Cause, effect, and carbon - Barokong

August 22, 2020    Comment   

Cause, effect, and carbon - Barokong

“As fires rage up and down the state of California, costing our taxpayers billions of dollars and threatening our families’ health—- the need for California to move to 100% clean, renewable energy could not be more urgent,” said Mr. de León in a statement.

Sen. Kevin de León, a Democrat who is waging a long-shot run for a U.S. Senate seat against incumbent Dianne Feinstein.

Reported in the Wall Street Journal

The context is

California passed legislation Tuesday that would make it the first large state to mandate completely carbon-free electricity generation, with a target of 2045.

My understanding is that nuclear does not count as "carbon free."

Just to belabor the obvious, the central part of our state has been living under a blanket of smoke most of the summer. Smoke causes an immediate and local pollution problem, which is a direct threat to human health -- fine particulate matter.  Yet the state has cut its firefighting air fleet and budget over the past few years, and also let fuel accumulate in forests over the winter.

California contributes maybe 1% of global carbon emissions. Guesstimate for yourself how much California carbon-free energy by 2045 will do to reduce wildfires in your grandchildren's lifetime.  "Urgent?"

If you think global warming is real, and that it will increase wildfires, it seems you would be rushing to spend money on putting out fires.

Instead, our state government seems to regard wildfires as punishments for our carbon sins, that only praying to the Temple of Carbon with largely symbolic billions of dollars can salve. Actually doing something about problems the West has always had -- wildfires -- that may be moving north a bit due to global warming seems to be regarded as an immoral act.

I am also interested by the fantastical cause-and-effect thinking going on here, and the flight from any vaguely quantifiable dollars per unit of effect. And this from the self-described "party of science."

Transport innovation - Barokong

August 18, 2020    Comment   

Transport innovation - Barokong

What is it?

I saw this in the parking lot of the hotel where I'm staying. Inspection: yes, it's the chassis of an early 1970s VW, with motor and transmission in place. The motor appears functional. It's connected to the gas cans. Yet, this is a trailer. Why? (Hint: it's parked next to a new Toyota CRV electric car.)

Answer: The owner has a nice new Toyota CRV electric. He extolled the virtues of the electric, its greenness, and the tax breaks and free charging options. But, it only has a 120 mile range, and sometimes he needs to drive longer distances on the freeway. This is Utah, after all.

So... the VW trailer. When in need, he puts the trailer in 4th gear, and turns on its electric system. The throttle is stuck full open. He pulls it to get going put, put put put... Then, the trailer pushes the car along. What if he needs to slow down? No problem, he hits the regenerative brakes on the Toyota, so now the VW is also charging up his batteries!

American ingenuity is still alive!

I did not ask if the highway patrol was aware of just how the trailer functions. Or the DOT, EPA, NHTSA, etc. etc.

Blueprint for America - Barokong

August 16, 2020    Comment   

Blueprint for America - Barokong

Some of the inspiration for this project came from the remarkable 1980 memo (here) to President-elect Ronald Reagan from his Coordinating Committee on Economic Policy.

Like that memo, this is a book about governance, not politics.  It's not partisan -- copies are being sent to both campaigns. It's not about choosing or spinning policies to attract voters or win elections.

The book is about long-term policies and policy frameworks -- how policy is made, return to rule of law, is as important as what the policy is --  that can fix America's problems. It focuses on what we think are the important issues as well as policies to address those issues -- it does not address every passion of the latest two-week news cycle.

The book comprises the answers we would give to an incoming Administration of any party, or incoming Congress, if they asked us for a policy package that is best for the long-term welfare of the country.

The chapters, to whet your appetite:

INTRODUCTION

CHAPTER 1: The Domestic Landscape by Michael J. Boskin

IN BRIEF: Spending by George P. Shultz

CHAPTER 2: Entitlements and the Budget by John F. Cogan

CHAPTER 3: A Blueprint for Tax Reform by Michael J. Boskin

CHAPTER 4: Transformational Health Care Reform by Scott W. Atlas

CHAPTER 5: Reforming Regulation by Michael J. Boskin

CHAPTER 6: National and International Monetary Reform by John B. Taylor

CHAPTER 7: A Blueprint for Effective Financial Reform by John H. Cochrane

IN BRIEF: National Human Resources by George P. Shultz

CHAPTER 8: Education and the Nation’s Future by Eric A. Hanushek

CHAPTER 9: Trade and Immigration by John H. Cochrane

IN BRIEF: A World Awash in Change

CHAPTER 10: Restoring Our National Security by James O. Ellis Jr., James N. Mattis, and Kori Schake

CHAPTER 11: Redefining Energy Security by James O. Ellis Jr.

CHAPTER 12: Diplomacy in a Time of Transition by James E. Goodby

CLOSING NOTE: The Art and Practice of Governance by George P. Shultz

My chapter on a Blueprint for Effective Financial Reform is a better version of the talk on Equity Financed banking which I posted here. (The talk was based on the paper. Now you have the paper.)

My chapter on Trade and Immigration is new, and an uncompromising red-meat free-market view. I don't think one should compromise centuries old economic understanding just because it's not politically popular at the moment.

If you got this far, you might also be interested in my Economic Growth essay written for a parallel but similar project.

Carbon compromise? - Barokong

July 30, 2020    Comment   

Carbon compromise? - Barokong

In a remarkable and clear oped "A Conservative Answer to Climate Change" James Baker and George Shultz lay out the case for a carbon tax in place of the complex, cronyist and ineffective regulatory approach to controlling carbon emissions.

A plea to commenters. Don't fall in to the trap of arguing whether climate change is real or whether carbon (and methane) contribute to it. That's 5% of the debate. The real debate is how much economic damage does climate change actually do. Science might tell us that the temperature will warm 2 degrees in a century, with a band of uncertainty. But the band of uncertainty of the economic, social and political consequences of 2 degrees is much bigger. Moreover, the band of relative uncertainty is bigger still. Does "science," as the IPCC claims, really tell us that climate change is the greatest danger facing us -- above nuclear war, pandemic, state failure, and so on?

And most of all, given that our governments are going to do something about climate change, how can we do something much more efficient, and (plea to environmentalists) much more effective? That's the question worth debating.

Both sides have fallen in to the trap of arguing about climate change itself, as if it follows inexorably that our governments must respond to "yes" with the current system of controls and interventions. The range of economic and environmental effects from the "how" question are much, much larger than the range of the effects of the "is climate change real" question.

So, Baker and Shultz lay out in gorgeous clarity the kind of compromise we all hope our governments can still occasionally achieve: Given that we're going to do something, trade a carbon tax for the removal of intrusive regulation. You get more economy and less carbon.

The oped refers to a report from the Climate Leadership Council, which is here and worth reading. TheNiskanen Center has also been championing the case, and reaching out to environmental groups.

There is a natural bargain, if our political system can get around its current habit of take-no-prisoners maximalism.

