I've seen a substantial part of the US completely discount the needless deaths of hundreds of thousands of people this year, so I don't see why anyone would care about a carbon tax.
I'm a conservative economist, and I also have long supported a net zero carbon tax. IE, one that lowers taxes on labor and replaces them with taxes on carbon. Moreover, I remember reading conservative economists in the Weekly Standard advocating the same probably 10+ years ago.
I also strongly agree that while capital budgeting (discounting of the future) is a great way for companies to look at projects. It makes little sense from the standpoint of society as a whole.
Because capital budgeting basically says our grand children have no value. But most would disagree.
Maybe at some point eventually the left ends up with most of the blame for the bad climate future. Think that's not possible? Consider what a mistake the left made (and still makes) with nuclear. Consider opposition to carbon taxes on the grounds of "it's wrong to buy rights to pollute." Consider using climate change as a pack animal to carry the left's extreme and unpopular views on de-growth and capitalism. Eventually it's going to be CW that the left's approach was mostly wrong and it will be a cautionary tale.
Regarding the anti-capitalist view of climate change, if it was only the wealthy one percenters who drove SUVs and owned homes filled with energy gobbling appliances the environmental impact would be minimal. If you are mad at capitalism it’s because capitalism has been successful at bringing material prosperity to the masses.
Having said this, I think a revenue neutral carbon tax is the “capitalist” solution to climate change.
Matt mentions GRE scores for economics being high…what are they for sociology? Sociologists are creating infrastructure for massive future employment with DEIA departments and these will be high paying jobs because if they aren’t it will be a signal the organization doesn’t take it seriously. In the analysis of easy degree vs high pay this is going to be the way to go!
Normally I think it's not worth getting too worked up either way about what private companies and organizations do about DEI - it's a free country, after all.
But this "trap house" incident at Yale Law School of the diversity officer's inanity is a bridge too far. This isn't just anywhere - it Yale Law, direct pipeline to power, sinking to this level of thought policing. Has there been a single complaint that Chapo Trap House is offensive?
While I haven't heard anyone complain that the name "Chapo Trap House" is offensive yet, the kind of people who would complain about such a thing are also probably overwhelmingly the people who call Chapo Trap House part of the "dirtbag left" and otherwise sneer at it for its class-over-identity focus.
I don’t think they will be HR. DEIA has to be its own department for status reasons. My organization has crated a group with a director. Within a year it is already staffed with 4 people. A DEIA project manager? What do they do? What skills are needed? Quite frankly, if they really want to make improvements they should hire someone with an Econ background. A sociologists will just go around espousing social justice rhetoric supported by bad causal links.
To best understand Roberts' post, it helps to be familiar with some of the long-running intramural arguments in the environmental community. In particular, a prominent piece of folk mythology among a broad swathe of climate activists is that the environmental movement's one-time enthusiasm for a carbon tax was originallyand largely meant as a sop to conservatives.
According to this narrative, left-wing climate types agreed to ditch the command-and-control regulation of corporations that they preferred in favor of less effective but more politically palatable market-based solutions.* Conservatives, the thinking went, hate regulations but love markets, so carbon taxes represented a sort of middle ground that left and right could unite on.
That carbon taxes are a total dead letter, in this telling, reflects the perfidy of the right and the foolishness of environmentalists who were willing to water down their policy ambitions out of political expediency.
In this telling, economists play a sort of pied piper role. Matt quotes Greg Mankiw, but Greg Mankiw is just the problem! Greg Mankiw can go on all day long about how great carbon taxes are, and he can chair the Council of Economic Advisors, and he can advise Republican presidential candidates. What he can't do, however, is actually make Republican politicians care about climate change. The problem here (again, in this telling) isn't with the Republican politicians or voters in general. It's with economists for cheerleading a bunch of hopeless policies that distract all the well-meaning climate activists.
This narrative, as far as I can tell, is pretty much entirely bullshit. I've worked in cimate circles for over fifteen years, and in my recollection the enthusiasm for carbon taxes on the left was entirely sincere. It would take a better historian than me to really dig in on the genesis and development of climate policy thinking and activism, but simply as a matter of common sense it doesn't really track that environmentalists would preemptively organize their agenda around conservative policy preferences.
Regardless, the notion that support for carbon taxes on the left was largely a misguided and unrequited attempt to extend an olive branch to conservatives runs underneath Roberts' critique of economists.
* I am eliding some considerable nuance here. In particular, back in the day, cap-and-trade was seen as a sop to conservatives, with carbon taxes being the purity option for those on the left. (Cap-and-trade = markets = Enron = capitalism = bad.) Over time, as environmentalists have soured on carbon taxes altogether, they seem to have gotten lumped together with cap-and-trade as a shiny bauble that have distracted us from what we should have been doing all along: large-scale industrial policy.
When people saw the effect of acid rain in the eighties, most developed countries adopted taxes on SO2 emissions and similar gasses. That worked well and fast and everyone was happy (even Republicans).
This helped convince lots of people that market based solutions (carbon taxes or tradable emission rights) would work.
In the EU there is the EmissionTrading System with perhaps not enough sectors covered and too many rights issued …
Yes, and the success of a cap-and-trade system for addressing ozone depletion was an even more salient example back when many of these arguments were playing out. In fact, some carbon tax purists were so intent on denigrating cap and trade that they began arguing that ozone depletion would have been addressed more quickly if cap and trade hadn't been the policy mechanism employed. Cap and trade enthusiasts were equally eager to point out the political economy benefits of cap and trade.
