Friday, April 09, 2010

Krugman on climate change

Paul Krugman has a good piece in the New York Times on building a green economy. He starts with the basics - environmental economics 101 and the idea of greenhouse gases as an externalised cost imposed by polluters on others, talks about pollution taxes vs cap and trade schemes, and then moves on to concrete policy proposals. He favours a cap and trade scheme, backed by strong regulatory restrictions on coal (because coal is the real problem here), and border carbon taxes if necessary (though its worth noting that its the poorer countries who want a global deal, and the rich countries which are currently dragging their feet. Any guesses for which side NZ is on in this debate?) And in general, he favours stronger, sooner action, both because of uncertainty ("it’s the nonnegligible probability of utter disaster that should dominate our policy analysis"), and fairness to future generations (which capitalism discounts into oblivion; governments should do better). He also has this to say about those, like ACT, who claim that any action will result in economic ruin:

This reaction — this extreme pessimism about the economy’s ability to live with cap and trade — is very much at odds with typical conservative rhetoric. After all, modern conservatives express a deep, almost mystical confidence in the effectiveness of market incentives — Ronald Reagan liked to talk about the “magic of the marketplace.” They believe that the capitalist system can deal with all kinds of limitations, that technology, say, can easily overcome any constraints on growth posed by limited reserves of oil or other natural resources. And yet now they submit that this same private sector is utterly incapable of coping with a limit on overall emissions, even though such a cap would, from the private sector’s point of view, operate very much like a limited supply of a resource, like land. Why don’t they believe that the dynamism of capitalism will spur it to find ways to make do in a world of reduced carbon emissions? Why do they think the marketplace loses its magic as soon as market incentives are invoked in favor of conservation?

Clearly, conservatives abandon all faith in the ability of markets to cope with climate-change policy because they don’t want government intervention.

Yes, as usual, ACT are hypocrites, not even true to their own professed beliefs. But then, their ideology isn't honestly held - its simply a rhetorical shield for the interests of rich polluters, nothing more.