climate change deserves serious consideration, Reason online`s Ron Bailey and libertarian/energy expert Lynne Kielsing supports climate change actions,  Bruce Yandle, CEI`s Iain Murray, Cato`s Indur Goklany has advanced a specific climate change-targeted proposal, and AEI`s Steven Hayward and Ken Green have provided relatively balanced analyses.]

Along with Roderick Long‘s recent Cato Unbound piece on libertarianism and corporatism, Cato hosted a reaction essay by liberal Matthew Yglesias, in which Yglesias made the following side comment:

The free-market case for a revenue-neutral carbon pricing scheme seems fairly impeccable to me. But instead of organizing its climate change efforts around seeking to ensure that any future carbon pricing plan be as close to revenue neutral as possible, Cato prefers to steadfastly defend the rights of industry to unload air pollution unimpeded.

Yglesias’ comment on carbon pricing elicited a longer response by Cato senior fellow Jerry Taylor, who in Cato-at-Liberty argues that the case for carbon taxes was not at all “impeccable”.   Unfortunately, Taylor does exactly what Yglesias argues –

• Taylor ignores Yglesias’ implicit agreement that any carbon pricing should be as revenue-neutral as possible, which further implies support by Yglesias of the notion that the government should avoid using any carbon revenues to subsidize particular technologies;
• Taylor refuses to address the question of whether relatively slim, revenue-neutral carbon pricing approaches are much preferable to the heavy-handed, pork-ridden policy alternatives that are being floated before Congress; and
• by proffering arguments by Indur Goklany, Taylor in effect concedes that the best policy is for the government to do nothing, other than to encourage adaptation and to fund adaptation efforts in the developing world – thus conceding to industry a continuing “right to emit GHGs”. 

It is a puzzle that Taylor doesn’t explicitly address these points, particularly as the policy debate has very much shifted ground from whether the government should act to the question of what policy is preferable.   While I believe that Jerry Taylor and Indur Goklany make important points, they can hardly expect to be effectual in their efforts to stand against greater federal policy intervention if they ignore the change in political currents and fail to more directly engage obviously sympathetic observers like Matt Yglesias, to establish and build on common ground, or to more forcefully argue on the basis of principles.

Moreover, Taylor rather surprisingly compounds his disengagement by pulling an apparently skewed figure (the rather low mode rather than the higher mean) from a 2004 review of climate change cost-benefit studies by economist Richard Tol,  who has conducted further reviews and analyses and this year has come very strongly out in favor of carbon taxes.  In the August 12, 2008 issue of Economics — the Open-Access, Open-Assessment E-Journal, Tol concluded:

… the uncertainty about the social cost of carbon is so large that the tails of the distribution may dominate the conclusions
(Weitzman 2007b)—even though many of the high estimates have not been peer reviewed and use unacceptably low discount rates. …

There are three implications. Firstly, greenhouse gas emission reduction today is justified. Even the most conservative assumption lead to positive estimates of the social cost of carbon (cf. Table 1) and the Pigou tax is thus greater than zero. Yohe et al. (2007) argue that there is reason to reduce greenhouse gas emissions further than recommended by cost-benefit analysis. The median of … peer-reviewed estimates with a 3% pure rate of time preference and without equity weights, is $20/tC. …. The case for intensification of climate policy outside the EU can be made with conservative assumptions. … Secondly, the uncertainty is so large that a considerable risk premium is warranted. With the conservative assumptions above, the mean equals $23/tC and the certainty-equivalent $25/tC. More importantly, there is a 1% probability that the social cost of carbon is greater than $78/tC. This number rapidly increases if we use a lower discount rate—as may well be appropriate for a problem with such a long time horizon—and if we allow for the possibility that there is some truth in the scare-mongering of the gray literature.  Thirdly, more research is needed into the economic impacts of climate change—to eliminate that part of the uncertainty that is due to lack of study, and to separate the truly scary impacts from the scare-mongering.