But, as mentioned, eventually carbon pricing fell out of favor, which is when the myth sprang up that all such proposals were neoliberal schemes pushed by out-of-touch economists.
I don't know what came before when and what caused what, but I think that the idea that carbon taxes or similar market-oriented schemes would be a middle ground that could generate some enthusiasm on the right was part of the equation, and did in fact fail.
I don't think it was a perfidious false-flag operation by economists meant to get the environmental movement to waste its time, energy, and political capital on doomed projects to undermine them.
I agree about 90%. [I'm an economist, after all.] The 10% is in WHY the pubic opposes a carbon tax. I don't think it is primarily that they don't take climate change seriously enough, but rather think that a carbon tax would be much more disruptive (i.e. much higher increase in their gasoline and electricity bills) than would in fact be the case. And this fear while real should not be taken 100% as given. In part it is driven by some climate activists exaggerating the harm from climate change and conservatives exaggerating the size of and harm from a carbon tax. Economists' message that we have a (comparatively) easy solution to a very real and growing problem is a hard sell.
It's sort of like removing restrictions on more dense residential and commercial development and affordable housing. Everyone is afraid the low-income skyscraper will go up on the lot next to them.
This sounds right. I have literally no sort of knowledge of how a carbon tax works, but my gut instance is that it would someone how effect me more directly than some other intervention that didn't have the world "tax" in it.
Interesting anecdote. My brother in law owns a restaurant. Last year he switched is pricing system so that the prices included tax. So... burger used to cost $5, now costs $5.30 on the menu... man people got upset. They were paying the exact same thing... but having the higher price visible just irked them.
Not sure how it relates to this, but people are irrational. Especially with the word tax.
Definitely that is part of the problem. It no accident that one half of the wage tax is "paid" by the employer although the effects on workers incomes would be the same if 1005 came from their salary.
Several hours after I read this, a Matt Stoller piece showed up in my inbox. It describes economists as the root of all evil (I exaggerate a bit). We need a Substack Matt summit, to work this out. I wonder what Taibbi thinks.
Naomi Klein's husband, Avi Lewis, ran for Parliament in last month's Canadian federal election. He came third, behind the Liberal incumbent and the Conservative candidate. A review of Naomi Klein's writings on climate, by Joseph Heath: http://induecourse.ca/final-thoughts-on-naomi-klein/
The Liberal government in Canada is in fact using carbon pricing (specifically, a steadily rising national carbon price floor) as the backbone of its climate policy. David Roberts wrote up a good explanation for Vox. It's survived two federal elections now, but it's required years of political and legal battles to get onto solid footing. Mark Jaccard argues that "flexible regulations" (like the clean energy standard) would incur far less opposition, and would be nearly as cost-effective. https://www.cambridge.org/core/books/citizens-guide-to-climate-success/we-must-price-carbon-emissions/66AEBB8BE9A7F7760DC1BCE3A9C50748
It survived quite narrowly two federal elections that occurred during an era of unusually low fuel prices. In particular natural gas used widely in home heating. That is about to change dramatically as these prices begin to rise. The same government is warning of this and taking steps to address it with fuel subsidies . Let us see how this policy fares under these more adverse conditions.
The usual advice from economists is that if you want to help lower-income people deal with rising prices, don't fiddle with the prices - give them more money so they can pay the higher prices.
I agree that if the entire population were economists, we'd be in better shape on fighting climate change. The same applies if the entire population were anthropologists or sociologists or specialists in the works of Jane Austen.
The question is whether economists have better ideas than the rest of the population that takes climate change seriously. To the extent that their big idea is a carbon tax then the answer is "no" unless we're open to the "assume you have a can opener on a desert island" approach to solving problems.
Listening to economists explore the virtues of carbon taxes is just wasting our time and diverting us from pursuing more effective solutions, like huge increases in R&D and "quiet Congress" type regulatory actions.
If you think climate activists are more supportive of that approach than economists, you know different climate activists than I do. Most of the ones I know believe a show down is needed between the forces of good (them) and the forces of evil (not them) so that the forces of good can triumph for all to see. They definitely don't think there should be quiet backroom deals to slowly inch things forward in "quiet Congress"
I would agree that economists aren't the problem. They just aren't the solution either. It probably doesn't do much harm for people to just ignore them. It's not that I don't appreciate the difficulties economists face. I am myself a math guy of the engineering variety. I pity economists. What they have before them are problems that if modeled with with advanced computational techniques based on the underlying multivariable non-linear equations would mostly just yield garbage. So they just use the meat axe of mathematical technique, statistics. Hence their eternal unresolved conflicts.
On the carbon tax you get a purely economistic view of the world. If you pull this lever magic will happen. What is this magic? Well it is will ostensibly discourage the use of carbon as a fuel
which directly implies reducing economic activity. People will switch to alternatives they say. And when people with a science or engineering point of view point out that these alternatives do not yet exist they reply that we will spend a pile on R&D and make them exist. Economic levers do not, in fact, change the laws which govern science. Not chemistry, not physics, nothing. You'd think a person capable of understanding economics at an advanced level might also have at least a basic understanding of science but this is apparently forbidden.
