Many political observers — those, at least, not wholly gutted by cynicism after eight years of criminally negligent Republican leadership — wonder when public concern over global warming will prompt a serious, thoughtful conservative response. Those hoping for real solutions from the GOP political leadership may have a long time to wait, but some conservative thinkers are beginning to wrestle with warming in an intellectually honest, if mistaken, manner.
Over at The American Scene, one of the best sources for quality conservative writing around, Jim Manzi recently laid out a detailed argument against a carbon tax. It’s worth noting that Manzi’s piece is a rather courageous statement for someone on the right, recognizing as it does that greenhouse-gas emissions are contributing to warming. At the same time, his analysis is wholly disappointing. As a conservative response to warming, it leaves much to be desired environmentally, economically, and politically.
Manzi begins by noting the IPCC’s assessment that warming could cost us some 1 to 5 percent of global GDP within the next hundred years or so, and he adds that William Nordhaus estimates that “the total present value of global-warming-related costs is about $22.6 trillion, which is roughly 1 percent of the present value of total global income over the next several centuries.” These figures are cited to show that the ultimate costs of warming will not be all that great relative to future wealth, and so we should be reluctant to impoverish ourselves now to avoid those costs.
This is problematic for a number of reasons. First, these numbers paint a cleaner portrait of warming’s costs than reality is likely to present to us. It is not the case that in 100 years we’ll begin evenly taxing off 1 to 5 percent of GDP in a clean and sterile process. Rather, these losses will be messy, unpredictable, and heartbreaking. This is relevant to the analysis. If you ask the average consumer whether they’re willing to accept a percentage point or so off growth over the next century, they’ll probably be fairly indifferent. If you ask the average consumer whether they’re willing to see New York destroyed in a disaster that shaves a percentage point or two off growth, the answer is likely to be considerably different.
Neither can we ignore distributional and moral issues. The U.S., wealthiest nation on earth and a massively larger per capita polluter than any other major developed nation, will not bear the brunt of the early warming pain, in all likelihood. We should ask ourselves whether we’re willing to stand by while Bangladesh disappears. It may comfort conservatives to note that such a disappearance will not be that costly in terms of global output. It does not comfort me.
A last point on this line of argument. Manzi’s analysis relies upon the idea that reduction of carbon emissions will be an extremely costly process to undertake right now. He notes:
Now, 1 to 5 percent of global GDP is a huge amount of money, and an ounce of prevention can be worth a pound of cure. But, in the case of global warming, the values may be exactly reversed: Getting most of the carbon out of the energy cycle today would be very expensive, and a century is a long time to wait for the payoff from this investment.
I think this conclusion misunderstands consumer behavior, particularly as it relates to choice and optimization. At the moment, consumers do not care about the level of emissions associated with a given consumption decision. They care only about cost and benefit. As such, a consumption choice that’s slightly cheaper than an alternative will dominate, even if the cheaper choice is massively more harmful for the environment.
In this situation, introducing carbon pricing will lead to a significant drop in emissions without much harming the consumer. As customers become sensitive to a product’s emissions footprint though the price mechanism, firms providing goods will rapidly optimize their production patterns around emissions reductions, building them into innovation in the same way other consumer product safety regulations are incorporated into optimal production methods.
In this way, and because we have a century or so before these serious growth costs kick in, small and incremental changes now can be effective. In 100 years, we will presumably be richer, but incremental reductions and a long process of optimization will no longer be helpful. It could very well be cheaper and easier to act now than to defer action to our richer descendants.
All of the above is somewhat beside the point. If you don’t believe there’s a problem to be solved, there’s no need to offer a solution. Manzi does offer us a solution, however — one which he says is preferable to a carbon tax. That silver bullet is the old technology fix; he wants the government to directly fund technological development to the tune of “single-digit billions per year.” This, he says, would be much cheaper than a carbon tax, which would cost hundreds of billions of dollars in the U.S. alone. His justification for that number is that “most advocates want to push for as large a tax as possible, as soon as possible, in order to force industry to create new technologies quickly.”