Tol, R.S.J. (2008), ‘The Social Cost of Carbon: Trends, Outliers, and Catastrophes‘.

Taylor should be aware of this paper, as Richard Tol is well-known and -regarded, and Tol’s above paper was available as a draft in August 2007 and widely discussed (including here).  Consequently, Taylor’s quoting of old numbers that Tol has himself moved away from looks like cherry-picking and in any case will not convince anyone who has moved on from 2004.

Further, while Taylor refers readers to an excellent study by Indur Goklany, he fails to note that Goklany is a strong advocate for “adaptation”, namely, the view that:

The world can best combat climate change and advance well-being, particularly of the world’s most vulnerable populations, by reducing present-day vulnerabilities to climate-sensitive problems that could be exacerbated by climate change rather than through overly aggressive GHG reductions. 

But can’t one agree with Goklany’s preferences and yet kill two birds with one stone, by using domestic carbon taxes to fund contributions to global development efforts?  The “adaptation is preferable to mitigation” dichotomy simply fails.

Here’s to hoping for more constructive engagement from Jerry Taylor and from Cato.

Kudos to Robert P. Murphy for a new opinion piece dated Novermber 15 in Forbes.com regarding  “The High Costs Of ‘Green Recovery'” . 

The biographical note appended to the piece describes Bob as “a senior economist with the Institute for Energy Research, a nonprofit foundation that applies free-market solutions to energy challenges” – but sadly, Bob’s piece fails (i) to suggest what “free-market solutions” are available for energy challenges, or (ii) to argue why such free-market solutions are actually the best approaches.  While I share Bob’s arguments that a federal “green” jobs program is likely to be counterproductive, I disagree with his generalizations on climate concerns. 

Bob noted the Forbes piece in his blog; I copy my below the comments I made to him there:

Congratulations, Bob, on getting into Forbes, but I must confess that it is a bit of a puzzle that even when you get the bully pulpit you decline to talk about what kinds of actions make sense as energy policy – such as how to improve the energy grid (a centralized push for local utility deregulation, so utilities might have some interest?), how to achieve political consensus on greater exploration (such as royalty checks to citizens), allowing faster depreciation, etc.

It also disappoints that you insist on engaging on climate change issues only from a heavy-handed government redistribution standpoint, while ignoring not only lack of property rights, many parties with differing views of equity, and tragedy of the commons aspects, but also ignoring the obvious superiority of carbon taxes (assuming legislators are going to choose between cap and trade and carbon taxes), which present few opportunities for rent-seeking and can be rebated to reduce the regressive effcts.

Update:  I note that Obama’s campaign energy policy (the “Obama-Biden comprehensive New Energy for America plan“) is here; his slimmed-down outline that describes a plan with the same name is here.

In June, I made a number of comments to Bob Murphy in response to his blog post entitled, Cap and Trade Is Not a “Market Solution”; Bob declined to respond at that time.

One of my comments was that Bob

(1) … unfairly conclude[s] that, since it will be government that will be implicitly pricing carbon emissions, such pricing “won’t reflect genuine economic scarcity” at all, when Austrian approaches do not deny that lack of property rights will result in economic actors ignoring external costs, but simply indicate the government pricing of resources can only imperfectly reflect economic factors;

Bob Murphy, in comments on his blog, has acknowledged his overstatement:

However, in context, my statements could easily be construed as saying that even in principle, the idea of carbon emissions having anything to do with scarcity was crazy. And that is too strong, so my op ed was misleading on this point.

It’s a minor point, but I appreciate Bob’s acknowledgment.

More here.