Environmental groups that really care about carbon are starting to realize that the current system produces symbolism at great cost but will never produce the kind of carbon reductions they think are necessary. High speed trains and electric coal-powered cars may make you feel good, but they don't make a dent in carbon. They are also realizing that climate is swallowing up the world's attention for other pressing environmental problems. Endangered species need habitat, now, not 2 degrees cooler in a century. People are dying of dirty water and particulate pollution now. Yes, they'd prefer carbon tax and controls, since they don't trust the tax incentive alone. But given the choice, I've met serious environmentalists who would take the deal.

Alas, the sad fate of the Washington (state)  carbon tax is not encouraging. Maximalism won. Some large environmental organizations are going to have to realize, in the current era, this is their best deal. Perhaps staring in the face that waiting for a progressive uprising that takes back house, senate, presidency, state legislators, governors, and turns back to tide of global nationalist populism, allowing regulations of the scale that actually would cut back carbon --without using nuclear power -- will induce a little deal-making will. It also feels good to be part of the "resistance," but the climate keeps warming while you feel good.

Those on the other side, horrified at the waste, cronyism, and economic damage of our current controls would prefer nothing, and hence keep arguing about the science. But a straightforward carbon tax would be immensely less distorting than what they will get otherwise. This one will not go away. Removing energy regulation, even with Rick Perry in charge of DOE, will be a miserable mess against an entrenched and very politically effective opposition. If you can get them to accept the deal, it will go much more easily than trying to shove no carbon regulation down their throats.

Of course, the major problem in any deal is trust. The environmental side may not trust that carbon taxes will be high enough to abandon command and control. And the market side certainly does not trust that controls will be removed, or not reimposed -- especially given the large amount of money that green subsidy-seekers can get from them.

Minor quibbles: The oped and council report refer to steadily increasing carbon taxes. Ideally, in my view, a big advantage of the carbon tax is that it is easily adjustable -- much more adjustable than direct controls. Implement a carbon tax at say $40 a ton. Keep fighting about the science, and the level of the carbon tax. There is uncertainty about the science, face it. Once in place it's easier to raise if we learn carbon is a bigger problem than thought, and vice versa.

Also, I think it will be much easier to agree on the principle of a carbon tax if each side knows it can keep fighting about the rate than if they have to agree on the principal of carbon tax + deregulation and the rate, and the schedule of future rates. (Generally, I think things would go much better to debate the structure of the tax code separately from the rates.)

Not mentioned, of course, is that it is vital for a tax like this that the law forbid any of the special credits and deductions that people will instantly start asking for. "Family farmers can't pay the carbon tax on their diesel fuel....; low income americans need a break so they can drive to work...." The incentive to make every single tax redistributive is strong.

Second, what to do with the money? Greg Mankiw has, on other occasions, argued that the carbon tax revenue should offset other, more distorting taxes. It is a double-whammy -- most taxes, in order to raise revenue, reduce some desirable economic activity. A carbon tax, to raise revenue, reduces an undesirable economic activity. As a matter of economics, Greg is exactly right.

The Oped and council propose instead that the tax is rebated to Americans, so the tax is revenue-neutral. That is, I think, politically attractive. A $2,000 check to each taxpayer is a nice way to build a political consensus for keeping the carbon tax, much as using the tariff to fund civil war pensions kept a strong pro-tariff constituency in the late 1800s. In a previous post, I suggested carbon rights instead: Each American owns the rights to emit X tons of carbon, which he or she sells on an electronic marketplace. Or throws away, if they want to do their bit. That too gives people a stake in keeping the system going.

But we should be clear when as economists we are treading into political waters. Giving up on a optimal tax in order to produce political support for a project is the kind of tradeoff that we're not as good at as we are at figuring out optimal taxes in the first place, and figuring out compromises between current political groupings is really not our strong point. Perhaps it would be better to outline the possibilities -- rebate if you think it's politically necessary, use to eliminate other distorting taxes if you can -- and let politicians figure that one out.

Quibbles over.

I must add that Shultz is an inspiration. I hope that at 96 I can write opeds half this good. Heck, I wish I could do it now!

Update: A Conservative Case for Climate Action by Martin Feldstein, Ted Halstead, and N. Gregory Mankiw in the New York Times, describing the same plan, also excellent.

On climate change 2 - Barokong

July 11, 2020    Comment   

On climate change 2 - Barokong

Now that 30 days have passed I can post the full Wall Street Journal climate change oped with David Henderson. The previous post has more commentary. A pdf is here.

By David R. Henderson and  John H. Cochrane

July 30, 2017 4:24 p.m. ET

Climate change is often misunderstood as a package deal: If global warming is “real,” both sides of the debate seem to assume, the climate lobby’s policy agenda follows inexorably.

It does not. Climate policy advocates need to do a much better job of quantitatively analyzing economic costs and the actual, rather than symbolic, benefits of their policies. Skeptics would also do well to focus more attention on economic and policy analysis.

To arrive at a wise policy response, we first need to consider how much economic damage climate change will do. Current models struggle to come up with economic costs commensurate with apocalyptic political rhetoric. Typical costs are well below 10% of gross domestic product in the year 2100 and beyond.

That’s a lot of money—but it’s a lot of years, too. Even 10% less GDP in 100 years corresponds to 0.1 percentage point less annual GDP growth. Climate change therefore does not justify policies that cost more than 0.1 percentage point of growth. If the goal is 10% more GDP in 100 years, pro-growth tax, regulatory and entitlement reforms would be far more effective.

Yes, the costs are not evenly spread. Some places will do better and some will do worse. The American South might be a worse place to grow wheat; Southern Canada might be a better one. In a century, Miami might find itself in approximately the same situation as the Dutch city of Rotterdam today.

But spread over a century, the costs of moving and adapting are not as imposing as they seem. Rotterdam’s dikes are expensive, but not prohibitively so. Most buildings are rebuilt about every 50 years. If we simply stopped building in flood-prone areas and started building on higher ground, even the costs of moving cities would be bearable. Migration is costly. But much of the world’s population moved from farms to cities in the 20th century. Allowing people to move to better climates in the 21st will be equally possible. Such investments in climate adaptation are small compared with the investments we will regularly make in houses, businesses, infrastructure and education.

And economics is the central question—unlike with other environmental problems such as chemical pollution. Carbon dioxide hurts nobody’s health. It’s good for plants. Climate change need not endanger anyone. If it did—and you do hear such claims—then living in hot Arizona rather than cool Maine, or living with Louisiana’s frequent floods, would be considered a health catastrophe today.

Global warming is not the only risk our society faces. Even if science tells us that climate change is real and man-made, it does not tell us, as President Obama asserted, that climate change is the greatest threat to humanity. Really? Greater than nuclear explosions, a world war, global pandemics, crop failures and civil chaos?

No. Healthy societies do not fall apart over slow, widely predicted, relatively small economic adjustments of the sort painted by climate analysis. Societies do fall apart from war, disease or chaos. Climate policy must compete with other long-term threats for always-scarce resources.

