I wrote last Friday about the China/India hole in the American climate strategy:
America appears to lack a high-probability strategy for how to get China, India, and Russia to agree to self-impose a significant positive carbon price.
The Administration and its Congressional allies are trying to impose a significant carbon price in the U.S. through something like the Waxman-Markey bill, while entering an international negotiation process in which as much as 60% of global carbon emissions could face little to no carbon price. The likely outcome would dramatically tilt the global economic playing field, harming U.S. workers and firms relative to their counterparts in China and India.At the same time, it would make little progress toward addressing the risk of severe global climate change, as a large portion of global carbon emissions would remain effectively uncapped.
In that post I identified two questions that American policymakers need to answer to fill that hole. The first of those was:
What tools should we use to try to convince the government of China to impose a positive carbon price as part of a global effort? (choose one or more)
- Leadership: U.S. goes first and self-imposes a price. Then we use diplomacy to try to convince the Chinese to do the same.
- Carrots: The U.S. pays the Chinese to reduce their emissions.
- Sticks: The U.S. imposes import tariffs on Chinese goods as long as the government China does not impose a carbon price.
I now see that I was eight days behind Dr. Paul Krugman in identifying this challenge. On May 14th, he wrote in his New York Times column “Empire of Carbon“:
(T)he people I talk to are increasingly optimistic that Congress will soon establish a cap-and-trade system that limits emissions of greenhouse gases, with the limits growing steadily tighter over time. And once America acts, we can expect much of the world to follow our lead.
… But that still leaves the problem of China, where I have been for most of the last week. … But China cannot continue along its current path because the planet can’t handle the strain. … And the growth of emissions from China … already the world’s largest producer of carbon dioxide … is one main reason for this new pessimism.
I’d like to compare where I think Dr. Krugman stands on various elements of the strategic question I posed, and compare them with my own views. We differ in our concern about the risks and costs of severe climate change, and that difference leads us to radically different policy recommendations.
I should state at the outset my views on the science and risk of climate change. There is a significant amount of evidence that there is a long-term risk of severe climate change. But there is little discussion about the numbers: How big of a risk? How much warmer? How quickly? How certain are we? And the numbers matter a lot. If we knew with certainty that Earth would warm 10 degrees over the next 20-30 years, I would be screaming for an immediate big carbon tax. If instead we think Earth is likely to warm one degree over the next century or two, then climate change is a trivial concern and we needn’t worry about it. The problem is that nobody knows where we are between these two extremes. This uncertainty matters a lot, and it makes the problem hard.
Given this uncertainty, I believe there is a small but non-trivial risk that there will be severe climate change over the next century or two. And so I am willing to consider significant and effective policy actions to slow the growth of greenhouse gas emissions to reduce that risk. I do not, however, believe that risk is so great or so certain that we must immediately commit to drastic changes in our economy, or that we must ignore the costs of those policy actions. I treat this like any other policy question: Given tremendous quantitative uncertainty, what are the marginal costs and benefits of our current emissions path, compared with various recommended policy options? I will quantify my thinking on these questions in a separate post. I am willing to consider policies to set a domestic carbon price, if I can be convinced that they’re worth it and will work. So far I have not seen any carbon pricing proposal that I think (a) would have benefits that exceed the costs, and (b) is feasible in the real world of nation-states with differing national interests. But I’m open to suggestions.
For now, let’s focus on two different answers to the China/India question in the American climate strategy.
- Dr. Krugman appears to believe that, if China does not slow its global greenhouse emissions growth, actions by the rest of the world will be insufficient to significantly slow global emissions. Krugman: “In January, China announced that it plans to continue its reliance on coal as its main energy source and that to feed its economic growth it will increase coal production 30 percent by 2015.” That’s a decision that, all by itself, will swamp any emissions reductions elsewhere.” I agree with him on this point.
- I agree with Dr. Krugman’s read of the official Chinese position: “So what is to be done about the China problem? Nothing, say the Chinese. Each time I raised the issue during my visit, I was met with outraged declarations that it was unfair to expect China to limit its use of fossil fuels.” This is consistent with what I know about the Chinese position from our Administration negotiators in 2007 and 2008 , and with what the Financial Times reported last Friday: “Beijing reiterated its belief that developing countries, including China, should curb emissions on a voluntary basis, and only if the cuts ‘accord with their national situations and sustainable development strategies.'” Translation: We’re not setting a domestic carbon price. The Chinese are proposing that the U.S. and other rich nations choose answer (B) Carrots from my menu above: rich countries pay China to reduce their emissions.
- It appears that Dr. Krugman believes Chinese leaders will not be swayed by option (A) Leadership: “And once America acts, we can expect much of the world to follow our lead.” But that still leaves the problem of China – I largely agree with him on this point.
- Dr. Krugman appears to presume that we must slow the growth of global greenhouse gas emissions starting now. I disagree with Dr. Krugman on this point, and am more persuaded by Dr. Bjorn Lomborg. The state of technology is such that economic costs of near-term emissions reductions are high, and the long-term climate benefits are small. As an example, Dr. Lomborg estimates that $1 expended through the Kyoto agreement would produce the equivalent of about 30 cents of long-term climate benefits. To the extent you believe long-term climate change must be addressed, we are better off devoting resources to technology pushes that try to reduce the cost of carbon-reducing technologies. The less expensive these technologies, the easier it is for everyone to make significant emissions reductions, and the easier it would be to get a global emissions reduction agreement that includes China and India (presuming you think such an agreement is necessary).
- Since Dr. Krugman believes that we must persuade the Chinese to change their growth path “because the planet can’t handle the strain,” he appears to conclude that we should threaten a carbon import tariff. His phrasing is quite careful, but he is clearly floating the idea:
As the United States and other advanced countries finally move to confront climate change, they will also be morally empowered to confront those nations that refuse to act. Sooner than most people think, countries that refuse to limit their greenhouse gas emissions will face sanctions, probably in the form of taxes on their exports. They will complain bitterly that this is protectionism, but so what? Globalization doesn’t do much good if the globe itself becomes unlivable.