They also like to talk about deployment a lot I notice. When it is pointed out that you have to have something to deploy they usually cycle back to arguments about R&D spending. When you confront them with arguments about deployment with the presumption that a hypothetical technology does exist and the logistics of deployment, then they usually retreat behind an SEP (Douglas Adams' famous Somebody Else's Problem Field). It's not their problem because they have pulled the lever and their responsibility ends there.
How do you go about converting the half of the homes in the US that use hydrocarbon based heating to pure electric is an example question I like to ask. This is a monstrous technical problem in its own right. And you aren't going to get it done with carbon taxes or tax credits. It is a vastly more difficult problem than just removing legacy lead lines from plumbing and you are just starting to address that problem. These are deployment problems that will take decades to achieve given the manpower available. And every single bit of it presumes the political authority exists to command it.
One thing you can be assured of in any functioning Democracy. Political authority to undertake a conversion from a fossil fueled economy to a fully electrified one will evaporate with the first major failure. And for some unknown reason economists seem to favor the riskiest strategies.
The important thing to remember is that *absolutely no one* in US policy circles actually prioritizes climate to the extent implied by their public warnings so this mostly just an issue of aesthetics.
Obviously Democratic politicians also place a fairly high discount rate on climate change, since they have chosen to subordinate it to their other domestic priorities like dental for seniors. Even the Sunrise Movement and other 'activist groups' seem equally/more interested in left wing social policy (defund, housing, etc.) as they are in climate change.
The mistake economists make is that they articulate those tradeoffs rather than pretending they don't exist in public but taking them into account in practice.
I agree but I think Matt understates his case for economists and overstates the case against the political possibility of carbon pricing.
Putting a price on all the damage from climate change is impossible so some economists have just worked backwards from when we need to reach net zero to avoid the worst harms to find what carbon price might achieve that:
No significant climate policies have been “politically workable” in the U.S. up to now (it has taken a few years of increasingly frequent photogenic disasters to make any climate action likely), so singling out taxing carbon is unfair. Yes, Republican support for pricing carbon has faded with the rise of negative partisanship to the point where open support is down to a lone house member sponsoring one of the five carbon pricing bills in Congress and a few senators like Romney and Murkowski allowing that it makes a lot of sense (but not cosponsoring the bills that would do it), but the Democrat-only reconciliation bill contains the major climate policies for this Congress (and probably for the rest of this presidential term). The bipartisan infrastructure bill is probably a wash, since most of its billions go to pour concrete without charging the drivers, fliers, or shippers a penny to use the resulting better infrastructure, meaning they will use it more, with almost exclusively fossil-fuels.
So at the moment anything that can get all Democratic senators and virtually all Democratic representatives to vote for it is politically possible and anything that can’t isn’t. Senator Whitehouse has said it’s “highly likely” a carbon fee will be included in reconciliation (https://ricochet.com/podcast/plugged-in/sen-sheldon-whitehouse-dishes-on-reconciliation-strategy/). While he’s certainly talking his book, it’s premature to consider carbon pricing a “political dead-end.” Even if it doesn’t end up in reconciliation this year, it will surely be considered again soon since the policies that are in reconciliation will not be sufficient and the disasters that have created public support for action will keep getting worse. Most of the support for the non-pricing solutions is among activists on Twitter, some of whom literally make a living supporting them. As someone who talks to relatively well-informed strangers about climate change (I’m picking places to find people who might support carbon pricing if they learn about it) I can assure you that no one has heard of the Clean Electricity Performance Program (until yesterday, the term had appeared in the Washington Post only once, and that in a Bloomberg column) and very few have even heard of carbon pricing, so the idea that voters have well informed preferences for particular climate policies is silly. There's just a general idea we should switch to renewables without much thought on how that will happen. Most people don't think like economists so they just want someone to make it happen.
The anti-economist crew has not helped the political viability of any effective climate policies by increasingly telling even those who are concerned about climate that it’s all Exxon’s and the Koch brothers’ fault. Why should anyone agree to sacrifice anything to solve a problem they had no role in creating? Bernie Sanders supported taxing carbon more recently than 2014—it was part of his 2016 platform. When I asked Elizabeth Warren why in a blue state the toll to enter Boston via Route 1 from the north is only $1.25 even at rush hour (and is zero for many other routes) she assured me that I didn’t understand big oil’s power. This makes some sense for a politician with an all-encompassing ideology trying to be consistent but even climate scientists who say in their writings that climate pricing is essential don’t mention it much on Twitter or cable TV appearances (e.g., Michael Mann and Katharine Hayhoe), presumably out of fear that they’ll antagonize the anti-pricing activists, who present Americans as impoverished slaves to fossil fuel interests, unable to alter their behavior or to afford any rise in the lowest energy prices of any of our peers.
While it would be great if there were non-pricing policies we could easily pass that would solve the problem, “the policy entrepreneurs” “ways of getting things done other than the most straightforward one,” aren’t looking too good. That the Senate parliamentarian may block the Clean Electricity Performance Program got some attention yesterday (https://www.washingtonpost.com/politics/2021/10/14/democrats-central-climate-program-is-trouble/ ) but other problems with the CEPP have been largely ignored.
