Thursday, July 14, 2011


What would work best as a preventative to anthropogenic global climate change? According to most economists -- including, in particular for the purposes of this post, John Quiggin -- it's carbon taxes. I don't think so. For that matter, I don't think that any number of other favorite solutions have a good chance of working.

To make long argument short, I favor a model that goes something like this: people use whatever infrastructure is available. In a contemporary society, major infrastructure is essentially a command-and-control activity of government. Therefore what needs to happen is: a) scientists convince the public that change is needed, b) the public tells their governments that change is needed, c) governments issue orders to replace one kind of infrastructure with another. Emissions trading schemes and carbon taxes are basically market fetishism, because the vast majority of users of energy, including businesses, do not have the ability to choose differently enough within the existing infrastructure to make a difference. Demand elasticity only goes so far, and not far enough. Only if the cost of an ETS or carbon tax builds up enough to force a major rebuild of infrastructure would they work. But that is unlikely to happen, because a government in which people are feeling that much pressure from the ETS or carbon tax will respond to that pressure by revoking it.

And let's take the carbon tax argument to its limit. Quiggin writes that "The alternative solution is to make those responsible for carbon emissions pay a price, just as they do for goods and services of all kinds." What good or service are they paying for? Unless they are paying to replace carbon infrastructure with non-carbon, then what they are really paying for is ecosystem services. Imagine a situation in which global climate change goes on unchecked, but in which economists announce that the people doing the polluting have properly paid for their damages, in monetary terms, to other people. Is that really acceptable? No. Aside from the moral or ethical valuations involved, ecosystems can't really be replaced by money (i.e. human activity) just in physical terms.

Quiggin, in the linked blog post, writes that those who favor what is being called "direct action" in Australia do so primarily because they are either business-linked/conservative or because they are climate change deniers. I am neither of those, and wouldn't want to give aid or comfort to them. But it's my sense that this support of "direct action" on their part is purely instrumental, because they perceive that in their current politics it is least likely to lead to any action at all. You see this in the U.S. in the other direction, where measures against climate change were originally proposed to be regulatory, and so the right wing "favored" emissions trading schemes. When it looked like those might have a chance of actually being implemented, they went to pure denialism. So I don't think there's any point in disfavoring regulatory/command-and-control change just because they favor a do-nothing version.

Quiggin uses the usual invisible hand imagery of economics when he writes that "This problem raises a vast number of possible options, and the problem is to choose which will achieve the necessary reductions in emissions with the least possible disruption and economic cost. This is a difficult problem. [...]" Therefore, turn it over to the market (in the main) rather than the experts. But there is a large amount of fictitious economic activity that goes on, at least in the U.S., to camouflage the fact that major energy infrastructure is in fact an activity already decided by a few experts. Want to build a coal-burning electric power plant? In no sense is a "market" really involved. The government is involved from start to finish. How about a gasoline refinery? In fact, the major inputs to the system are government-controlled in all but name, with corporate ownership mostly being there for purposes of crony capitalism.

Someone might reply that the millions of decisions take place on the consumption side, with all of those light bulbs being replaced, car miles being driven to a greater or lesser extent, heaters being turned up or down, and small solar panels being put on roofs. None of that makes enough difference. If the electricity is being supplied by a coal-burning plant, people will use it somehow. If the roads have gasoline stations and infrastructure and no electric infrastructure, people will use up whatever gas is available, for the wider sense of "available" meaning "all that can be gotten out of the ground".

Conversion of our societies from carbon fuel to non-carbon is really a communal, global cost. Governments are how contemporary societies decide on and pay those kinds of costs. Trying to get the government to hand it off to the market is just the economist with a hammer thinking that everything looks like a nail.


  1. Me? I am hoping that the Sepulveda Pass construction project goes horribly wrong, and come Monday, millions of people will realize that their reliance on the individual automobile is tragically flawed. That, or a major earthquake would do the trick. In other news, there is going to be a huge weekend party in LA.

  2. > "Emissions trading schemes and carbon taxes are basically market fetishism"

    Also, the "fantastical-market" is also used to hand-wave cheap&cheerful solutions out of thin air (the "market" is always creating solutions to every problem simultaneously, and if problems remain, they must not really be problems); also, the "fantastical-market" assures that we can call these future solutions optimal, sight-unseen.

    It is a way to seem smart, capable, responsible, & adult without ever actually manifesting intelligence, capability, responsibility, & maturity and wisdom. Ancient Shamans would balance gilded antlers upon their heads; modern Shamans balance economics texts upon their heads.

  3. The Sepulvida Pass thing is pretty amazing, spyder. Such a tremendous amount of dependence on one road.

    moe, there's a number of solutionary (if that's a word) tropes that I didn't even bother to cover in this post, since I figuring it was getting long anyways. Technoptimism is one of them. I have some sympathy for some parts of it -- Bruce Sterling's Viridian list, for example, was at least an attempt to do something that the people involved could do, instead of waiting -- but what techno-optimists tend not to understand is that these kinds of developments hardly ever arise from the market. They're almost always from government-funded research or from specific governmental mandates (of the "you must replace CFCs with something else" type). The market really has no interest in basic research or even in applied research that takes large corporations too far out of their well-understood current market zone.

    The other one is volunteerism. That's almost always a bad faith suggestion, but apparently there are some people who really believe that personal virtue in the form of people deciding to turn off light bulbs and drive fewer miles can have an effect. Someday maybe I'll do the math to see just how large an efficiency improvement we'd get if 10% of society virtuously decided to use 10% less energy, and how this compares to what we need to do.

  4. I never made any claims about the purity of markets, absence of governments etc.

    The fact remains that the choice of generating technology in electricity is very responsive to relative costs, as can be seen from the virtual disappearance of oil-fired generation after the 1973 price shock, the collapse of nuclear when it became apparent that it was far more expensive than advertised and the recent rise of wind and gas.

    That process can be helped along in all sorts of ways, but if the price incentives that determine relative profitability are wrong, you are unlikely to get far.

  5. I also don't think much of the style of argument "your policy proposal won't work because, if it did, vested interests would stop it". Maybe so, but you don't give any grounds for supposing that yours would be any more acceptable to the same interests.

  6. Thanks for responding in comments, John. I didn't mean to imply that you had written about purity of markets, absence of governments etc, but I do think that you're applying economic logic to what is basically not an economics question.

    The reason that a mandated change in infrastructure is not vulnerable to political pressure in the same way as either a carbon tax or an ETS is because of who it affects directly and how it works. A carbon tax directly raises prices of gas for individuals who drive cars, home owners who use oil heat, and so on. The impact is widespread, painful to individuals who are forced by their existing infrastructure, job, or location to use their things, and regressive. The resulting complaints will be widespread among the electorate, and grow more and more loud the closer the policy is to actually having an effect.

    Replacement of infrastructure, on the other hand, affects moneyed interests first -- they are the ones who own major elements of existing infrastructure and who will finance building new ones. Their political power is already being used more or less all out against change, so once it's overcome, there isn't much more they can do. And once infrastructure starts to get replaced, whatever part of the new set that's in progress becomes a sunk cost, so that it becomes less and less likely for people to succeed in rejecting it.

    It comes down to one's theory of politics, a subject of recent discussion on CT. Pressure against the poor and middle class does not work to bring people together to sustain political change, even if it may be more efficient.

  7. Sometime in 2016, John Quiggin mentioned that he'd changed his mind about this, based in part on the facts changing but also in some small part on this post. The first time ever that I've ever helped to change anyone's mind about anything important (only a slight exaggeration).