Facing this reality, some advocate that we buy some “insurance.” Sure, they argue, the projected economic cost seems small, but it could turn out to be a lot worse. But the same argument applies to any possible risk. If you buy overpriced insurance against every potential danger, you soon run out of money. You can sensibly insure only when the premium is in line with the risk—which brings us back where we started, to the need for quantifying probabilities, costs, benefits and alternatives. And uncertainty goes both ways. Nobody forecast fracking, or that it would make the U.S. the world’s carbon-reduction leader. Strategic waiting is a rational response to a slow-moving uncertain peril with fast-changing technology.

Global warming is not even the obvious top environmental threat. Dirty water, dirty air and insect-borne diseases are a far greater problem today for most people world-wide. Habitat loss and human predation are a far greater problem for most animals. Elephants won’t make it to see a warmer climate. Ask them how they would prefer to spend $1 trillion—subsidizing high-speed trains or a human-free park the size of Montana.

Then, we need to know what effect proposed policies have and at what cost. Scientific, quantifiable or even vaguely plausible cause-and-effect thinking are missing from much advocacy for policies to reduce carbon emissions. The Intergovernmental Panel on Climate Change’s “scientific” recommendations, for example, include “reduced gender inequality & marginalization in other forms,” “provisioning of adequate housing,” “cash transfers” and “awareness raising & integrating into education.” Even if some of these are worthy goals, they are not scientifically valid, cost-benefit-tested policies to cool the planet.

Climate policy advocates’ apocalyptic vision demands serious analysis, and mushy thinking undermines their case. If carbon emissions pose the greatest threat to humanity, it follows that the costs of nuclear power—waste disposal and the occasional meltdown—might be bearable. It follows that the costs of genetically modified foods and modern pesticides, which can feed us with less land and lower carbon emissions, might be bearable. It follows that if the future of civilization is really at stake, adaptation or geo-engineering should not be unmentionable. And it follows that symbolic, ineffective, political grab-bag policies should be intolerable.

Update:

A good recent summary of the calculations of economic damage of climate change in an NBER working paper:

2.  A Survey of Global Impacts of Climate Change: Replication,

Survey Methods, and a Statistical Analysis

by William D. Nordhaus, Andrew Moffat  -  #23646 (EEE PE)

Abstract:

....the estimated impact is-2.04 (± 2.21) % of income at 3 °C warming and -8.06 (± 2.43) % of income at 6 °C warming.  We also considered the likelihood of thresholds or sharp convexities in the damage function and found no evidence from the damage estimates of a sharp discontinuity or high convexity.

http://papers.nber.org/papers/w23646

In the name of Science - Barokong

July 11, 2020    Comment   

In the name of Science - Barokong

Source: climatefeedback.org

"Climate Feedback" has produced a "scientific review" of my WSJ oped with David Henderson on (Oped ungated full text here, see also associated blog post.)

In the blog post, I wrote,

"If it is not clear enough, nothing in this piece takes a stand on climate science, either affirming or denying current climate forecasts. I will be interested to see how quickly we are painted as unscientific climate-deniers."

Now we know the answer.

To recap, the oped said nothing about climate science, nothing about climate computer model forecasts, and did not even question the integrated model forecasts of economic damage. We did not deny either climate change nor did we argue against CO2 mitigation policies in principle. For argument's sake we granted a rather extreme forecast (level of GDP reduced by 10% forever) of economic costs. We did not even question the highly questionable cost-benefit analyses of policies subject to cost benefit analysis. We mostly complained about the lack of any cost benefit analysis, and the quantitative nonsense of many claims.

So, it's curious that there could be any "scientific" review of a purely economic article in the first place. How do they do it?

Aaron Bernstein, Associate Director of the Center for Health and the Global Environment, Boston Children’s Hospital, Harvard: writes

We did not say known. We cited estimates, which have standard errors. We cited 10% of the level of GDP, forever. The response cites the discounted cost of all future GDP loss, in terms of one year's GDP. Our number is much larger. 10% of GDP forever has a discounted value of 10%/(interest rate - growth rate). If interest rate - growth rate is one percentage point, then 10% of GDP forever is worth 10 times annual GDP, 1000% a lot more than 20%. If we took his number, total discounted costs only 20%, then climate change would truly be trivial. Even if he were answering our 10% with 20%, a factor of two is couch change in this business. OK, two tenths of a percentage point of growth.

(The quote is only about losses up to 2100, so you don't get the full r-g effect, but you see the point -- apples to oranges. The lesson is don't divide a present value by one year's flow. The discounted costs are an even larger fraction of a minute's GDP.)

Bernstein  continues:

"Even these higher damage estimates may fail to capture the full costs of extreme events over time, as Martin Weitzman’s work has shown. But there’s another, and more difficult, rub. What if we don’t understand the full consequences of greenhouse gas emissions? "

and continues with a standard list of things that might go wrong. We had written,

"... some advocate that we buy some “insurance.” Sure, they argue, the projected economic cost seems small, but it could turn out to be a lot worse. "

and addressed the issue.

"Science" and "scientific" review is supposed to include the ability to read and basic quantification.

David Easterling, Chief of the Scientific Services Division, NOAA's National Climatic Data Center writes:

It wasn't an oped on climate change impacts. It was an oped on cost-benefit analysis of policies to address climate change impacts, and never questioned any climate change impacts.

Just why is building dikes, or other adaptations laughable? Miami is 7 feet above sea level, Rotterdam about the same below sea level, and 7 is greater than most estimates of sea level rise. Rotterdam did it. Climate change is the biggest environmental risk? More than nuclear war, chemical pollution, the crap in the water that most people in the world drink, malaria, loss of habitat, poaching, all put together? A citation or two comparing climate change to the others would be nice. And the total value of smaller more expendable buildings is far larger than the total value of Empire State buildings.

Easterling falls neatly into our trap. We accused the politicized climate policy community for leaving quantitative, cost-benefit policy analysis behind and he... leaves quantitative cost benefit policy analysis behind.

Frank Vöhringer, Dr. rer. pol, Scientist, Ecole Polytechnique Fédérale de Lausanne (EPFL),

Verena Schoepf, Research Associate, The University of Western Australia,

"The authors seem unaware of many consequences of climate change, particularly related to the ocean. The increase in ocean acidity and temperature, due to uptake of atmospheric CO2, will have tremendous consequences for many marine organisms and thus ultimately humans via sea level rise, impacts on weather and climate, food security, etc."

Wolfgang Cramer, Professor, Directeur de Recherche, Mediterranean Institute for Biodiversity and Ecology (IMBE) continues in the same vein.

This is all simply untrue. We didn't "play down" any costs, and certainly not "economic studies," which we fully acknowledge. We do take for granted all the scientific, computer modeling and economic model estimates (though there is plenty to argue with there, but that's for another day). Nothing in the oped questions any of this. And "fails to mention" has to respect our limits: the WSJ gives us 900 words. We can't mention everything.

