Among the weird memes that has grown up around the cap-and-trade debate, one of the most puzzling to me is that C&T is fatally flawed because it is complex. Americans don’t “get it.” They’ll only support a climate policy that is so “simple and transparent” that you can explain it on a napkin. (Like a carbon tax, which Americans “get,” and thus support. Supposedly. All evidence to the contrary.)
The twin energy and climate crises are incredibly complex and far-reaching. Should federal policy designed to address complex, far-reaching problems be simple enough to explain to your grandmother?
As far as I can tell, that requirement was invented out of whole cloth, specifically for this problem, more specifically for this particular way of dealing with this problem. Yet despite being completely made up, it’s something people repeat to each other all the time, with serene confidence, as though it’s self-evident. It’s crazy.
If you stop an average person on the street and ask them to explain how Social Security works, do you think you’ll get an accurate answer? How about Medicare or Medicaid? How about, oh, governance of public lands? Defense appropriations? Pick a federal policy out of a hat. The mechanics are probably complex. Why? Because the problems are complex, the government is huge, and there are lots of competing interests involved. Such is life in a wealthy, developed democracy.
Now, people can probably explain the basic goal of Social Security. “It protects old people from poverty.” Medicare? “It’s health care for old people.” Medicaid? “Health care for poor people.” Defense? “It protects the country.” Income taxes? “Pay for gov’t services.”
But of course they can explain the goal of cap-and-trade, too: “Prevent climate change and shift to clean energy.”
Perhaps the difference is that climate policy is asking people to sacrifice, and if we want them to sacrifice, we have to have their buy-in. They have to know what they’re sacrificing for, and how it works.
Far as I can tell, though, this notion is just a weird outgrowth of the moralizing that attends climate policy discussions. Climate policy will redirect money from certain parts of the economy to other parts of the economy. It uses the public’s money to secure public goods. In that, it is exactly like all public policy. Any reallocation of money asks (some) people to sacrifice, insofar as by “sacrifice” we mean “pay for it.” Taxpayers “sacrifice” to fund Social Security, to build highways, to clean up Superfund sites, to run fire departments, etc. They also benefit, as they will benefit from increased energy efficiency, new jobs, new industries, and of course, avoided global warming.
Regardless, the fact that someone pays doesn’t obviously entail that climate policy, any more than all the other policies for which someone pays, should be simple enough to fit on a napkin.
Perhaps the problem is that complexity means the policy will be ridden with cheating and gaming of the system. Once you have more than one or two moving parts, it becomes anarchy! Who can keep track? But of course, as Eric pointed out the other day, we have C&T systems running now, and they’re administered quite well.
Of course the collapse of the financial system has raised a general hostility toward anything that smacks of finance. But this is just commodity trading, of a substance that is fairly easily measured (is already measured in most cases). The gimmicky financial instruments that could or could not be used to package and distort commodity prices and risks also could or could not be used on other commodities, and will be prevented, or won’t, by decent financial regulation. We’re a rich country full of smart people. I bet we could figure out how to run a working market. Despite the financial hysteria going on, there are actually lots and lots of working markets going on all around us.
Taxpayers express their goals to their elected representatives. Those representatives then determine how to accomplish the goals and how to pay for it. The notion that the process has somehow gone wrong once it reaches a point where average taxpayers no longer understand its detailed mechanics it is just wacky, invented out of the blue. Applying that constraint to all federal policy would be crippling.
Government of a huge, diverse country is complicated. Markets are complicated. Life is complicated. Climate policy will inevitably be complicated, no matter what form it takes. Again: such is life in a wealthy, developed democracy.
(Having said all that, I should add as an addendum: I don’t even really see how cap-and-trade is particularly complex, as public policies go. You put a declining cap on emissions, you issue permits, people trade the permits. There’s my napkin summary!)