Posted by Jonathan Adler:
"Capitalism Against Climate":
http://volokh.com/archives/archive_2007_05_27-2007_06_02.shtml#1180618101
In today's W$J, economist R. Glenn Hubbard, former Chairman of
President Bush's Council of Economic Advisors, [1]makes the case for a
carbon emission trading scheme along the lines proposed by the
[2]National Commission on Energy Policy.
We do not know how much long-term climate change will result from
our ever-expanding economic activity -- primarily from the burning
of fossil fuels -- or how much climate change is "safe." To
understand this from an economic perspective, we need a flexible,
measured approach, one that continues to research the consequences
of climate change and how we can avoid damage in the future. This
approach would establish a policy architecture that sends
appropriate signals to businesses and consumers in order to spur
climate-saving innovations, while engaging both rich and poor
nations in similar, cost-effective activities to reduce the threat
of climate change throughout the world. . . .
. . . near-term actions should not impose greater risks than the
problem they seek to address. MIT economist Richard Schmalensee, a
member of the NCEP, once put forward a helpful analogy: If you
smell smoke at home, it would be silly to do nothing until you
actually see flames, but you also should not hose down the house
after one whiff of what might be smoke.
For the global warming debate, uncertainty justifies neither
inaction nor over-reaction. As the smoke analogy suggests, the
United States should pursue a moderate policy that can be justified
as we learn more about the threat of climate change and the costs
of alternative responses.
The NCEP proposal meets this test of taking serious action while
not imposing economic risks greater than the threat of climate
change itself. It comprehensively addresses all U.S. emission of
CO2 and other climate change-related gases. It does this using one
system: tradable permits. In such a system, the use of coal, oil
and natural gas will require permits in proportion to their CO2
emissions, typically sold along with the fuel -- so individuals
need not deal with the permit market.
Those businesses and individuals who can reduce their fuel use and
emissions most inexpensively will do so. Those who cannot will end
up purchasing more permits and supporting those who can. In this
way, the program flexibly encourages the least-expensive efforts to
reduce emissions without constraining any individual or business.
And revenue from the auction of a portion of these permits could be
used to reduce the corporate income tax, blunting adverse economic
consequences.
This approach, Hubbard argues, will help control emissions "without
betting the bank." Can the same be said for any legislation likely to
pass this (or any) Congress?
References
1.
http://online.wsj.com/article/SB118057946335919651.html?mod=opinion_main_commentaries
2. http://www.energycommission.org/site/page.php?index
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