The signatories agreed to the following 10 principles:

1. Canada needs to act on climate change now.
2. Any substantive action will involve economic costs.
3. These economic impacts cannot be an excuse for inaction.
4. Pricing carbon is the best approach from an economic perspective.
   1. Pricing allows each business and family to choose the response that is best and most efficient for them.
   2. Pricing induces innovation.
   3. Carbon is almost certainly under-priced right now.
5. Regulation is the most expensive way to meet a given climate change goal.
6. A carbon tax has the advantage of providing certainty in the price of carbon.
7. A cap and trade system provides certainty on the quantity of carbon
   emitted, but not on the price of carbon and can be a highly complex
   policy to implement.
8. Although carbon taxes have
   the most obvious effects on consumers, all carbon reduction policies
   increase the prices individuals face.
9. Price mechanisms can be regressive and our policy should address this.
10. A pricing mechanism can allow other taxes to be reduced and provide an opportunity to improve the tax system.

Too bad they didn’t take any initiative in discussing other helpful policy measures, such as eliminating corporate income taxes (or allowing immediate write-off of new investments), deregulating the power industry and eliminating subsidies for particular technologies.

h/t James Calder

Last week the Wall Street Journal ran an op-ed by James P. Lucier, Jr., a managing director of Capital Alpha Partners, LLC, in Washington, D.C.

Lucier`s piece describes how Alaska shares its oil revenues with residents, and suggests that John McCain adopt a page from Alaska`s book to get popular support for oil and gas drilling in the OCS (on top of revenue sharing with the relevant states).  Here are Lucier’s key points:

this year every Alaskan will receive a $1,200 check as a share of the oil bonanza. (The check comes in addition to the
approximately $2,000 every Alaskan will receive this year as a dividend from the Permanent Fund, which was established by state constitutional
amendment in 1976 as a way of sharing the state’s mineral wealth with the people.)

A direct share in oil profits for every citizen is the ultimate incentive for more drilling. That’s why in Alaska drilling for
oil seems almost universally popular, while other states are drill-phobic.

The real comparison is …  between Alaska’s constitutional rule — that the people must share
directly in the state’s mineral wealth — and Mr. McCain’s proposal that coastal states should share in federal offshore oil revenue. His
plan is for the funds to be used for public purposes like roads, schools and conservation. A share of royalties dramatically improves
the coastal states’ incentive to support drilling. But if Mr. McCain offered every individual American a royalty check too, he might find it
easier to sell his program.

(emphasis added)

As I’ve previously noted, this makes eminent sense to me!

Let`s hope this good idea for royalty-sharing snowballs.  It`s something alot of people could get behind, even enviros – and if extended could vastly improve federal land management and could as well point the way to a rebated carbon tax.

I copy below comments I made on a related thread at Roger Pielke, Jr.’s Prometheus science policy blog, regarding recent duelling op-eds on climate change policy between the left-leaning Danish political scientist Bjørn Lomborg and economist Gary Yohe.

Lomborg has stirred up discussions of environmental issues with his books, The Skeptical Environmentalist (2004) and Cool It: The Skeptical Environmentalist’s Guide to Global Warming (2007), and conceived, organized and directs the Copenhagen Consensus Centre at the Copenhagen Business School, where Lomborg is now an adjunct professor.  Yohe, on the other hand, is a professor of economics at Wesleyan University (Ph.D. Yale), is a leading economist on climate change an one of the Lead Authors of the Intergovernmental Panel on Climate Change (IPCC)’s Third and Fourth Assessment Reports.

At issue in the dust-up between Lomborg and Yohe were discrepancies in interpretation of (1) the conclusions of the 2008 Copenhagen Consensus – by which a panel of leading economists tried to prioritize various government policies for improving welfare in the developing world – and (2) the challenge paper on climate change that Yohe, Richard Tol and others prepared and submitted to the Copenhagen Consensus panel.

My remarks were as follows; for more context, please see Pielke’s post and thread (linked above), as well as his follow-up post (here) (minor edits and emphasis added):

Round 1:

If I may venture a few comments:

“1. It seems to me that Tol and Yohe have a point that Lomborg has confused his readers as to what Yohe and Tol concluded, but fail to focus on the point of confusion – only Roger seems to have caught the drift, but doesn’t identify any responsibility for Lomborg in it.