Moreover, we acknowledge and consider

"Yes, the costs are not evenly spread. Some places will do better and some will do worse...."

We acknowledge and consider that

"Migration is costly. But much of the world’s population moved from farms to cities in the 20th century...."

Not bad for 900 words.

Wolfgang Cramer, Professor, Directeur de Recherche, Mediterranean Institute for Biodiversity and Ecology (IMBE) continues, but I'm running out of steam. You get the idea.

Bottom line

Our main charge for the climate-policy community was,

"Scientific, quantifiable or even vaguely plausible cause-and-effect thinking are missing from much advocacy for policies to reduce carbon emissions. "

climatefeedback.org has nicely illustrated exactly such flights from scientific, quantifiable, or even vaguely plausible cause and effect thinking. Notice not one counterexample in my quotes or the whole post. Along with a striking inability to read, and a fascinating will to put words in people's mouths that aren't there.

Let me offer a little "scientific review" of this "scientific review." N=5 is a small data sample. There is this little concept called "selection bias." Offering highly interested people a chance to blast an oped is not a "scientific review."

Blogging, opedding, publishing your political opinions is what democracy and free speech are all about. Just don't call it "science."

Like most people, I revere "science." Its dispassionate quest for the truth has brought us unimagined prosperity. But, dear climate policy "scientists," be careful,  if you are going to invoke the imprimatur of "science"you had darn well better be right. If you end up saying "never mind," as the food establishment has done with the 1970s advice to eat margarine and sugar instead of animal fats, the public prestige of science, and all the good for policy it has brought, will come crashing down. You will be treated no more seriously than economists. And that will be a great tragedy. The fact that you are using such unscientific method in your policy analysis is an early warning sign.

I wrote to the climatefeedback editor, requesting that they post a link to this response on their "review." It will be an interesting test of what ethics remain part of "science" to see if they do that, or answer my email.

Update: climatefeedback answers, in the true spirit of dispassionate transparency that "science" demands:

Hello John,

Thank you for reaching out. We could agree to add a link in our review acknowledging

your reply; we only require that The Wall Street Journal adds a link to our review from your article.

Thank you,

Emmanuel Vincent I replied with a guffaw. Grumpy enjoys good snark as much as the next person. I invited them to post a comment at WSJ, which at least WSJ allows and climatefeedback does not ("feedback" does not even include comments), and allow me to post a comment at their site.

I also pointed out that the Wall Street Journal oped page is explicitly an opinion page, while they pretend to be a page of "scientific review." In the old days "science" publications were not opinion, and operated by greater standards of transparency and openness. (Though, not only through comments and letters, even the WSJ opinion page would publish a response such as mine. Editors have contacted me in the past with several inquiries about my articles.)

Not allowing a criticized author a link to a response, forget about posting the response itself, is way out of the bounds of "scientific" ethics. Proof again that the name of "science" is taken in vain here.

Duet Redux - Barokong

July 09, 2020    Comment   

Duet Redux - Barokong

Another duet of headlines with an interesting lesson, both from the Wall Street Journal:

Solar power death wish

Suniva Inc., a bankrupt solar-panel maker, and German-owned SolarWorld Americas have petitioned the U.S. International Trade Commission (ITC) to impose tariffs on foreign-made crystalline silicon photovoltaic cells.

Solar cells in the U.S. sell for around 27 cents a watt. The petitioners want to add a new duty of 40 cents a watt. They also want a floor price for imported panels of 78 cents a watt versus the market price of 37 cents.

they’re resorting to Section 201 of the Trade Act of 1974 because they don’t need to show they are victims of dumping or foreign government subsidies. They only need to show that imports have harmed them

California Democrats Target Tesla

The United Automobile Workers are struggling for a presence in Tesla’s Fremont plant, and organized labor has called in a political favor.

Since 2010 California has offered a $2,500 rebate to encourage consumers to buy electric vehicles. But last week, at unions’ behest, Democrats introduced an amendment to cap-and-trade spending legislation that would require participating manufacturers to get a sign-off from the state labor secretary verifying that they are “fair and responsible in their treatment of workers.”

The legislation, which passed Friday, is a direct shot at Tesla. The Clean Vehicle Rebate Project has amounted to a $82.5 million subsidy for the company

Both moves ought to pose a liberal conundrum. If you want carbon reduction, you want cheap solar cells, so that more people will buy them. The planet does not care where the solar cells are produced. If you want electric cars, you want cheap electric cars so that more people will buy them.

But those who falsely sold green energy as a job producer, a boon to the economy; not a costly alternative to fossil fuels, a cost that must be borne to save the planet, now face this conundrum.

The deeper lesson here is the corrosive nature of subsidies and protection. Once the government starts subsidizing solar cells and electric cars, there is a quite natural force demanding access to the subsidies. Why should the owners of the Tesla company get largesse from the taxpayers, and not their workers too?

Solar cells are just the latest embodiment of the infant industry fallacy -- that protection from competition will allow an industry to grow and become competitive.  Instead, they become infantile industries, expert and getting protections and subsidies not producing cheap solar cells.

The infrastructure paradox is similar. We need infrastructure. Yet federal contracting requirements, requirements for union workers and union wages, and everything else attracted to federal money being handed out, drive costs up to astronomical levels.

For energy, this is an abject lesson in the wisdom of a simple carbon (and methane) tax in place of all the subsidies and winner-and-loser-picking our government does. (Let's not fight about whether to do it. The point is if we want to restrict fossil fuels and subsidize a move to non-carbon energy, this is how to do it.) Subsidies and protection invite demands for subsidies and protection, not clean energy.

Carbon Tax - Barokong

June 29, 2020    Comment   

Carbon Tax - Barokong

Source: Seattle Times

"The carbon tax is dead; long live the carbon tax" is the headline of Tyler Cowen's Bloomberg column on the failed (again) Washington State carbon tax.  And rather decisively, per the picture on the left.

"Maybe its failure on the ballot in Washington state will inspire economists to come up with better arguments" challenges the subhead. I can't resist.

The key question for a carbon tax is, what do you get in return? What do you do with the money? Washington's carbon tax would have, according to the Seattle Times,

It would have taken effect in 2020, rising year after year to finance a multibillion-dollar spending surge intended to cut Washington greenhouse-gas emissions. The initiative reflected proponents’ faith that an activist government can play a key role in speeding up a transition to cleaner fuels.

The fee would have raised more than $1 billion annually by 2023, with spending decisions to be made by a governor-appointed board as well as the state’s utilities

Well, perhaps the voters of Washington State were not so much against a carbon tax per se, but had less than full faith that a large increase in green boondoggle spending by Washington State government was a good idea. They need only to look south at California's high speed train to see cost-benefit analysis at work in dollars per ton of carbon saved.