And that’s even after Resources for the Future “assume[d] that gaming will be precluded” (1st endnote in full report), which an analysis by four energy economists found would not be the case:
“These differences in incentives open up a variety of channels for gaming and unintended consequences that could lead to large government expenditures without inducing large-scale substitution of new, clean energy supply for fossil-fueled generation.”
I have not seen this analysis picked up anywhere. Nor is anyone writing about how a president in 2025 who did not support the CEPP’s goals could destroy its effectiveness by having the DOE, which would be in charge of writing, interpreting, and enforcing all of its complex rules, selectively apply its subsidies and fines to help his fossil fuel supporters in red states.
The CEPP and tax credits would all sunset in ten years under the Byrd Rule, but a carbon fee would not since it would reduce, not increase the deficit, even after a means-tested rebate to make all but the affluent whole. (I’m not sure why Matt writes “regressive tax cuts under Bush and Trump probably would have been deeper because of the presence of carbon tax revenue,” when in the previous paragraph he refers to “a revenue-neutral carbon tax,” as in the most popular carbon fee proposal. It would rebate of all of its revenues, reducing inequality but providing no revenues for other purposes.)
The huge problem of what to do about China has also been swept under the rug by the anti-pricing faction: a) we’re only 15% of world emissions now so need to also engage the other 85% to act and b) if we incur significant costs in reducing emissions, our energy-intensive industries will be vulnerable to unfair competition, at home and abroad, from countries that do not. A border carbon adjustment is the only plausible solution to both, yet the WTO will never allow one without us having an explicit price on carbon. In their desire to have it both ways, Democrats have supported a ‘polluter import fee’ (a BCA) without carbon pricing, which is not possible. Nor can we participate in international agreements that increasingly will have to focus on harmonizing at least rich countries’ explicit carbon prices.
Is there another reason for the failure to discuss any of these problems (publicly at least—perhaps someone is working behind the scenes to fix them) than that the anti-pricing climate movement seems to think that passing laws, no matter how defective, represents victory? Certainly it seems to have concluded that phony research is justified for the right cause. Evergreen and NRDC paid Analysis Group for a report that concluded the CEPP would create nearly 8 million jobs—vs. doing nothing, not vs. other possible policies such as a carbon fee that would increase renewable use—then touted it as “independent analysis” (https://www.evergreenaction.com/press/new-analysis-finds-cepp-would-expand-workforce-by-nearly-8-million-jobs-over-the-next-decade : you have to follow the links to the actual report and read the acknowledgements to learn that). Academics like Leah Stokes and Jesse Jenkins pose as impartial experts on the plan even though they were involved in creating it.
This is a great summation: “Klein-style arguments that associate tackling climate change with the general-purpose, far-left ideas that most people reject have been a much larger practical impediment to acting on climate change than anything coming out of the economics world.” The weekly constituent update from the Democratic incumbent in one of the swingiest congressional districts in the country (NH-1) does not mention any of the supposedly popular policies in the reconciliation bill, including on climate—in fact it doesn’t mention the bill at all!
What a crock Matt. Economists don't make climate policy but they are supposed to come up with credible estimates of the relative costs and benefits of alternative policies to inform a rational discussion which they have not done.
In 2008, Alan Greenspan found a fatal flaw in his model of how the world works. What a cluster fuck that was but nothing like the one we're headed for in the second half of this century.
As Matt shows, economists are far more concerned about climate change than the general public and therefore endorse expensive policies to forestall its worst effects. They estimae costs and benefits of different policies all the time. People apparently just don't like that the most effective policy depends on prices and economic self-interest (not that subsidies don't).
Here's one summary from 2015 and a couple of quotes from it:
"Experts on the economics of climate change expressed higher levels of concern about climate change impacts than the general public, when asked identical survey questions."
"The discounting approach that the U.S. government currently uses to analyze climate regulations and other policies – a constant discount rate calibrated to market rates – was identified by experts as the least desirable approach for setting discount rates in the context of climate policies. Nearly half (46%) of respondents favored an approach that featured declining discount rates, while 44% favored using rates calibrated with ethical parameters."
Here's an approach that does not rely on estimating a social cost of carbon:
Many economists had pointed out that the mortgage market was subject to insufficient regulation. Even Milton Friedman would tell you that if the government guarantees bank deposits it has to keep an eye on what they do with them. Here's an earlier look at how Wall Street works:
This seriously mischaracterizes Smith's piece.
I've seen a substantial part of the US completely discount the needless deaths of hundreds of thousands of people this year, so I don't see why anyone would care about a carbon tax.
I'm a conservative economist, and I also have long supported a net zero carbon tax. IE, one that lowers taxes on labor and replaces them with taxes on carbon. Moreover, I remember reading conservative economists in the Weekly Standard advocating the same probably 10+ years ago.
I also strongly agree that while capital budgeting (discounting of the future) is a great way for companies to look at projects. It makes little sense from the standpoint of society as a whole.
Because capital budgeting basically says our grand children have no value. But most would disagree.
Maybe at some point eventually the left ends up with most of the blame for the bad climate future. Think that's not possible? Consider what a mistake the left made (and still makes) with nuclear. Consider opposition to carbon taxes on the grounds of "it's wrong to buy rights to pollute." Consider using climate change as a pack animal to carry the left's extreme and unpopular views on de-growth and capitalism. Eventually it's going to be CW that the left's approach was mostly wrong and it will be a cautionary tale.
