Paul Krugman: Climate Change Economics, What Economists Agree On

The New York Times Magazine:

In what follows, I will offer a brief survey of the economics of climate change or, more precisely, the economics of lessening climate change. I'll try to lay out the areas of broad agreement as well as those that remain in major dispute. First, though, a primer in the basic economics of environmental protection.

Read the whole story: The New York Times Magazine

Comments

[WYHKTai-Tai]

10:12 PM on 04/08/2010

AAAARGH!! Thank You all for the great comments. I wish I could continue this discussion, hopefully later, but my kids are k!lling each other so I have to stop blogging and go be a parent!!! (& K!LL BOTH OF THEM!!!!!))

((kidding of course).

[ReedYoung]

06:22 PM on 04/08/2010

Page 9:
The policy-ramp advocates argue that the damage done by an additional ton of carbon in the atmosphere is fairly low at current concentrations; the cost will not get really large until there is a lot more carbon dioxide in the air, and that won’t happen until late this century. And they argue that costs that far in the future should not have a large influence on policy today. They point to market rates of return, which indicate that investors place only a small weight on the gains or losses they expect in the distant future, and argue that public policies, including climate policies, should do the same.
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More fundamentally, "market rates of return" and the behavior of "investors" are microeconomic data -- even if you sum over the entire economy, they are just measures of the activities of the wealthiest citizens -- which should be subordinated to macroeconomic policy decisions on behalf of the commons and the general welfare. In other words, what speculators do should not even enter into this policy debate.

[ReedYoung]

05:48 PM on 04/08/2010

But there are at least two reasons to take sanguine assessments of the consequences of climate change with a grain of salt. One is that, as I have just pointed out, it’s not just a matter of having warmer weather — many of the costs of climate change are likely to result from droughts, flooding and severe storms. The other is that while modern economies may be highly adaptable, the same may not be true of ecosystems.
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This seems to base projected damages only on increasingly frequent damaging events, but I would expect agriculture to be more severely affected by the decrease in predictability of whatever severe weather events occur. Maybe that's included, just not specifically mentioned by Krugman. I don't know.

[ReedYoung]

05:25 PM on 04/08/2010

Page 7:
Suppose that China refuses to reduce emissions, while the United States adopts policies that set a price of $100 per ton of carbon emissions. If the United States were to impose such a carbon tariff, any shipment to America of Chinese goods whose production involved emitting a ton of carbon would result in a $100 tax over and above any other duties. Such tariffs, if levied by major players — probably the United States and the European Union — would give noncooperating countries a strong incentive to reconsider their positions.

To the objection that such a policy would be protectionist, a violation of the principles of free trade, one reply is, So?
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"Free trade" with communist China is a ridiculous assertion. Of course we should have protectionist trade policies against the world's slave labor nations.

[ReedYoung]

05:02 PM on 04/08/2010

Page 6:
But while it’s unlikely that these models get everything right, it’s a good bet that they overstate rather than understate the economic costs of climate-change action. That is what the experience from the cap-and-trade program for acid rain suggests: costs came in well below initial predictions. And in general, what the models do not and cannot take into account is creativity; surely, faced with an economy in which there are big monetary payoffs for reducing greenhouse-gas emissions, the private sector will come up with ways to limit emissions that are not yet in any model.
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Unless the captains of the coal and petroleum industries have not an iota of competence among them.

[ReedYoung]

05:12 PM on 04/08/2010

What you hear from conservative opponents of a climate-change policy, however, is that any attempt to limit emissions would be economically devastating. The Heritage Foundation, for one, responded to Budget Office estimates on Waxman-Markey with a broadside titled, “C.B.O. Grossly Underestimates Costs of Cap and Trade.” The real effects, the foundation said, would be ruinous for families and job creation.
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Apparently, such gross incompetence is exactly what Heritage believes about its corporate owners.

[ReedYoung]

05:17 PM on 04/08/2010

The National Republican Congressional Committee, for example, issued multiple press releases specifically citing a study from M.I.T. as the basis for a claim that cap and trade would cost $3,100 per household, despite repeated attempts by the study’s authors to get out the word that the actual number was only about a quarter as much. (Ibid.)

