03/18/2010 05:12 am ET Updated May 25, 2011

Paul Krugman: China, Climate Change

Silicon Valley -- What does Paul Krugman really think about the threat of climate change and what action does he recommend the governments of US and China take? As President Obama tours China this week and presses President Hu Jintao to take a lead on climate change, the Nobel Prize winner for economics has some timely advice. In this exclusive Fresh Dialogues interview we explore Krugman's preference for cap and trade over a straight carbon tax; and why he says, "climate change is the mother of all externalities ... left without any government intervention, we're going to par-boil the planet."

Unlike his colleague, Tom Friedman, Krugman is not concerned that the U.S. is behind clean energy leaders like Denmark and China and recommends, "you don't want to get hung up on sexy technologies ... nobody gets a monopoly for very long. I don't get anxiety about it ... I'm more concerned that we don't do what we need to do to protect the environment."
And what, in Krugman's view, should the government be doing to save the planet?
"The government has to provide the incentives ... put a price on greenhouse gas emissions and then let the private sector do its stuff."

Krugman has a strong preference for cap and trade over a carbon tax and explains it thus: "Cap and trade is well suited to paying off the industry groups, right? We live in the real world. By handing out some of the licenses ... you make it easier to swallow. International coordination is easier with cap and trade. If we say to the Chinese -- we want you to have a carbon tax -- how can we really tell it's enforced? But if we negotiate with the Chinese that they will have total CO2 emissions of so much, we can monitor pretty well whether that's actually happening."

You can hear the lively four minute interview segment and read a transcript at Fresh Dialogues

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