The U.S., according to recent estimates, releases about 6 billion metric tons of CO2 annually. A commonly suggested carbon levy, cited often by Pigou Club founder Greg Mankiw, is $15 per metric ton of carbon dioxide, for a total cost of about $90 billion per year (in the first year — we can expect this number to decline in subsequent years). That’s not “single-digit billions,” but it’s also not hundreds of billions of dollars. Moreover, practically every economist proposing a Pigou tax suggests that the proceeds could be partially offset by reductions in the payroll tax — a more inefficient and distortionary levy. In other words, we could adopt a revenue-neutral carbon tax that improves the efficiency of the tax code, or we could take revenue from less efficient taxes and use them to fund government technology programs. Which of these sounds more conservative?
It’s obviously the case, though, that a carbon tax needn’t be more expensive than technology funding; both amounts can be arbitrarily chosen depending upon the extent to which policy makers view warming as a threat. The question is, for a given societal cost, which policy proposal is likely to be more effective?
Manzi doesn’t suggest where he’ll get the revenue for his funding proposal. Given that carbon taxes are fairly innocuous as taxes go, certainly more so than income or payroll taxes, even a carbon tax that has no effect on emissions or technology still produces revenue for Manzi’s funding plan in a more efficient manner than current tax sources. It’s good tax policy independent of its effects on warming.
As it happens, practically any carbon levy will be more effective than direct technology funding, because carbon pricing uses the market to allocate resources efficiently. With carbon pricing, consumers reduce their emissions output where it’s easiest to do so, and companies invest in technological fixes where those fixes are likely to generate the biggest bang for an invested buck. Government directed technology funding is top-down industrial policy. It would put the government in the position of throwing darts — politically influenced darts — hoping to hit on a solution that’s cost effective and socially beneficial.
Our current record on this score is not encouraging. Government is busily funding biofuel measures that may not reduce emissions and may not be cost-effective. At the same time, consumers are responding to higher gas prices by curtailing their gas expenses in myriad ways (purchasing smaller cars, driving less, using transit more), and they’re reducing transportation emissions in the process.
A “conservative” approach to emissions reduction that favors the wisdom of central planning over market allocations? The mind boggles.
Manzi throws in a few more objections for good measure. First on the list is geopolitics. How can we expect to negotiate and enforce a global emissions reduction regime?
For one thing, we don’t necessarily need to right away. The U.S. is responsible for nearly one-fourth of global CO2 emissions; simply cutting our own carbon output would meaningfully affect global emissions. Next, a number of those difficult-to-convince other nations have signaled a willingness to engage in a global agreement on carbon. The holdup is us, not them.
Manzi cites enforcement failures like the Kyoto Protocol as reasons to doubt the efficacy of a global agreement, but Kyoto is an example of a program that underperformed precisely because the U.S. failed to provide leadership. On other international agreements, enforcement has proven far easier. When the U.S. and Europe unite behind a global standard, it is difficult for other nations to refuse to participate.
Manzi also frets that a carbon tax will be difficult to undo. This is an odd concern. We have plenty of examples of Congress reducing or eliminating taxes, but no examples of them enacting a carbon tax. Perhaps a bit reductionist, but the facts on the ground suggest that generating the tax will be more difficult than getting rid of it should our forecasts change for the better. It’s not especially easy to get rid of government-funding programs either. At any rate, this seems a lot like arguing against closing a gash because removing the stitches may hurt.
In short, Manzi’s argument against a carbon tax is that there isn’t much of a problem, that the carbon tax — by its nature — must be a massively expensive solution to that problem, and that despite the fact that a massively expensive carbon tax program will be necessary to obtain necessary reductions in emissions and improvements in technology, the government is smart enough to accomplish the same reductions and innovations with only a few billion dollars in targeted research funding a year.
It’s safe to say that these conclusions fly in the face of economic insight on the subject, and they aren’t particularly conservative to boot. It’s nice to see some writers on the right acknowledging that we may be contributing to warming. Unfortunately, they have work to do before delivering real policy options on the issue.