Lomborg first mentions Yohe as “one of the lead economists of the IPCC” who “For the Copenhagen Consensus … did a survey”. But in concluding what climate policy should be, Lomborg completely ignores the strong recommendation of Yohe and Tol (for a policy that focusses on mitigation, with R&D investments to be primarily market driven and some limited government-funded efforts to aid adaptation in developing countries) for “the best climate solution from the top economists from the Copenhagen Consensus”, without making any effort to clearly distinguish Yohe/Tol from those who voted on the CC ranking.

Says Lomborg, “if we are to find a workable and economically smart solution, we would do well to look at the best climate solution from the top economists from the Copenhagen Consensus. They found that, unlike even moderate CO2 cuts, which cost more than they do good should focus on investing in finding cheaper low-carbon energy. This requires us to invest massively in energy research and development (R&D). Right now, we don’t – because the climate panic makes us focus exclusively on cutting CO2.”

But none of these conclusions can be derived from the Yohe/Tol work, and since Lomborg first refers to them, it is a puzzle that he did not do a better job of distinguishing their conclusions from those of the CC voting panel of economists.

2. The disjunction between Lomborg scoffing at Tickell’s concerns about the immediate and long-term effects of a global average warming by 2100 in the range of 3-4 degrees C (with costs to global GDP of only a few %) and but then nevertheless insisting that climate risks “requires us to invest massively in energy research and development (R&D)” is more than a bit much.

If there’s no serious problem, why should our governments do anything about it? If there is – and a global average temperature increase of 3-4 degrees C sounds EXTREMELY serious to me – why is having governments throw money at the best solution? Why does Lomborg think the CC ranking means we should ignore what the entire economics profession has been telling us for decades about pricing carbon, and about letting private markets determine where investment funds should flow and what other behavior changes are warranted?

3. Lomborg’s assertion that “climate panic” makes us focus exclusively on cutting CO2, at the expense of R&D, is not merely unsupportable but manifests a fundamental misconception – apparently also embedded in the CC process – as to what drives (and who makes) investment in market economies.

Absent a serious concern about climate change, there is simply little justification for government funding of low-carbon energy R&D investments. That we are finally seriously talking about such investments in the US (Warner-Lieberman was full of such pork) is only a result of what Lomborg dismisses as “climate panic”. Clearly, then, mitigation and government R&D funding can go hand-in-hand and in fact are intimately linked.

But the more basic confusion is that R&D of the type Lomborg and the CC calls for is in fact already underway – in the private economy. Because there is really little justification for the government to directly be making such investments, it is wrong to somehow lump this R&D into government expenditures, in the manner that both Lomborg and the CC do. Rather, the vast bulk of such investments can be made by the private economy once carbon pricing mechanisms – which are really a form of factor pricing with respect to what has until now been a valued but unpriced open-access resource – are in place.

For purposes of the CC valuations, the only real governmental cost that should be measured is the cost of establishing measures to administer carbon prices; these can be extremely cheap if carbon taxes are used, or more expensive if politicians prefer opacity and side deals for rent-seekers (cap and trade). In either case, the administrative costs will be much less than the level of private R&D that carbon pricing will elicit from markets.

Round 2:

 “I would agree with davidacoder: the misrepresentation here lies in the silly rules of the CC exercise and the liberties Lomborg takes in describing the conclusions.

The whole premise of the CC is that if governments are going to spend a limited pot of money, what would they spend it on? The economists’ panel recognized the foolishness of this in part by putting Doha at second to the top – and explained that freeing trade costs nothing and in fact improves GDP. Much the same for climate change – although in this case the economists didn’t focus on the question of whose pocket the money was coming from. To pose the issue starkly, if governments imposed and fully rebated carbon taxes, what do the carbon taxes cost the governments? Nothing, but an effective mitigation industry nevertheless springs up. Meanwhile, governments remain free to spend on other priorities.