And in fact it violates the whole idea of a carbon tax. The point of a carbon tax is to give people and businesses an incentive to figure out their own ways to cut carbon emissions. The whole point is not to fund big government projects. If you want to fund big government projects, you do it out of the broadest based and fairest tax you can find.

As Tyler suggested,

But maybe it’s time for a change in tactics. These new approaches might start with the notion that we can address climate change without transferring more money from voters to politicians.

Here are three ideas:

Idea 1: One answer is obvious: a revenue-neutral carbon tax. Use the carbon tax to offset other taxes. Tyler anticipates this with

The economist can respond, correctly, that a carbon tax will ease the path to greener outcomes, and that other taxes can be cut as recompense if necessary. But it seems right now there is not enough trust for such a grand bargain to be struck.

Perhaps. But if the carbon tax were coupled with an explicit reduction in other taxes, it might help to convince people. If carbon taxes were coupled with elimination of other taxes, it would help more. Taxes are like zombies. If you just lower the rates they tend to come back. If you eliminate them entirely, perhaps requiring referendum for their reinstatement, there can be more trust. Couple the carbon tax with elimination of, say, state property taxes, income taxes, or sales taxes.

And in the end we all know taxes must equal spending. You can convince voters there won't be more taxes if there isn't more spending. Advertising the carbon tax as a substitute for carbon spending; simultaneously eliminating green boondoggles, would help to seal the deal.

Idea 2: The Baker-Shultz plan, or Americans for Carbon Dividends, (previousblog post here) has another bright idea: Send the proceeds back to the voters. Write everyone a nice check. This ensures that the money doesn't go to boondoggles, and gives every voter a stake in keeping the scheme going. It is highly progressive, which Democrats should like.

I had a similar idea a while ago: Rather than a tax, give each American a right to, say x tons of carbon emissions that they can sell on a carbon market. That also gives everyone an incentive to vote for the system. And it states the issue squarely. You, a voter, are having your air polluted. You have a right to collect on that damage. It makes it clear that carbon is a fee, a penalty, not a "tax." The point is to disincentivize the use of carbon, not to raise revenue for the government to spend. "Tax" is a loaded word in American culture and politics. Carbon rights takes the whole discussion away from "tax."

Idea 3: Lastly, one could pair the carbon tax and fee with a trade: A hefty fee, in return for elimination of all the other carbon subsidies and regulations. To those who don't believe in climate change: ok, but our government is going to do all sorts of crazy stuff. Let's cut out the rot and just pay a simple fee instead. No more electric car subsidies -- $15 k from taxpayers to each Tesla owner in Palo Alto -- HOV lanes, windmill subsidies, rooftop solar mandates, washing machines that don't wash clothes anymore (hint: do NOT buy any washing machine built since Jan 1 2018), and so on and so forth.

I think on the left the strategy has been to ramp up climate hysteria: if we just yell louder and demonize opponents more, the voters will buy it. No matter how much of a problem you think climate is, let's admit that's not working. In part the claims are now so over the top that everyone can tell it's gone too far. No, the way to put out fires in California is not to build a high speed train.

When, in the name of science the IPCC writes things like this -- right up front in the executive summary --

D3.2. ...For example, if poorly designed or implemented, adaptation projects in a range of sectors can increase... increase gender and social inequality... adaptations that include attention to poverty and sustainable development (high confidence).

D6. Sustainable development supports, and often enables, the fundamental societal and systems transitions and transformations that help limit global warming to 1.5°C. ... in conjunction with poverty eradication and efforts to reduce inequalities (high confidence)....

D6.1. Social justice and equity are core aspects of climate-resilient development pathways that aim to limit global warming to 1.5°C...

D7.2. Cooperation on strengthened accountable multilevel governance that includes non-state actors such as industry, civil society and scientific institutions, coordinated sectoral and cross-sectoral policies at various governance levels, gender-sensitive policies.... (high confidence).

D7.4. Collective efforts at all levels, ... taking into account equity as well as effectiveness, can facilitate strengthening the global response to climate change, achieving sustainable development and eradicating poverty (high confidence)

You can't blame the suspicious Washington State voter from wondering if perhaps a larger agenda isn't being financed here.

There is a sensible middle. Voters who want to do something about carbon, but not finance massive boondoggles or a collectivist progressive agenda. Environmentalists who want to do something about carbon that actually will work. Skeptics who understand, as long as we're going to so something, let's do it efficiently via a carbon fee rather than at massive cost as we are doing now.

Economists' letter on carbon - Barokong

June 28, 2020    Comment   

Economists' letter on carbon - Barokong

The "Economists’ Statement on Carbon Dividends" in the Wall Street Journal this week is a remarkable document. It's short, sweet, and signed by, as far as I can tell, every living CEA chair, every living Fed Chair, both Democrat and Republican, and most of the living Nobel Prize winners. (Thanks to a commenter who corrected an earlier count.)

It offers four principles 1. A carbon tax, initially $40 per ton. 2. The carbon tax substitutes for regulations and subsidies and (my words) the vast crony-capitalist green boondoggle swamp, which is chewing up money and not saving carbon. 3. Border adjustment like VAT have 4. "All the revenue should be returned directly to U.S. citizens through equal lump-sum rebates."

That the carbon tax is better than regulations and subsidies in choosing technology gets a lot of press. Yes, should we have rooftop solar cells or utility cells in the desert? Is it better to have battery powered cars or high speed trains? Do we really have to have washing machines that no longer actually clean clothes? And the only way to actually save lots of carbon -- nuclear -- has a much better chance under a carbon tax than hoping our political system will allow it.

But most people forget what economists know best -- that a carbon tax is the only way to change behavior. The answer to energy savings isn't as much new technology as in old behaviors. Turn the lights off. Take fewer trips. Turn the heat down. Move nearer your work. Carpool. Without a carbon tax there is no way for the average bleeding heart Palo Alto climate worrier to realize that one trip to Europe is like driving a car for 10,000 miles. (Planes get about 80 passenger miles per gallon -- but it's a lot of miles to Europe.) Twenty years ago, my then 8 year old daughter, reading about fuel economy standards, piped up "if they make cars more fuel efficient, it will be cheaper to drive. Won't people just move further away?" Indeed.

I try to sell a carbon tax deal to friends who are climate skeptics. Well, our government is going to do something. Given that fact, the carbon tax will cause much less damage than ever increasing regulations and subsidies. And I try to sell it to carbon warrior friends too. The tax instead of the regulations and subsidies, in our political system, is going to save you a lot more carbon.

The last proposal is, I think, the most contentious. Optimal taxation theory, as several of the signatories pointed out in other contexts, says that the carbon tax should go to reduce other distorting taxes. This will create more economic growth. AsHolman Jenkins  put it,

A tax reform that included a carbon tax to replace taxes that depress work, saving and investment would be an incentive to do everything in a less carbon-intensive way, bringing forth new technologies

Here the authors step back from benevolent-planner optimums and think politically. Well, we live in a political system.

