Arnold Kling  

Cap and Trade: Be Afraid

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Peter Orszag writes,


because of the long-term nature of climate change, the key issue from an environmental perspective involves the long-term emissions and concentration paths of greenhouse gases, not the year-to-year fluctuations in emissions. The most cost-effective cap-and-trade design would thus encourage firms to make greater reductions when the cost of doing so was low and would allow them leeway to lessen their efforts when the cost was high. Providing firms with such flexibility could also prevent large fluctuations in the price of allowances that could be disruptive to the economy.

From a political economy perspective one important disadvantage of cap-and-trade relative to a carbon tax is that cap-and-trade will develop a long-term constituency. People talk about the irreversibility of the alleged climate change due to CO2 emissions. If you want to see irreversibility, watch what you happens once companies have a stake in pollution permits. Five years from now, if all the scientific evidence turns out to be that global warming is not an issue, any cap-and-trade program will be all but impossible to unwind.

We can't even unwind our counterproductive ethanol subsidies.


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COMMENTS (13 to date)
Eric Hanneken writes:

I think you're comparing an unromantic cap-and-trade system with an ideal carbon tax. In a real world with a carbon tax code, the many exemptions, deductions, and credits would indeed have a constituency. Tax lawyers would talk about "adjusted gross carbon emission."

Chris writes:

It is amazing to me that the taxi medallion system in cities can be so universally decried as creating cartels, etc., while a cap-and-trade system can simultaneously be so universally popular. Aren't the two exactly the same? Doesn't a taxi medallion "cap" the number of taxi's in New York, and the fact that they can be bought and sold mean that they can be "traded"?

It is mind-boggling that we are about to implement the New York taxi model to the entire U.S. economy.

Lord writes:

Good there are other reasons for at least some of it then. Energy efficiency, security, stability, sustainability.

Ben Kalafut writes:

So cap-and-trade should be avoided to prepare for a contingency (the science turning out to be all wrong, or some magical deus ex machina effect appearing that nobody knows about which will nearly completely cancel a greenhouse forcing) about as probable as Santa Claus turning out to be real?

I think you need to read more climatology and quit being so lily-livered about this. Climatologists are not the dunces you would have them be. The hard scientists aren't just guessing and blundering. The basics are, right now, incontrovertible, and the GCMs have been proven successiful. (and at a fundamental level, there's no getting around the greenhouse effect!); what's open for dispute are particulars.

It's also worth noting that you're avoiding even considering ocean acidification. There's not even a snowball's chance in hell that ocean acidification will turn out to be the blunder you think AGW will turn out to be. What is the better solution to ocean acidification? Cap and trade or a tax?

loki on the run writes:

Ben Kalafut says:

The basics are, right now, incontrovertible, and the GCMs have been proven successful. (Spelling corrected.)

Hmmm, I guess you haven't seen this: 31,000 Scientists reject 'global warming' agenda or this: 31,072 American scientists against AGW. Nice list of prominent 'climatologists' LuboŇ° has assembled. Al Gore (no science degree), ...

Oh, BTW, which CGMs get the right answer, or is it the ensemble answer that you like, and how can they be so good if they really only get the trend?

Ben Kalafut writes:

Getting the "trend" is exactly what they're supposed to do. See the recent letter by Roger Pielke Jr to Nature Geoscience--or the IPCC 4AR-- for more about that.

I'd say I'm sure you recall GCMs getting the effects of the Pinatubo eruption right, but then again I'm not sure. It's probably off your radar.

As for the Oregon Petition, I'm not going to wrestle in the mud with someone who cites such a major wad of stupid to me. A group of ideologues send a bit of propaganda out to miscellaneous "scientists"--few of whom are practicing scientists or have doctorates, and only forty of whom are climatologists. They may as well poll taxi drivers. Does the opinion of 9 out of 10 cab drivers say anything about the veracity of a technical question?

Cite me papers from the peer reviewed literature casting categorical doubt on AGW (and no, Scafetta and West doesn't do that). Put up or shut up. If your opinion has no justification in science you have no moral right to have it. If you think the five-minute flim-flam objections you have have merit, submit them for publication or present them at a conference, for frank evaluation by experts.

reason writes:

Five YEARS from now? We won't even have a cap and trade system implemented by then, let alone a definitive idea that Global Warming is not a serious long term problem.

Matt writes:

Right you are, Arnold, if what I hear is true we are better off letting peak oil and global competition adjust our energy use.

The problem with federal constituencies getting special emission rights is already here as many of our long term promises made by the federal legislature have implicit emission credits.

brian writes:

Chris: It is amazing to me that the taxi medallion system in cities can be so universally decried as creating cartels, etc., while a cap-and-trade system can simultaneously be so universally popular. Aren't the two exactly the same? Doesn't a taxi medallion "cap" the number of taxi's in New York

They're the same in that they both "cap" something. The difference is that the taxi medallion system "caps" something that people want (a good) whereas the carbon permits "cap" something that people don't want (a bad).

In sum:
Reducing things that people like = bad.
Reducing things that people dislike = good.

Floccina writes:

People talk about the irreversibility of the alleged climate change due to CO2

CO2 can be removed from the air various methods to do so exist. My favorite is biochar. So it in not irreversibile.

aaron writes:

I recall them over shooting the pinatubo eruption on both ends, the initial cooling and subsequent warming.

Lord writes:

How does one argue with people that don't even accept evolution?

loki on the run writes:
How does one argue with people that don't even accept evolution?

Who is it that you think do(es) not accept evolution, and what version of evolution are they not accepting.

The modern synthesis and natural selection and so forth seem to me to be a good explanation for the characteristics of life that we observe today.

The claim that human activity is causing global warming and that we are all going to die if we don't hurry up and do something economically stupid right now seems unsupported and unfounded. My view is that the probability that the precautionary principle should be applied right now is gainsaid by the fact that the planet's climate has evolved within fairly narrow limits for a long time despite a 30% or so increase in the sun's luminosity (albeit over billions of years and thus yielding tiny increases in luminosity on the scale of centuries).

So, am I one of those creationists you were thinking of?

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