Of course, an observer might note that if governments DON’T rebate carbon taxes or permit revenues, they actually have MORE revenues to spend on a Copenhagen Consensus agenda, not less.

Accordingly, the CC ranking tells us almost nothing about climate change policy.

Thomas Schelling’s explanation for the low ranking for climate change specifically confirms that they were looking only at government dollars spent, for which one looks at mitigation only if it is the government paying industry/utilities to mitigate:

“The reasons why climate change measures came out so low on the list of priorities are that, for one, the Conference tried to look at cost-benefits, and, for another, its original idea was to rank things in terms of priority for immediate expenditure of money. Therefore, we proposed to eliminate poverty over and above anything else. The trade liberalization ranked fairly high. This was expected, whenever economists got together to talk about a variety of things including trade liberalization. The climate issue became lower ranks, because the paper on climate advocated for the project that stretched out to the year 2250 with the estimated costs to be in many trillions of dollars. We did not see how spending any part of 50 billion dollars on climate change measures would make a difference, although putting way down the list did not necessarily mean that we considered it as not an urgent subject. We put climate way down the list of priorities, because we did not see how spending a little bit of money over next few years would significantly improve the cost effectiveness.”
http://www.gispri.or.jp/english/Annual/2005-9.html

Further, as I and others have noted, the papers presented and the conclusions of the economists panel certainly don’t tell us, as Lomborg would have it in his editorial, that mitigation strategies “cost more than they do good”. This is a liberty too far, not only from the Yohe/Tol paper, but from Chris Green’s as well. Green specifically suggests using a mitigation-spurring carbon tax to raise the pot of money for government-spent R&D:

“If the $60 billion were raised by a carbon tax, then even a tax with a 25% cost of public funds would stay within the CC budget constraint ($60 + 25(60) = $75 billion). A tax of $4 per ton CO2 on just 50% of the approximately 30 GtCO2/yr (~8GtC/yr) currently emitted would raise 60$ billion/yr. But frankly, if it were politically feasible, I cannot see why we cannot do better by starting with a more robust $8-10/tonne CO2, and then allow the tax to rise gradually over time. To keep within CC ground rules the extra revenues could be used to reduce other taxes that have even higher marginal costs of public funds.”

Round 3:

 “Roger, as to justifications for government R&D soending, I think my main point stands; namely, that Lomborg is wrong to blame “climate panic” and a focus on mitigation for stymieing low-carbon energy R&D investments.

In market economies, it is the private economy that makes investment decisions and drives wealth, not the government. While there is plenty of low-carbon energy R&D investments already underway, one of the the most effective ways to get more research done is to send the market carbon pricing signals. The government may of course decide to drive research by spending for it itself, but this is money that has to come out of the pockets of the private economy.

In either case, the government can only act in a meanful way if politicians are supported by a sufficiently serious concern about climate change. Those who argue for mitigation are NOT getting in the way, but are obviously pushing things along. If Lomborg believes that the best way to move policy along is to bash his putative allies and throw government money/pork to those are blocking policy change, then even while I oppose pork I’d at least be able to understand where he is coming from.

In response to my position that “Absent a serious concern about climate change, there is simply little justification for government funding of low-carbon energy R&D investments,” you argue that “The costs of energy, energy demand, energy security, and non-climate environmental concerns all provide solid justifications for such investments.” In this, apparently I am even more of a “non-skeptic heretic” than you, who take a classic big-government position (hard to say whether your position is liberal or conservative these days, after we’ve just wasted trillions in Iraq on an “energy security” fantasy).