Regarding the anti-capitalist view of climate change, if it was only the wealthy one percenters who drove SUVs and owned homes filled with energy gobbling appliances the environmental impact would be minimal. If you are mad at capitalism it’s because capitalism has been successful at bringing material prosperity to the masses.
Having said this, I think a revenue neutral carbon tax is the “capitalist” solution to climate change.
Matt mentions GRE scores for economics being high…what are they for sociology? Sociologists are creating infrastructure for massive future employment with DEIA departments and these will be high paying jobs because if they aren’t it will be a signal the organization doesn’t take it seriously. In the analysis of easy degree vs high pay this is going to be the way to go!
Normally I think it's not worth getting too worked up either way about what private companies and organizations do about DEI - it's a free country, after all.
But this "trap house" incident at Yale Law School of the diversity officer's inanity is a bridge too far. This isn't just anywhere - it Yale Law, direct pipeline to power, sinking to this level of thought policing. Has there been a single complaint that Chapo Trap House is offensive?
https://freebeacon.com/campus/listen-to-yale-law-school-administrators-tell-a-student-his-affiliation-with-the-federalist-society-is-triggering-for-classmates/
While I haven't heard anyone complain that the name "Chapo Trap House" is offensive yet, the kind of people who would complain about such a thing are also probably overwhelmingly the people who call Chapo Trap House part of the "dirtbag left" and otherwise sneer at it for its class-over-identity focus.
Trick question - they don't take the GRE because it's racist.
There will be tons of people lining up for them. They will be HR jobs. HR folks make a lot less than economists.
I don’t think they will be HR. DEIA has to be its own department for status reasons. My organization has crated a group with a director. Within a year it is already staffed with 4 people. A DEIA project manager? What do they do? What skills are needed? Quite frankly, if they really want to make improvements they should hire someone with an Econ background. A sociologists will just go around espousing social justice rhetoric supported by bad causal links.
To best understand Roberts' post, it helps to be familiar with some of the long-running intramural arguments in the environmental community. In particular, a prominent piece of folk mythology among a broad swathe of climate activists is that the environmental movement's one-time enthusiasm for a carbon tax was originallyand largely meant as a sop to conservatives.
According to this narrative, left-wing climate types agreed to ditch the command-and-control regulation of corporations that they preferred in favor of less effective but more politically palatable market-based solutions.* Conservatives, the thinking went, hate regulations but love markets, so carbon taxes represented a sort of middle ground that left and right could unite on.
That carbon taxes are a total dead letter, in this telling, reflects the perfidy of the right and the foolishness of environmentalists who were willing to water down their policy ambitions out of political expediency.
In this telling, economists play a sort of pied piper role. Matt quotes Greg Mankiw, but Greg Mankiw is just the problem! Greg Mankiw can go on all day long about how great carbon taxes are, and he can chair the Council of Economic Advisors, and he can advise Republican presidential candidates. What he can't do, however, is actually make Republican politicians care about climate change. The problem here (again, in this telling) isn't with the Republican politicians or voters in general. It's with economists for cheerleading a bunch of hopeless policies that distract all the well-meaning climate activists.
This narrative, as far as I can tell, is pretty much entirely bullshit. I've worked in cimate circles for over fifteen years, and in my recollection the enthusiasm for carbon taxes on the left was entirely sincere. It would take a better historian than me to really dig in on the genesis and development of climate policy thinking and activism, but simply as a matter of common sense it doesn't really track that environmentalists would preemptively organize their agenda around conservative policy preferences.
Regardless, the notion that support for carbon taxes on the left was largely a misguided and unrequited attempt to extend an olive branch to conservatives runs underneath Roberts' critique of economists.
* I am eliding some considerable nuance here. In particular, back in the day, cap-and-trade was seen as a sop to conservatives, with carbon taxes being the purity option for those on the left. (Cap-and-trade = markets = Enron = capitalism = bad.) Over time, as environmentalists have soured on carbon taxes altogether, they seem to have gotten lumped together with cap-and-trade as a shiny bauble that have distracted us from what we should have been doing all along: large-scale industrial policy.
When people saw the effect of acid rain in the eighties, most developed countries adopted taxes on SO2 emissions and similar gasses. That worked well and fast and everyone was happy (even Republicans).
This helped convince lots of people that market based solutions (carbon taxes or tradable emission rights) would work.
In the EU there is the EmissionTrading System with perhaps not enough sectors covered and too many rights issued …
Yes, and the success of a cap-and-trade system for addressing ozone depletion was an even more salient example back when many of these arguments were playing out. In fact, some carbon tax purists were so intent on denigrating cap and trade that they began arguing that ozone depletion would have been addressed more quickly if cap and trade hadn't been the policy mechanism employed. Cap and trade enthusiasts were equally eager to point out the political economy benefits of cap and trade.
But, as mentioned, eventually carbon pricing fell out of favor, which is when the myth sprang up that all such proposals were neoliberal schemes pushed by out-of-touch economists.
I don't know what came before when and what caused what, but I think that the idea that carbon taxes or similar market-oriented schemes would be a middle ground that could generate some enthusiasm on the right was part of the equation, and did in fact fail.
