Environmentalists are generally applauding the piece for making the case that action to reduce heat-trapping gases is necessary (the consensus of climate scientists), that it can be done with minimal cost (the consensus of environmental economists) and that to not do it will have ruinous economic consequences. But some (like Alex Steffan at Worldchanging--not my favorite but worth hearing) think Krugman actually underestimates the economic costs of failing to severely reduce heat-trapping gases and shift to clean energy, by a lot.
Krugman starts off by discussing the arguments for cap & trade versus a pollution tax. While the pollution tax is simpler, cap & trade seemed politically more feasible, at least until recently. He points out that this exotic notion of cap & trade has already worked: "experience suggests that market-based emission controls work. Our recent history with acid rain shows as much. The Clean Air Act of 1990 introduced a cap-and-trade system in which power plants could buy and sell the right to emit sulfur dioxide, leaving it up to individual companies to manage their own business within the new limits. Sure enough, over time sulfur-dioxide emissions from power plants were cut almost in half, at a much lower cost than even optimists expected; electricity prices fell instead of rising. Acid rain did not disappear as a problem, but it was significantly mitigated."
He briefly notes three axioms concerning the climate science: "The first is that the planet is indeed warming... the upward trend is unmistakable: each successive decade since the 1970s has been warmer than the one before."
"Second, climate models predicted this well in advance, even getting the magnitude of the temperature rise roughly right... So the fact that climate modelers more than 20 years ago successfully predicted the subsequent global warming gives them enormous credibility...
...my third point: models based on this research indicate that if we continue adding greenhouse gases to the atmosphere as we have, we will eventually face drastic changes in the climate. Let’s be clear. We’re not talking about a few more hot days in the summer and a bit less snow in the winter; we’re talking about massively disruptive events, like the transformation of the Southwestern United States into a permanent dust bowl over the next few decades."
Krugman then argues for a mixed approach, part market-based (like cap & trade) and part directed government action, like "direct controls" on burning coal. He suggests international cap & trade as well as other instruments such as carbon tariffs to tackle the problem of reducing global emissions.
He returns then to the reasons to do all this, and the urgency. "In public discussion, the climate-change skeptics have clearly been gaining ground over the past couple of years, even though the odds have been looking good lately that 2010 could be the warmest year on record. But climate modelers themselves have grown increasingly pessimistic. What were previously worst-case scenarios have become base-line projections, with a number of organizations doubling their predictions for temperature rise over the course of the 21st century. Underlying this new pessimism is increased concern about feedback effects..."
He notes predictions of a 9 degree F rise in average temperature from the start of this century to its end, with the accompanying storms, floods, droughts and other major disruptions. "And the troubles would not stop there: temperatures would continue to rise."
Krugman maintains his even and reasonable economics tone, but the climate facts are leading him into a different order of change. He writes: "The other is that while modern economies may be highly adaptable, the same may not be true of ecosystems. The last time the earth experienced warming at anything like the pace we now expect was during the Paleocene-Eocene Thermal Maximum, about 55 million years ago, when temperatures rose by about 11 degrees Fahrenheit over the course of around 20,000 years (which is a much slower rate than the current pace of warming). That increase was associated with mass extinctions, which, to put it mildly, probably would not be good for living standards."
And since he is still writing about the economics, he discusses the price tags, but notes that making economic decisions may depend on how they are applied to time, and what people making these decisions care about: the very near term, the near future, or the farther future.
He thinks that even in the near term the cost of inaction is probably higher than previously estimated, because "substantial global warming is already “baked in,” as a result of past emissions and because even with a strong climate-change policy the amount of carbon dioxide in the atmosphere is most likely to continue rising for many years. So even if the nations of the world do manage to take on climate change, we will still have to pay for earlier inaction." That's the Fix It function, as I used to call it, dealing with Effects, now and soon, and continuing for at least the next 40 years, and probably the next 400.
But if serious efforts are made now to reduce carbon and other heat-trapping gases, costs to do that will begin immediately. If those efforts aren't made, it will cost much, much more in 30 or 40 years to deal with the Effects of what those present emissions Cause, because there is something like a 30 year lag time between emissions Cause and Effect on climate. And the logic of that continues--if the Cause continues, the cumulative Effects will grow even stronger into the next century, with a much higher price.
Then Krugman looks at the economic rationale for action. He mentions the uncertainty of predictions, but notes that the risk is high enough to act--the operative economic model is not cost-benefit analysis, but risk assessment.
This is the economic language for a position many have held for awhile now, articulated especially by Greg Craven in his handy little book, What's the Worst That Could Happen: that given the strong scientific evidence and the consequences science predicts, the risks associated with responding to climate change even if it turns out to be not so bad are nowhere near as great as the risks of assuming it's not going to happen. Especially since there are plenty of other good reasons to cut heat-trapping pollution and convert to clean energy.
Krugman then looks at the arguments for a gradual approach to reducing carbon, and the "big bang" model of doing it bigger and sooner. "So what I end up with is basically Martin Weitzman’s argument: it’s the nonnegligible probability of utter disaster that should dominate our policy analysis. And that argues for aggressive moves to curb emissions, soon." He then assesses the Congressional mood as not very likely to act, and concludes: "We know how to limit greenhouse-gas emissions. We have a good sense of the costs — and they’re manageable. All we need now is the political will."
As time goes on, complicating all of this-- economically as well as in most other ways-- is the conflict I've been writing about for awhile, which is the collision between dealing with Cause and dealing with Effects. The debate is now being cast in the mind-numbing terminology of Mitigation vs. Adaptation, which is maybe why nobody much cares about it but policy wonks. But the need to do both--to cut heat-trapping pollution and switch to clean energy at the same time as we're dealing with long-term disasters (droughts, sea level rise, higher incidences of insect-borne diseases etc.) and an avalanche of short-term emergencies (storms, floods, killer heat waves, etc.)--is the economic as well as civilizational challenge of the future. Which is rapidly intruding on the present.
Like a lot of economics, and even science, this is fairly abstract. The reality won't be, and the possibilities aren't. Which will continue to be a topic here.
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