[ReedYoung]

04:25 PM on 04/08/2010

Ironically, on page five Krugman reports that "The Congressional Budget Office, relying on a survey of models, has concluded that Waxman-Markey 'would reduce the projected average annual rate of growth of gross domestic product between 2010 and 2050 by 0.03 to 0.09 percentage points.'”

That's 300 to 900 parts per million, which, when it pertains to the atmosphere, climate deniers claim is too little to matter. From now on, the next time a climate denier makes the stupid assertion that the change in CO₂ concentration is too little to be significant, I will reply that if they believe that to be true they must concede that it is equally true of the economy and therefore they have no valid objection to Cap and Trade.

[ReedYoung]

04:04 PM on 04/08/2010

@Just A Citizen: "Now putting that aside, ALL SUBSIDIES should be eliminated for ALL programs."

Incorrect. The federal government has not only the right but the mandate "to promote the general welfare." Subsidies to clean energy businesses qualify. Subsidies to polluters are contrary to the general welfare and must be not only ended, but outlawed as felonies.

[Just A Citizen]

04:14 PM on 04/08/2010

Reed

All forms of energy production cause some type of pollution. There is no zero in this game.

The fed govt has no such obligation to "promote the general welfare" as your are trying to define it. Per the Constitution or otherwise. In fact it would be more correct to argue that any subsidy of any kind that is not shared equally among the people is contrary to the "general welfare" as it was understood in 1787.

Eliminate ALL subsidies for EVERYONE and then eliminate the government created barriers to market entry. Renewable should do just fine.

Are you afraid they can't compete in a free and open market?

[ReedYoung]

04:28 PM on 04/08/2010

Way too late for that argument. Coal and petroleum have been subsidized for 90 years.

And you're just flat lying about the general welfare. The government has every right to reward behavior that is beneficial to the general welfare, from college loans and guaranteed access to public education through grade twelve, to Social Security, Welfare and Medicare -- for all.

[Ardi Ramidus]

04:42 PM on 04/08/2010

I am confused. The government has no obligation to correct market failures (e.g., overproduction of goods that create negative externalities, underproduction of goods that produce positive externalities)?

Do you believe that if all subsidies were eliminated, the market would choose the goods and services that benefit society the most? Or will it choose the most profitable goods and services? Are the most profitable goods and services those that benefit society the most? Shouldn't we be concerned that some of the most profitable industries are those that don't internalize the external costs of production?

[CampCalifornia]

12:50 PM on 04/08/2010

Yeah, Cap & Tax us while we breathe pollutoin form China and India.

[ReedYoung]

12:52 PM on 04/08/2010

Okay, that's what you oppose. Got it, five by five. Now, what do you **support** doing about the proven fact of global warming?

[ReedYoung]

12:35 PM on 04/08/2010

I'm pleased to see that somebody with a national platform is **finally** discussing what to do about the proven fact of global warming and how to do it.

The science is settled, boys and girls.
http://skepticalscience.com/global-warming-scientific-consensus.htm

The only crime in "climategate" was the theft of data.
http://www.huffingtonpost.com/2009/12/01/climategate-phil-jones-uk_n_375670.html

There is no room for honest disagreement that global warming is caused by human COࠢ emissions, nor that global mean temperature is increasing at an unprecedented rate to which natural systems are incapable of adapting. This is all proven.

The only debate to have is about what to do about it. Here is my suggestion:
http://www.grist.org/article/wind-still-enough-to-save-the-world

[WYHKTai-Tai]

07:22 PM on 04/08/2010

Oh, You are so fanned. Thank You for rational clear arguments.

[Stop Dissent Now]

12:34 PM on 04/08/2010

Former Enron Advisor, who are the guys who came up with cap and trade.

DO NOT TRUST.

[ReedYoung]

12:37 PM on 04/08/2010

This is the ideal thread in which to suggest better policies than cap and trade, which I agree is crap.
http://www.capanddividend.org/?q=readfirst

[WYHKTai-Tai]

07:29 PM on 04/08/2010

Sounds like a great idea, except, I would not like the Govt. wiring anything or having access to my bank account. They can get it back to me as a tax refund, or use the tax revenues for infrastructure, green energy development or something like that.