I don't think it was a perfidious false-flag operation by economists meant to get the environmental movement to waste its time, energy, and political capital on doomed projects to undermine them.
I agree about 90%. [I'm an economist, after all.] The 10% is in WHY the pubic opposes a carbon tax. I don't think it is primarily that they don't take climate change seriously enough, but rather think that a carbon tax would be much more disruptive (i.e. much higher increase in their gasoline and electricity bills) than would in fact be the case. And this fear while real should not be taken 100% as given. In part it is driven by some climate activists exaggerating the harm from climate change and conservatives exaggerating the size of and harm from a carbon tax. Economists' message that we have a (comparatively) easy solution to a very real and growing problem is a hard sell.
It's sort of like removing restrictions on more dense residential and commercial development and affordable housing. Everyone is afraid the low-income skyscraper will go up on the lot next to them.
This sounds right. I have literally no sort of knowledge of how a carbon tax works, but my gut instance is that it would someone how effect me more directly than some other intervention that didn't have the world "tax" in it.
Interesting anecdote. My brother in law owns a restaurant. Last year he switched is pricing system so that the prices included tax. So... burger used to cost $5, now costs $5.30 on the menu... man people got upset. They were paying the exact same thing... but having the higher price visible just irked them.
Not sure how it relates to this, but people are irrational. Especially with the word tax.
Definitely that is part of the problem. It no accident that one half of the wage tax is "paid" by the employer although the effects on workers incomes would be the same if 1005 came from their salary.
Several hours after I read this, a Matt Stoller piece showed up in my inbox. It describes economists as the root of all evil (I exaggerate a bit). We need a Substack Matt summit, to work this out. I wonder what Taibbi thinks.
Naomi Klein's husband, Avi Lewis, ran for Parliament in last month's Canadian federal election. He came third, behind the Liberal incumbent and the Conservative candidate. A review of Naomi Klein's writings on climate, by Joseph Heath: http://induecourse.ca/final-thoughts-on-naomi-klein/
The Liberal government in Canada is in fact using carbon pricing (specifically, a steadily rising national carbon price floor) as the backbone of its climate policy. David Roberts wrote up a good explanation for Vox. It's survived two federal elections now, but it's required years of political and legal battles to get onto solid footing. Mark Jaccard argues that "flexible regulations" (like the clean energy standard) would incur far less opposition, and would be nearly as cost-effective. https://www.cambridge.org/core/books/citizens-guide-to-climate-success/we-must-price-carbon-emissions/66AEBB8BE9A7F7760DC1BCE3A9C50748
It survived quite narrowly two federal elections that occurred during an era of unusually low fuel prices. In particular natural gas used widely in home heating. That is about to change dramatically as these prices begin to rise. The same government is warning of this and taking steps to address it with fuel subsidies . Let us see how this policy fares under these more adverse conditions.
Exactly why Jaccard recommends less blatant regulations. What fuel subsidies are you referring to?
The PSA I see on my television (starting last week. ) I live in Ontario.
Interesting. Is the PSA provincial, or federal? I'm not seeing any news items related to home-heating natural-gas subsidies in Ontario. A story from a couple days ago, talking about rising natural-gas and fuel-oil prices: https://globalnews.ca/news/8259465/furnace-oil-propane-natural-gas-prices-canada/
The usual advice from economists is that if you want to help lower-income people deal with rising prices, don't fiddle with the prices - give them more money so they can pay the higher prices.
Great post, thanks for writing.
I agree that if the entire population were economists, we'd be in better shape on fighting climate change. The same applies if the entire population were anthropologists or sociologists or specialists in the works of Jane Austen.
The question is whether economists have better ideas than the rest of the population that takes climate change seriously. To the extent that their big idea is a carbon tax then the answer is "no" unless we're open to the "assume you have a can opener on a desert island" approach to solving problems.
Listening to economists explore the virtues of carbon taxes is just wasting our time and diverting us from pursuing more effective solutions, like huge increases in R&D and "quiet Congress" type regulatory actions.
If you think climate activists are more supportive of that approach than economists, you know different climate activists than I do. Most of the ones I know believe a show down is needed between the forces of good (them) and the forces of evil (not them) so that the forces of good can triumph for all to see. They definitely don't think there should be quiet backroom deals to slowly inch things forward in "quiet Congress"
Not that impressed by the ideas of most of climate activists either, though I do admire and cheer their passion.
I would agree that economists aren't the problem. They just aren't the solution either. It probably doesn't do much harm for people to just ignore them. It's not that I don't appreciate the difficulties economists face. I am myself a math guy of the engineering variety. I pity economists. What they have before them are problems that if modeled with with advanced computational techniques based on the underlying multivariable non-linear equations would mostly just yield garbage. So they just use the meat axe of mathematical technique, statistics. Hence their eternal unresolved conflicts.
On the carbon tax you get a purely economistic view of the world. If you pull this lever magic will happen. What is this magic? Well it is will ostensibly discourage the use of carbon as a fuel
which directly implies reducing economic activity. People will switch to alternatives they say. And when people with a science or engineering point of view point out that these alternatives do not yet exist they reply that we will spend a pile on R&D and make them exist. Economic levers do not, in fact, change the laws which govern science. Not chemistry, not physics, nothing. You'd think a person capable of understanding economics at an advanced level might also have at least a basic understanding of science but this is apparently forbidden.