But there is a bright side. One big point of the dividend is to guarantee that revenues willnot go to financing ever larger green boondoggles like the California high-speed train to nowhere, or to subsidize a Tesla in every VCs driveway. Carbon dividend means no "green new deal." The view that the tax system is what it is, and a major new source of revenue will not go to reducing marginal tax rates in a growth-oriented reform sounds quite realistic to me. If our Congress were interested in growth-oriented tax system it would already look a lot different than it is today.

A flat dividend is also immensely progressive. It is, effectively a universal basic income. And casual observation on ownership of large houses and jet travel suggests wealth people spew a lot more carbon than poor ones. I guess that is an effort to get Democrats to give up some of their cherished regulations and subsidies to get these long sought goals. (Like any UBI, it's going to make immigration a tougher issue, but we won't go there today.)

Tyler Cowen disagrees with the dividend.

"It strikes me as economists thinking they know what makes good politics, something which economists are rarely good at."

Well, he has a point, and I also think economists should emphasize more when they have expertise and when they don't. On the other hand, I don't see anybody else having much better idea what makes good politics these days, and the list of "economists" that created and signed the letter, starting with George Shultz, have immense political experience.

The dividend may not be the economically most efficient thing to do, but it will guarantee a lifetime of political support for the carbon tax! Hamilton figured this out with the assumption of national debt.

It has taken me some time to come around, as attached as I am to reducing marginal tax rates, but the political advantage that out keeps the money from being spent on boondoggles, and creates a constituency in favor of the tax and against spending the results on boondoggles, is strong.

I also worry about the wide range of environmental issues that have been forgotten in the Great Carbon War. Butterflies and Frogs are disappearing. The pacific garbage patch grows. Rhinos and Elephants will be gone long before climate bothers them. Take your pick, if we passed the carbon tax, and if this issue could disappear as one of the issues uniting partisanship and sweeping up the entire environmental movement, it would be a lot better for life on the planet.  Once upon a time, there were Republicans in the Sierra Club, Audubon Society, Greenpeace, and other formerly non-partisan organizations. Put carbon behind us, and it could be so again.

"Big Names Bake a Climate Pie in the Sky"complained Holman Jenkins. His complaint, largely, is that the deal won't be kept -- we'll get the taxand regulations, and the dividend promise will disappear into the bowels of Washington.

Besides, since we face a “climate emergency,” wouldn’t the money be better spent on speeding up deployment of wind and solar? As for existing mandates and subsidies, sure, we might expend additional political energy to repeal these. And pigs might fly.

This is an important point. As reducing marginal rates and removing deductions sounds nice, our tax reforms (especially the last) reduce marginal rates but don't remove deductions. The VAT with no income tax is a much better system, but many free market economists don't favor it because they don't trust the deal. Trusting the deal, carbon tax in return for no regulations, is a stretch.

However, I can hope that a deal could be struck, carbon tax in return for nonewregulations and subsidies, or subsidy extensions -- no "Green New Deal."  If we give up that deals can ever be struck and kept, we might as well give up on democracy.

Of course, in the 5th week of a shutdown, over a completely symbolic issue, with great deals on the table that benefit both sides, if only each could let the other have a symbolic victory, is not a great time to advance such hope. But even here, once you realize the shutdown has nothing to do with immigration, you see hope. This is a battle to the end over the Trump presidency. If he backs down, his presidency is finished. The Democrats think they can achieve that, and if they back down their left wing takes over. There is no way out of that one -- and reason to hope that when Washington is bargaining over actual policy and not over a symbolic but life-and-death battle, that they can do it.

Carbon tax update - Barokong

June 28, 2020    Comment   

Carbon tax update - Barokong

An interesting question emerged from some discussion surrounding my last carbon tax post. How big will the tax be? The letter says $40 a ton, but then rising. But how far? And in response to what question?

It occurs to me that the two obvious targets lead to radically different answers.

1) The social cost of carbon. This is what economists usually think of as the appropriate Pigouvian tax. In order to pollute, you pay the cost you impose on others by your pollution.

Even the worst-case scenarios now put the cost of carbon emissions at 10% of GDP in the year 2100. Discount that back, divide by all the carbon emitted between now and then, and, you're going to get a pretty small tax.

2) Temperature or quantitative guidelines. Or, "whatever it takes to stop the global temperature from rising more than 1.5 degrees C." Such a tax has to be high enough to basically stop us  from using fossil fuels. It would be radically higher, and impose economic costs far higher than 10% of GDP.

When you set a goal of a quantity with no attached price, the price can get pretty high.

I see now some of the back and forth chatter. Anti-carbon types warn that any tax "won't be enough." Now I know what they mean.

So who sets the tax, and on what basis, are important issues we're all fudging over.

Of course, a cynic would take the view that the tax will be set to

3) Maximize government revenue.

Given the behavioral elasticities, that is likely to be a good deal less than #2, as to high a tax will quickly erode the tax base.

PS: to my may CO2-is-not-a-problem commenters. If (or perhaps when) it's all proved to be a hoax, a carbon tax is a lot easier to undo than the alternative regulatory approach!

EPA, the nature of regulation, and democracy - Barokong

June 27, 2020    Comment   

EPA, the nature of regulation, and democracy - Barokong

My Hoover colleague Richard Epstein posted a revealing essay on the nature of environmental regulation last week, with environmental regulation as a particular example. The contrast with "Environmental Laws Under Siege: Here is why we have them" in New York Times and the New Yorker'sScott Pruitt's Dirty Politics is instructive

Epstein's point is not about the raw amount of or even what's in the regulation, but the procedure by which regulation is imposed:


As drafted, NEPA [National Environmental Policy Act of 1970 ] contains no provision that allows private parties to challenge agency decisions in court. Instead, the NEPA approval process is a matter for internal agency consultation and deliberation that takes into account comments submitted by any interested parties.
One year after its passage, NEPA was turned upside down in a key decision by Judge J. Skelly Wright of the D.C. Circuit Court of Appeals... Wright read the law as giving private parties the right to challenge government actions. Indeed, Wright welcomed such challenges, writing (admiringly) that the change, “promises to become a flood of new litigation—litigation seeking judicial assistance in protecting our natural environment.”
Giving private parties the right to challenge an agency decision grants enormous leverage to the private parties most opposed to letting projects go forward. In the case of nuclear power, delay became the order of the day, as the D.C. Circuit on which Judge Wright sat arrogated to itself the power to find that any EA or EIS was insufficient in some way, so that the entire project was held up until a new and exhaustively updated EIS was prepared—which could then be duly challenged yet again in court.



Epstein offers another case:


... the approval process for the construction of the 1,172-mile Dakota Access Pipeline (DAPL), and its offshoot, the 163-mile Bayou Bridge Pipeline, ...Both pipelines are capable of transporting close to 500,000 barrels of crude oil per day by incorporating state-of-the-art technologies that make them far safer than the alternative means used for shipping crude oil long distances: the railroads and trucks that create logistical nightmares and are capable of causing catastrophic spills, and the older pipelines that are still in service....In case you missed it, the pipelines have large net environmental benefits. Pipelines are better than trucks.