My problem with either market based solution is that where corruption can leak in, it WILL. As Krugman details, we improved the situation with acid rain, so maybe I'm wrong; but I could easily see these market based solutions going nowhere if not heavily watched, and HOW can we watch other countries?

[Publicola]

02:31 PM on 04/08/2010

Lie - cap-and-trade existed long before Enron.

And it's worked quite well to curb SO2 emissions:

http://www.edf.org/page.cfm?tagID=1085

Whether it will work as well to curb CO2 however is debatable.

[akrishn3]

12:25 PM on 04/08/2010

I wonder why Obama won't fire Bernake and appoint Paul as the Fed chairman or fire Geidner and appoint Paul as Treas. Sec.
Paul is afer all has Nobel prize winner....

Paul + Stu and himself ... it will be a nice Nobel team implementing real changes. isn't it?

[CompashCat]

11:32 AM on 04/08/2010

For all those people who believe that the concept of man-made climate change is a joke, consider these numbers:

For every ONE mile a car drives, it emits 12 POUNDS of carbon emissions.
There are BILLIONS of cars on this planet ... and trucks and trains and airplanes ...
How many pounds of emissions do you think every FACTORY on the planet produces?
Look around your home and ask yourself how many of those items were manufactured by a factory?
How many of those items were SHIPPED from somewhere far away?
NOW think of every building -- every home, every office building, etc. They produce carbon emissions too.
NOW consider that the planet now has over 7 BILLION people on it, and that number is supposed to double in 50 years. All those people driving cars, many working in large buildings, having all those possessions in their homes ...
Do you honestly think that our carbon-spewing modern way of life is NOT AFFECTING THE PLANET??!!

Since when did we become a nation of people who ignore scientific evidence just because it is telling us something we don't want to hear?!!

[WYHKTai-Tai]

09:28 PM on 04/08/2010

Since when did we become a nation of people who ignore scientific evidence just because it is telling us something we don't want to hear?!!
====================================

In this video, Chris Hedges posits that we are collectively living on the edge of collapse of our known way of life, from the environment to our economic systems to our social systems, and it creates a we!rd, mass denial. We don't really know what concrete actions to take, so we turn the other way and continue on in denial of the collapse. The more imminent the collapse, the more forcefully we stick our fingers in our ears and sing LA LA LA LA LA!

It's an interesting perspective, and if you find an hour to watch it, it's worth it. I don't necessarily agree with his simple 'socialism' answer to all of the problems at the end of the vid, but the points he makes throughout most of it are very on target.

The Empire of Illusion
http://www.youtube.com/watch?v=_EpeF1fcji0

[WYHKTai-Tai]

09:32 PM on 04/08/2010

I think the phrase is "dancing on the edge of a volcano".

[ReedYoung]

10:14 PM on 04/08/2010

LOL! I don't know that phrase, but it fits.

[Ardi Ramidus]

11:07 AM on 04/08/2010

This thread is a joke.

If you don't know much about climate science, GO LEARN OR TRUST THE VAST MAJORITY OF CLIMATE SCIENTISTS WHO SAY THAT THE GLOBE IS WARMING, THAT IT IS CAUSED BY HUMANS, AND THAT IS POSES SERIOUS RISKS TO HUMAN WELFARE.

If you don't know much about environmental economics, READ KRUGMAN'S ARTICLE (THE LINK IS JUST ABOVE!!!) OR THE WORK OF THOUSANDS OF OTHER ENVIRONMENTAL ECONOMISTS AND POLICY PROFESSIONALS. If you have specific problems with Cap & Trade, articulate them and challenge us with viable alternatives.

[SkiingGator]

03:09 PM on 04/08/2010

good luck with that ardi. you're arguing with those that have no clue and don't want one either

[WYHKTai-Tai]

08:23 PM on 04/08/2010

Thanks for trying:) fanned.

[jwoww]

11:05 AM on 04/08/2010

dont do anything it was 90 yesterday in NYC WINTER IS OVER!!! pump up the heat and let the sun shine

[robodweeb]

11:03 AM on 04/08/2010

Those who claim humans can't affect the planet might be interested in the fact that the weight of the water in China's 3 Gorges Dam reservoir tilts the Earth's axis by an inch.