They also like to talk about deployment a lot I notice. When it is pointed out that you have to have something to deploy they usually cycle back to arguments about R&D spending. When you confront them with arguments about deployment with the presumption that a hypothetical technology does exist and the logistics of deployment, then they usually retreat behind an SEP (Douglas Adams' famous Somebody Else's Problem Field). It's not their problem because they have pulled the lever and their responsibility ends there.
How do you go about converting the half of the homes in the US that use hydrocarbon based heating to pure electric is an example question I like to ask. This is a monstrous technical problem in its own right. And you aren't going to get it done with carbon taxes or tax credits. It is a vastly more difficult problem than just removing legacy lead lines from plumbing and you are just starting to address that problem. These are deployment problems that will take decades to achieve given the manpower available. And every single bit of it presumes the political authority exists to command it.
One thing you can be assured of in any functioning Democracy. Political authority to undertake a conversion from a fossil fueled economy to a fully electrified one will evaporate with the first major failure. And for some unknown reason economists seem to favor the riskiest strategies.
The important thing to remember is that *absolutely no one* in US policy circles actually prioritizes climate to the extent implied by their public warnings so this mostly just an issue of aesthetics.
Obviously Democratic politicians also place a fairly high discount rate on climate change, since they have chosen to subordinate it to their other domestic priorities like dental for seniors. Even the Sunrise Movement and other 'activist groups' seem equally/more interested in left wing social policy (defund, housing, etc.) as they are in climate change.
The mistake economists make is that they articulate those tradeoffs rather than pretending they don't exist in public but taking them into account in practice.
I agree but I think Matt understates his case for economists and overstates the case against the political possibility of carbon pricing.
Putting a price on all the damage from climate change is impossible so some economists have just worked backwards from when we need to reach net zero to avoid the worst harms to find what carbon price might achieve that:
https://www.nature.com/articles/s41558-020-0880-3
No significant climate policies have been “politically workable” in the U.S. up to now (it has taken a few years of increasingly frequent photogenic disasters to make any climate action likely), so singling out taxing carbon is unfair. Yes, Republican support for pricing carbon has faded with the rise of negative partisanship to the point where open support is down to a lone house member sponsoring one of the five carbon pricing bills in Congress and a few senators like Romney and Murkowski allowing that it makes a lot of sense (but not cosponsoring the bills that would do it), but the Democrat-only reconciliation bill contains the major climate policies for this Congress (and probably for the rest of this presidential term). The bipartisan infrastructure bill is probably a wash, since most of its billions go to pour concrete without charging the drivers, fliers, or shippers a penny to use the resulting better infrastructure, meaning they will use it more, with almost exclusively fossil-fuels.
So at the moment anything that can get all Democratic senators and virtually all Democratic representatives to vote for it is politically possible and anything that can’t isn’t. Senator Whitehouse has said it’s “highly likely” a carbon fee will be included in reconciliation (https://ricochet.com/podcast/plugged-in/sen-sheldon-whitehouse-dishes-on-reconciliation-strategy/). While he’s certainly talking his book, it’s premature to consider carbon pricing a “political dead-end.” Even if it doesn’t end up in reconciliation this year, it will surely be considered again soon since the policies that are in reconciliation will not be sufficient and the disasters that have created public support for action will keep getting worse. Most of the support for the non-pricing solutions is among activists on Twitter, some of whom literally make a living supporting them. As someone who talks to relatively well-informed strangers about climate change (I’m picking places to find people who might support carbon pricing if they learn about it) I can assure you that no one has heard of the Clean Electricity Performance Program (until yesterday, the term had appeared in the Washington Post only once, and that in a Bloomberg column) and very few have even heard of carbon pricing, so the idea that voters have well informed preferences for particular climate policies is silly. There's just a general idea we should switch to renewables without much thought on how that will happen. Most people don't think like economists so they just want someone to make it happen.
The anti-economist crew has not helped the political viability of any effective climate policies by increasingly telling even those who are concerned about climate that it’s all Exxon’s and the Koch brothers’ fault. Why should anyone agree to sacrifice anything to solve a problem they had no role in creating? Bernie Sanders supported taxing carbon more recently than 2014—it was part of his 2016 platform. When I asked Elizabeth Warren why in a blue state the toll to enter Boston via Route 1 from the north is only $1.25 even at rush hour (and is zero for many other routes) she assured me that I didn’t understand big oil’s power. This makes some sense for a politician with an all-encompassing ideology trying to be consistent but even climate scientists who say in their writings that climate pricing is essential don’t mention it much on Twitter or cable TV appearances (e.g., Michael Mann and Katharine Hayhoe), presumably out of fear that they’ll antagonize the anti-pricing activists, who present Americans as impoverished slaves to fossil fuel interests, unable to alter their behavior or to afford any rise in the lowest energy prices of any of our peers.
While it would be great if there were non-pricing policies we could easily pass that would solve the problem, “the policy entrepreneurs” “ways of getting things done other than the most straightforward one,” aren’t looking too good. That the Senate parliamentarian may block the Clean Electricity Performance Program got some attention yesterday (https://www.washingtonpost.com/politics/2021/10/14/democrats-central-climate-program-is-trouble/ ) but other problems with the CEPP have been largely ignored.