The market addresses all of these concerns well. The only items I have sympathy for are some you haven’t listed – but which Jim Manzi argues for at Cato:

“improved global climate prediction capability, visionary biotechnology to capture and recycle carbon dioxide emissions, or geo-engineering projects to change the albedo of the earth’s surface or atmosphere”

http://mises.org/Community/blogs/tokyotom/archive/2008/08/23/more-on-manzi-cato-on-climate.aspx

We should leave decisions on particular investments in energy technologies with private markets. Governments will never have more knowledge than markets do, and they tend to give us pork-barrel boondogles instead, like synfuels and corn-fed ethanol.”

More from the National Review‘s “Planet Gore” corner.

My reaction?  While we do need investments in power transmission infrastructure, do it with your own money, T. Boone.

While I, along with many others, could support a rebated carbon tax that would spur investments in energy efficiency and in GHG-lite technologies, we certainly don’t need the government to be picking and choosing technologies, a la synfuels, ethanol or “clean coal”.  But there probably is a role for the federal government in encouraging the states to deregulate local power generation and transmission (and to take other actions that encourage capital investments, such as allowing immediate depreciation).

A few days ago I concluded that Jim Manzi’s lead essay in Cato Unbound’s new climate issue exhibited rather weak “libertariarian sinews”.

Allow me to note a few additional remarks on Manzi`s arguments.

1.  It’s clear from Manzi’s essay that (i) he is actually quite concerned about the risks posed by anticipated climate change, even while he dismisses the “scare stories” and the “precautionary principle” and (ii) he believes that the risks warrant even greater investments by government in climate science and carbon sequestration/geo-engineering efforts. 

While I commend Manzi for addressing at close to face value the IPCC’s warnings (even while climate science does not provide a firm basis for precise temperature or climate change prognostications) and the advice offered by economists such as William Nordhaus and Martin Weitzman, it is puzzling that he does not see in climate change concerns the opportunity for a positive agenda of deregulation and tax reform that would liberate our economy and help to spur changes in capital investments.

2.  Manzi has underplayed both the possible degree of climate change under “business as usual”/non-aggressive policy scenarios and the absolute and relative magnitude of the concomitant risks and costs.

Manzi notes that the “current IPCC consensus forecast is that, under fairly reasonable assumptions for world population and economic growth, global temperatures will rise by about 3 °C by the year 2100.” Note that this implies a an AVERAGE global temperature increase of 5.4 °F, with even greater temperature increases in the US and elsewhere the further one gets away from the equator. The IPCC does not make “forecasts”, but has analyzed and released a number of projections based on various scenarios, most of which assume aggressive actions to deploy clean energy technologies.

As fellow contributor Joe Romm (undergrad and Ph.D. in physics at MIT, Senior Fellow at the Center for American Progress, where he writes and maintains the Climate Progress blog, and author of “Hell and High Water: Global Warming–the Solution and the Politics–and What We Should Do” ) argues, Manzi has seriously understated the risks of much higher temperatures by 2100 that the IPCC has noted.  Joe Romm notes that, in fact, the growth of actual global carbon emissions since 2000 has exceeded the IPCC’s most extreme A1F1 scenario, and argues that 

“the latest IPCC report finds that, absent a sharp reversal of BAU trends, we are headed toward atmospheric levels of carbon dioxide far exceeding 1,000 parts per million by 2100. IPCC’s “best estimate” for temperature increase is 5.5°C (10°F), which means that over much of the inland United States, temperatures would be about 15°F higher.” (emphasis in original)

Further, even using a very optimistic projection, Manzi has also seriously understated the impact and costs that the IPCC suggests may be felt in the US. Manzi, assuming that global temperatures rise “only” by 3 °C increase by 2100, refers to an IPCC summary that states that such a temperature increase would cause total estimated economic losses in the low end of a range of 1–5 percent of global GDP (and later uses an estimate of 3% of GDP). This ignores not only the much higher costs that will be faced if warming is even greater, but also ignores:

(1) that as global GDP is expected to substantially grow, the absolute magnitude of the annual GDP loss may be very large, indeed,

(2) that measures of “economic” losses include adaptation costs as a part of GDP but do not cover non-market damages, the risk of potential extreme weather, socially contingent effects, or the potential for longer-term catastrophic events and

(3) that the greatest negative effects of climate change are expected to be felt in developing countries that have a relatively insignificant share of GDP.