Nonetheless, the completion of DAPL has been delayed by fierce objections from both Native American groups and environmental groups. Under NEPA, they have legal standing to object to any proposed project by pointing to improbable risks while ignoring the undisputed gains in safety and efficiency that these pipelines promise. ...
...The sustained objection to the pipelines is driven not by any concern for safety, but by an overarching effort to use the NEPA process to stop the production, distribution, and use of fossil fuels.If you want a left of center example, environmental suits have been used to slow down the still nonexistent California high speed train.



Epstein offers procedural remedies, not ram-my-view-down-their-throats


NEPA thus needs to be cut down to size. For starters, courts should reject Calvert Cliffs. Today’s courts must be much more sensitive to the necessary trade-offs before overturning the detailed factual findings that government agencies make on technical matters in approving projects. In addition, courts should be reluctant to stop projects because of some gap in an EA or EIS.... And third, they must explicitly take into account the major environmental, economic, and political gains that the project has to offer, such as the removal of more dangerous modes of transportation in the case of the pipelines.This reflects my larger view in an earlier essay on regulation. The issue is not a simple "more vs less" regulation, the issue is how regulation proceeds.



The New York Times offers an interesting contrast. In an article titled "Environmental Laws Under Siege: Here is why we have them" --- in the news section, not opinion -- reporters Livia Albeck-Ripka and Kendra Pierre-Louis remind us of some of the environmental disasters of the 1960s. For example, the Cuyahoga River really did burn, 13 times. They conclude


Waterways across the United States are markedly cleaner though half still fall short of national goals. Recent decisions, though, could lead to backsliding.
The E.P.A. has suspended the Obama-era Waters of the United States rules, which sought to clarify which waters are considered part of the national water system...Air and water is a lot cleaner than in the 1970s, a huge and praiseworthy accomplishment of environmental law and regulation. But that does not mean every current action of the EPA is "progress," and any criticism is "Backsliding."



All the Times offers a reader is a simple morality play of "progress" vs. evil forces of reaction. If you have doubts about the Waters of the United States rules, which basically put every mud-puddle under federal control, then you must be part of a cabal who wants to "backslide" us all the way to rivers that burn. And likely bought off by nefarious corporate interests.

Not even the article title is right. The Waters of the United States is a rule, not a law. The law gave the EPA authority over "navigable waters." The EPA decided to interpret that rather broadly to put it mildly. Your kitchen sink is connected to navigable waters too. And your kitchen sink is not unregulated. States forbid you to throw motor oil down the kitchen sink, so the issue is federal preemption of state regulation -- which can cut both ways, forbidding states to impose higher standards. (Politico's coverage, the first that came up in a google search, was actually pretty good on covering both sides.)

Anyway, you can see there are subtle procedural issues here. Did the EPA exceed its legal authority over "navigable waters?" The house thought so and passed an over ride of the rule. Should, as politico mentioned, federal environmental impact review be triggered every time a farmer drains a mud puddle? Maybe. Should you be able to file environmental suits to stop your neighbors from construction projects you don't like, as Epstein bemoans?

These are the tough questions in a democracy, which you do not learn from the Times' simple morality tale.

In the New Yorker, ground zero of Trumpoplexy, Margret Talbot finished herlong attack on Scott Pruitt (yes, I read the New Yorker, and yes, I often actually finish articles) with


"One of the engineers said that it might take a while to “rebuild capacity” after Pruitt. But it would be done. The public, he reminded everyone, “is expecting us to protect the planet.” He said, “Pruitt is a temporary interloper. We are the real agency."My jaw dropped. No, I am not making this up. This is not fake news from some alt-Right website. Here's a screenshot.









Nor was it at all ironic. Ms. Talbot clearly meant this to reassure us that everything will be ok.

In case I have to pound you over the head with it, this is exactly the kind of bureaucratic obstructionism that those who bemoan the "deep state" point to.

This would not be so ironic if it were not so blatantly hypocritical. The New York Times and the New Yorker are also ground zero for authoritarian alarmism -- Trump is trampling democracy, checks and balances, he is the new Mussolini. Yet notice here who is for democracy and who is against it.

Democracy worries that unchecked power -- the power to write laws (regulations are laws), interpret them after the fact, impose large fines and jail sentences, hear appeals to such judgments, and to set standards on which citizens can sue each other and block each other's affairs -- must be constrained by judicial review, congressional review, and the ballot box. If those get it wrong at times, so be it. Democracy was never about superb technocratic competence (!) Democracy is a last ditch safeguard against little tyrants run amok. And large ones.

Democracy is not about what is the right answer and then ram it down their throats. Democracy is about the subtle question of who shall decide that answer and how.

If the New Yorker and New York Times were honest, they would write that in their view, the environment (along with about 50 other issues) is so important that democracy must be abolished. If deplorable yahoos vote in a president who clearly campaigned on a regulatory roll back, and then appoints agency heads who do exactly that, then the president's power -- the electorate's power -- to change the nature of regulation must be abolished. Likewise if the same deplorable yahoos vote in a Congress who passes a law countermanding the agencies action. Hooray for the agency that can obstruct these efforts and fight on! (It will be interesting to see their attitude when Trump appointees at, say, the CFPB, similarly resist President Elizabeth Warren's reforms.) The right of people to even express contrary views is dubious in the quest for "progress." Just who decides what news is "fake" will soon be up for grabs.

That would be honest, and a fair description of their position. Authoritarians have made similar arguments through the ages. China makes it today. Democracy is too messy, the wrong people can take power.

Let's just be clear who is making the authoritarian argument, and who the democratic one. And this predates Trump by decades.

Let us indeed celebrate the remarkable improvement in the environment in America. And let us hope that the anti-democratic forces among us do not succeed in their effort at such over-reach that the whole edifice loses its bipartisan credibility and comes tumbling down, or the nation screeches to a halt.

Ip on carbon tax - Barokong

June 23, 2020    Comment   

Ip on carbon tax - Barokong

Over the weekend, Greg Ip at WSJ wrote a nice piece on the carbon tax.

Greg addresses some common objections.

This urge to stop at nothing to find an effective solution is understandable. How can you put a price tag on the future of the planet?

..Green New Deal backers make another powerful argument: Global emissions levels are still rising, and to reverse them, carbon prices would have to be so high they’d be politically toxic. Better, the activists argue, to simply go straight to a massive, government-directed transition.

This attitude is common. But there is no evading economics. Either you have visible economic damage (carbon tax) of $1,000 per ton or invisible economic damage of $10,000 per ton.  Prices are better than restrictions because you can see where you're wasting $10,000 per ton, which money could reduce 9 times as much carbon properly deployed.