Combined with tax credits, it wouldn’t hit our emission reduction targets: https://www.rff.org/news/press-releases/a-clean-electricity-performance-program-and-tax-credits-could-drive-emissions-reductionsbut-alone-are-not-enough-to-meet-us-climate-goals/
And that’s even after Resources for the Future “assume[d] that gaming will be precluded” (1st endnote in full report), which an analysis by four energy economists found would not be the case:
“These differences in incentives open up a variety of channels for gaming and unintended consequences that could lead to large government expenditures without inducing large-scale substitution of new, clean energy supply for fossil-fueled generation.”
https://energyathaas.wordpress.com/2021/10/04/the-cepp-is-not-a-clean-energy-standard/
I have not seen this analysis picked up anywhere. Nor is anyone writing about how a president in 2025 who did not support the CEPP’s goals could destroy its effectiveness by having the DOE, which would be in charge of writing, interpreting, and enforcing all of its complex rules, selectively apply its subsidies and fines to help his fossil fuel supporters in red states.
The CEPP and tax credits would all sunset in ten years under the Byrd Rule, but a carbon fee would not since it would reduce, not increase the deficit, even after a means-tested rebate to make all but the affluent whole. (I’m not sure why Matt writes “regressive tax cuts under Bush and Trump probably would have been deeper because of the presence of carbon tax revenue,” when in the previous paragraph he refers to “a revenue-neutral carbon tax,” as in the most popular carbon fee proposal. It would rebate of all of its revenues, reducing inequality but providing no revenues for other purposes.)
The huge problem of what to do about China has also been swept under the rug by the anti-pricing faction: a) we’re only 15% of world emissions now so need to also engage the other 85% to act and b) if we incur significant costs in reducing emissions, our energy-intensive industries will be vulnerable to unfair competition, at home and abroad, from countries that do not. A border carbon adjustment is the only plausible solution to both, yet the WTO will never allow one without us having an explicit price on carbon. In their desire to have it both ways, Democrats have supported a ‘polluter import fee’ (a BCA) without carbon pricing, which is not possible. Nor can we participate in international agreements that increasingly will have to focus on harmonizing at least rich countries’ explicit carbon prices.
Is there another reason for the failure to discuss any of these problems (publicly at least—perhaps someone is working behind the scenes to fix them) than that the anti-pricing climate movement seems to think that passing laws, no matter how defective, represents victory? Certainly it seems to have concluded that phony research is justified for the right cause. Evergreen and NRDC paid Analysis Group for a report that concluded the CEPP would create nearly 8 million jobs—vs. doing nothing, not vs. other possible policies such as a carbon fee that would increase renewable use—then touted it as “independent analysis” (https://www.evergreenaction.com/press/new-analysis-finds-cepp-would-expand-workforce-by-nearly-8-million-jobs-over-the-next-decade : you have to follow the links to the actual report and read the acknowledgements to learn that). Academics like Leah Stokes and Jesse Jenkins pose as impartial experts on the plan even though they were involved in creating it.
This is a great summation: “Klein-style arguments that associate tackling climate change with the general-purpose, far-left ideas that most people reject have been a much larger practical impediment to acting on climate change than anything coming out of the economics world.” The weekly constituent update from the Democratic incumbent in one of the swingiest congressional districts in the country (NH-1) does not mention any of the supposedly popular policies in the reconciliation bill, including on climate—in fact it doesn’t mention the bill at all!
What a crock Matt. Economists don't make climate policy but they are supposed to come up with credible estimates of the relative costs and benefits of alternative policies to inform a rational discussion which they have not done.
In 2008, Alan Greenspan found a fatal flaw in his model of how the world works. What a cluster fuck that was but nothing like the one we're headed for in the second half of this century.
As Matt shows, economists are far more concerned about climate change than the general public and therefore endorse expensive policies to forestall its worst effects. They estimae costs and benefits of different policies all the time. People apparently just don't like that the most effective policy depends on prices and economic self-interest (not that subsidies don't).
Here's one summary from 2015 and a couple of quotes from it:
https://www.edf.org/sites/default/files/expertconsensusreport.pdf
"Experts on the economics of climate change expressed higher levels of concern about climate change impacts than the general public, when asked identical survey questions."
"The discounting approach that the U.S. government currently uses to analyze climate regulations and other policies – a constant discount rate calibrated to market rates – was identified by experts as the least desirable approach for setting discount rates in the context of climate policies. Nearly half (46%) of respondents favored an approach that featured declining discount rates, while 44% favored using rates calibrated with ethical parameters."
Here's an approach that does not rely on estimating a social cost of carbon:
https://www.nature.com/articles/s41558-020-0880-3
Alan Greenspan was in the Ayn Rand Collective and did not represent the economic consensus. https://en.wikipedia.org/wiki/Alan_Greenspan#:~:text=In%20the%20early%201950s%2C%20Greenspan,his%20first%20wife%2C%20Joan%20Mitchell.&text=Rand%20stood%20beside%20him%20at,until%20her%20death%20in%201982.
Many economists had pointed out that the mortgage market was subject to insufficient regulation. Even Milton Friedman would tell you that if the government guarantees bank deposits it has to keep an eye on what they do with them. Here's an earlier look at how Wall Street works:
http://efficientmarkets.com/