3.  Manzi notes that even with the low-ball assumptions, mainstream economists like Yale’s William Nordhaus have long argued on a standard cost-benefit analysis basis that the gains from implementing an escalating carbon tax would outweigh the costs (Nordhaus has for many years been at the low end of the benefits to be gained), but even so Manzi argues that “the real world of geostrategic competition and domestic politics” one leads him to greatly discount the basis for a policy the difficulties with implementing a carbon tax or similar policy.

But it looks like Manzi has put his thumb on the scale again. Manzi asserts that in order to have an effective GHG mitigation policy, we would have to agree to, and enforce, “for hundreds of years” a “global, harmonized tax on all significant uses of carbon and other greenhouse gases in any material form” that “would run directly contrary to the narrow self-interest of most people currently alive on the planet” and that “all the side deals that would be required to get this done would create enough economic drag to more than offset the benefit.” Manzi also points to the ineffectiveness of the Kyoto Protocol, the apparent unwillingness of developing nations to agree to GHG restrictions and the penchant for politicians for loading down climate change legislation with special deals as reasons to think that a globally-coordinated climate policy is not worth while.

But while these are serious concerns, it is relatively easy to counter that:

– the Kyoto Protocol is no failure, but that the Europeans have been waiting for the US to agree to similar action rather than blindly biting any bullet unilaterally;

– it is clear that China, India, Brazil and other developing countries are seriously concerned about climate change, but their initial participation is not needed for the developed nations to commence a meaningful mitigation deal, and there are trade and other levers (including a desire for cleaner energy technologies) to eventually bring them on boar;

– Manzi later acknowledges this in his own plan for an agreement among developed nations to invest in technology that can then be shared with developing ones;and

– effective climate policy can be initiated and implemented domestically without external coordination, such as power market deregulation, allowing immediate depreciation of capital investments, and replacement of income taxes with resource taxes.

Further, it’s clear that Manzi`s assertion that climate policies “run directly contrary to the narrow self-interest of most people currently alive on the planet” is simply an unfounded and unjustifiable conclusion.

All of mankind shares the atmosphere, as an open-access but indispensable commons. We are approaching the point that the costs and risks of inaction (or rather, the costs of continuing free use without responsibility for costs/risks shifted to others) merit the costs of shifting to a system of shared rules (and other investments) with respect to its management – the efforts in which people and firms of many nations are voluntarily engaging in this regard are themselves evidence that even narrow self-interest justifies coordination with our neighbors (even as gamesmanship remains).

4.  Manzi next, rightly, considers the “inherently unquantifiable possibility that our probability distribution itself is wrong,” so that “the case for a carbon tax or a cap-and-trade emissions rationing system is really that it would be a hedge against the risk that actual damages from warming would be much, much worse than current risk-adjusted projections indicate,” with the primary purpose of such a tax or rationing system being “not to encourage conservation per se, but rather to induce the development of new technologies that can de-link economic growth from damaging accumulations of atmospheric carbon dioxide”.

Oddly, though, Manzi simply concludes, with no analysis, that any carbon pricing program would be “insanely expensive” and yet even then “would very likely not be high enough to successfully incentivize the creation of the desired technologies.” One would like to know on what basis he concludes that markets do not respond to incremental changes in prices – so that the governments of developed nations ought to directly make certain climate change technology investments (or incentivize them via prizes, etc.)

5.  It is also odd that Manzi then turns immediately from the dismissal of a gradualist pricing approach to a focus on “rapid, aggressive emissions abatement” that would only be justified if “the outer edge of the probability distribution of our predictions for global-warming impacts is enormously conservative, and disaster looms if we don’t change our ways radically and this instant,” in which case Manzi agrees that “we really should start shutting down power plants and confiscating cars tomorrow morning.”