There is also a political judgment here that people will not stand for a visible tax, but will stand politically, or perhaps be too stupid to notice, the much larger shadow price of direct controls. They won't pay $5 at the pump for gas, but will stand for banning cars. I don't think that's true. I don't think the left thinks it's true either. The way the Green New Deal and even the IPCC reports now bundle carbon reduction with a vast left-wing political agenda, and a rather Orwellian drive to silence criticism confirms it.

"Experience demonstrates that these methods work. In 2013, the U.K. levied a tax on carbon dioxide emitted in electricity generation. Within four years, British emissions dropped 20%, while the European Union’s fell by just 7%. Last year, coal accounted for only 6% of British electricity generation, down from 44% in 2012.

How did the British do it? Their carbon tax was just high enough to give natural gas and (to a lesser extent) wind and solar power an advantage over coal,

...To many Green New Deal advocates, this isn’t good enough. Replacing coal with natural gas only reduces carbon-dioxide emissions; it doesn’t eliminate them. This misses the point. The climate doesn’t care if we eliminate a ton of carbon dioxide by replacing coal with natural gas or solar power..

Green New Deal enthusiasts correctly note that simply reducing carbon emissions isn’t enough: To save the planet, renewable and nuclear energy will eventually have to replace most oil, natural gas and coal."

I think here too Greg misses that climate policy advocates have gone far beyond a technocratic idea of simply, well, reducing carbon. "And nuclear energy" is usually noticeably absent. Carbon capture technologies, equally good at reducing carbon are usually noticeably absent. Other agendas like "climate justice" creep in -- worthy or not, anything else that creeps in means less carbon reduction per dollar. A carbon tax reduces carbon any way that reduces carbon, which is really good at, well, reducing carbon, and not getting distracted with other agendas. That is a strong reason why carbon taxes, and especially such taxes in return for less regulation are resisted on the left.

A quibble

"So market purists should acknowledge that government subsidies and regulations have a place: They can create sufficient demand for low-carbon technology to achieve the manufacturing economies of scale necessary to compete with fossil fuels. In 2000, Germany began requiring utilities to dramatically boost their use of renewable electricity, which spurred so much investment in solar manufacturing that prices have fallen for everyone. It is now often competitive with coal and natural gas."

In the long history of subsidizing and regulating industries, the usual outcome has been gross inefficiency and the demand for more subsidies. Technology is global too. The decline in, say, solar panel prices is not caused by Germany's subsidies. It came from China. The US promptly put in tariffs against cheap Chinese solar panels, and regulatory barriers make solar installation outrageously expensive, even in green and sunny Palo Alto. The climate does not care where solar panels are produced, but US producers and unions do, and they are able to channel subsidies and regulations their way.  Carbon taxes deny politicians the opportunity of big ribbon cutting ceremonies.

Subsidies and regulations have an even longer history of backing the wrong horse -- switchgrass, bio fuels, and high speed trains, say. A hefty carbon tax has exactly the same incentive to innovate and lower prices for non-carbon alternatives. This market purist needs a lot more persuading. (I think Greg was fishing hard to find something nice to say, in order to sound balanced.)

"the opposition that has resisted carbon prices—rooted in short-term self-interest or skepticism about climate change—would likely sink the Green New Deal. No senator from West Virginia will vote to put coal miners out of work."

This is a great point that needs more attention. In any large-scale project, we need to form a coalition of people who agree, I give up my benefit if you agree to give up yours. A carbon tax forms such a coalition automatically -- it guarantees equal pain across carbon emitters, and equal benefit across low-carbon alternatives. Any regulatory or subsidy response is negotiated bit by bit. Regulations on coal, oil, fracking, and cars; subsidies to solar, wind, nuclear (ha!), capture, buses, and trains, each clamor separately. If you want to see the result of this approach, look at the tax code. It is much more effective to say "the limit on coal production from West Virginia needs to be expanded to save my constituent's jobs" than it is to say "the national carbon tax must be reduced to save my constituent's jobs," or even "we need an exemption to the carbon tax to save my constituent's jobs." The visibility of a price rather than controls is a political advantage too, in forming this coalition.

Greg also misses two huge points about carbon taxes. First, How do you know if, after accounting for carbon used to make the batteries and to make the electricity, a Tesla really is greener than a BMW? It's really hard to find out. But carbon taxes build all that into the final product and the cost itself is the guide. Prices are the signals in the economy (Hayek) -- and they are really the only signals that work.

Second, an observation from my daughter, then age 8: "Dad, if they make everyone drive high mileage cars, won't people just move further from work and drive more?" The most carbon-efficient car out there is a Chevy suburban, with all the seats filled, operated by someone who chooses to live a lot nearer to work. The same technology can use a lot of carbon or a little carbon. You can replace all the lights with LEDs, or just turn them off more religiously.   Behavioral responses by consumers, and careful process responses by companies are the thousand points of light in carbon reduction, and they cannot possibly be achieved by regulation.

Also, Greg ends

"Whether greenhouse-gas emissions are slashed via a Green New Deal, a carbon price or both is a secondary challenge. The main one is for political leaders to accept the problem of climate change and invest political capital to tackle it. Once they do, they will ask, “What’s the cheapest way to do this?” Markets will win, hands down."

I think this is flat out wrong. The main problem is not for "political leaders to accept the problem of climate change." We don't just need more crowds of young activists singing songs at protests.

The main obstacle to substituting carbon taxes for regulation right now comes from the left. The left has bundled climate change with a vast other agenda, of which the Green New Deal is a good but not the only example.  They certainly are not asking "what is the cheapest way to do this?"  The Green New Deal is not a minimalist, technocratic, policy package aimed narrowly at reducing carbon, marred only by command and control rather than market techniques. It is, and reflects the widespread movement for, a total overhaul of society, of government, and of political power, with green only a minor element. Opposition to carbon taxes is not just "deplorable" gillets jaunes too obtuse to understand greenhouse gases, or nefarious oil companies.  Resistance to climate policy is not pig-headed anti-scientism, needing only for "leaders" to "accept the problem." It flows from resistance to the rest of the now-bundled political agenda.

Climate policy was headed to this kind of bipartisan technocratic resolution in the 1990s before it became a tool of partisan warfare. The challenge, from both sides, is to remove the political baggage that climate policy has accumulated. And frankly, that challenge seems to me mostly to fall on climate policy advocates right now. Those genuinely concerned about climate have made allies with a far left wing. Resistance to that far left wing agenda now imperils necessarily bipartisan progress on climate policy. Hoping that this far left will quash its political opposition for the two generations needed to advance a climate agenda seems pretty hopeless. At least, being in the freedom-oriented political camp, I hope so.

To my climate-skeptic friends: Given that the government is going to regulate carbon, this is the way to do it with least damage. To my green-warrior friends, if the government is actually going to reduce carbon, not just subsidize cronies and engage in worthless value-signaling gestures, a trade of carbon taxes for absurdly costly regulations and subsidies is the only way to get anywhere.