My Letter to the Economist on Climate Change

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3 Responses

  1. Ken Rhodes says:

    I would submit that Mr. Oman understates the case, by overestimating the power of anybody to determine the “optimal” level of anything.

    Rather, one might say this: The carbon tax allows the government to set some taxation level, and hope the market will act through economics to regulate the emissions levels appropriately. OTOH, the cap and trade approach lets the government set *some* level of emissions, then allow the market economics to adjust the price accordingly for that level.

    What we know, I believe, is that *nobody* (economist OR scientist) knows either an “optimal level” for emissions OR an “optimal level” for taxation, so the cap and trade approach allows us to regulate directly, rather than indirectly, that which needs regulating, and allows the economics of the marketplace to do what it does best, which is not regulation, but rather, price-establishment.

  2. A.J. Sutter says:

    I agree with Nate that scientists are probably better positioned than economists, especially since the earth system doesn’t care whether we make a profit or not. I also agree with Ken about the depth of ignorance. But how can one say that a cap-and-trade system is better than a cap-only system, for example? Under one proposal, cap-and-dividend, all emissions permits would be auctioned, 75%-80% of the proceeds would be dividended back to individual consumers to help offset the higher prices that would result from the auction, and the remainder available for other government uses. Permits would not be tradeable, any more than building permits are.

    While I’m agnostic about C&D, C&T has more holes than just economic ones. The SO2 emissions situation that’s the poster child for C&T is more ambiguous than it’s usually presented as being. Not only are the impacts of SO2 emissions local, rather than global like those of greenhouse gases, but the earlier studies that claimed SO2 emissions have followed an inverted-U “environmental Kuznets curve” seem not to be reproducible by more sophisticated statistical methods. The curve, moreover, seems to be cubic, i.e. N-shaped — i.e. emissions don’t continue to decline with continued economic growth. So the efficacy of C&T seems rather an article of faith, as long as per capita GDP growth remains a priority.

  3. Green Girl says:

    Global Warming and Climate Change is the biggest environmental issue that we face these days. the long term effects of these environmental changes to a nations economy is quite damaging. there would be a shortage in food supply as well as on water supply too ….