Manzi seems to be as alarmist as many enviros, and to have even less faith in the market than they do.

Manzi then briefly addresses – and conflates with the table-pounding of Al Gore and others – the more sophisticated argument (advanced by Harvard’s Marty Weitzman) that “the risk that actual damages from warming would be much, much worse than current risk-adjusted projections indicate” is quite large. Says Manzi, “any rationale for rapid emissions abatement that confronts the facts in evidence is really a more or less sophisticated restatement of the precautionary principle: the somewhat grandiosely named idea that the downside possibilities are so bad that we should pay almost any price to avoid almost any chance of their occurrence.” 

Manzi believes that worrying too much about climate change is “to get lost in the hothouse world of single-issue advocates, and become myopic about risk,” while ignoring “lots of other unquantifiable threats of at least comparable realism and severity”. Well, I beg to disagree. While we can certainly deal with more than one risk at a time, why is it that conservatives like throwing trillions at “defense” and can focus on bird flu, but need to write off climate change? Could it have anything to do with what industries are in favor with Republicans and the White House?

Climate change differs from the other risks Manzi raises in that it is a risk that our own activities generate (not an “external” threat) – and one that we can manage by focussing on who is generating risk and asking them to bear some of the cost. Like the others, though, action is in some ways a collective choice problem, but unlike blowing trillions unilaterally on “defense”, climate change is a risk that other developed nations have shown they are willing to co-invest in heading off.

So why is continuing to be the spoiler in our national self-interest? Manzi provides the answer with a strawman:

“The loss of economic and technological development that would be required to eliminate literally all theorized climate change risk would cripple our ability to deal with virtually every other foreseeable and unforeseeable risk.”

Those who are concerned about climate change have long concluded that we are already facing ongoing climate change, with further unavoidable change in the pipeline, so simply nobody is talking about “eliminate[ing] literally all theorized climate change risk”.

6.  Finally, Manzi trots out his own proposal, after against dismissing any carbon pricing policies (and ignoring all others, like deregulation) with un-established suppositions:

“IF there is a real, though unquantifiably small, possibility of catastrophic climate change, and IF we would ideally want some technological hedges as insurance against this unlikely scenario, and IF raising the price of carbon to induce private economic actors to develop the technologies would be an enormously more expensive means of accomplishing this than would be advisable, then what, if anything, should we do about the danger?”

Apparently, Manzi has introduced these suppositions to tone down the much firmer and more extensive proposals he has made and justified elsewhere:

“There is, however, massive uncertainty (rather than mere risk) in our ability to predict the impacts of AGW, and recognizing this reality should lead us to take at least two actions: (1) improve the science to better-specify these extreme risks, and (2) hedge this uncertainty by making “insurance-type” investments today that would provide protection if an extreme AGW scenario ends up happening.”

Manzi`s proposals? To avoid the “failed game of industrial policy” by creating a climate change DARPA with a “a very high-IQ staff” to make many small (but collectively substantial) investments related to “detecting or ameliorating the effects of global warming” that “serve a public rather than a private need” (viz., that provide “no obvious potential source of profit to investors if successful”). Manzi thinks investments of the following types are merited: “improved global climate prediction capability, visionary biotechnology to capture and recycle carbon dioxide emissions, or geo-engineering projects to change the albedo of the earth’s surface or atmosphere”. Does Manzi not see that carbon pricing, if structured to allow offsets, would encourage private investments in all of these areas?

Ironically, Manzi concludes that “attempt[ing] to use the government to control the evolution of the energy sector of the economy” is not a “prudent reaction” to risk, but “the opposite: an impractical, panicky reaction unworthy of a serious government”.

Well, Jim, nice try, and thanks for your impractical, imprudent and panicky reaction.