Guest Post: Oren Cass on Cass Sunstein’s Case for Carbon Regulation

by Reihan Salam

Editor’s note: Oren Cass, who served as Governor Mitt Romney’s Domestic Policy Director in the 2012 presidential campaign, has generously agreed to share his thoughts on Cass Sunstein’s recent op-ed on U.S. climate policy. 

Last week, Reihan discussed a Cass Sunstein op-ed arguing for unilateral U.S. action on climate change. The op-ed focused on acknowledging and rebutting what Sunstein called the “Sophisticated Objection” to unilateral action:

Those who make the Sophisticated Objection acknowledge that climate change is a serious problem, and that the world’s nations should be doing something about it. …

The Sophisticated Objection is that if the U.S. acts on its own, it will impose costs on the American people without seriously addressing the climate problem. What’s the point?

It’s a legitimate question, and there are three good answers.

As a preliminary matter, it is worth noting that Sunstein has only stated what we might call the weak form of the Sophisticated Objection. In its strong form, the Objection worries that unilateral action not only lacks significant benefits but actually has costs: shifting energy-intensive production to developing nations with lower energy efficiency, making fossil fuels more attractive to the rest of the world by reducing our demand and thus depressing global prices, and depriving us of the primary leverage we might have to demand action from others in global negotiations.

In either case, Sunstein’s “three good answers” – that: (1) U.S. leadership will spur global action, (2) regulation will accelerate innovation, and (3) we have quantified the benefit of carbon reductions and can act where costs will be exceeded by benefits – are unsatisfying. Reihan has already criticized the first two (though I think he was far too kind, particularly with respect to the idea that “U.S. leadership” will somehow overcome developing nations’ refusal to handicap their development). But it is the third on which Sunstein seems to put most weight and on which the Obama Administration is likely to rely in pushing ahead with carbon regulation during the second term.

Sunstein argues that, thanks to the “Social Cost of Carbon” study published by the Obama Administration in February 2010, we can place a value of $23 on each ton of carbon emissions. (The quality of the analysis producing that figure is a whole other can of worms.) As a result, we should rationally take action that imposes costs of less than $23 per reduced ton. Cost-benefit analysis to the rescue! Sunstein says that recent regulations such as new CAFE standards have been “easily” justified on these grounds.

This argument doesn’t answer the Sophisticated Objection, it ignores the Objection altogether. If carbon emissions actually had a quantifiable, linear, ton-by-ton cost then the Sophisticated Objection would make no sense because the value of action at home could be measured independent of what action was or was not taken abroad. If we gain the same benefit every time we reduce emissions by another ton, why would we care what China does? But of course, as Sunstein acknowledges by taking the Objection seriously in the first place, this is not how climate change works.

The entire premise of the Objection is that climate dynamics are extraordinarily non-linear and that the climate change threat is not susceptible to mitigation at the margin. The best science available today attempts to estimate the amount of warming associated with a given level of carbon in the atmosphere, and to determine the thresholds at which such warming is likely to trigger severe and irreversible effects on climate systems. On their current trajectory, global emissions blow through these thresholds; blowing through them by a little bit less does not have much value. (Perhaps the best analogy is to nuclear disarmament: decommissioning one of your warheads might technically “reduce the global threat,” but it does not address the problem and it certainly does not have a value equal to the damage the warhead could have done.)

Sunstein’s CAFE standards offer a helpful illustration. According to the Regulatory Impact Analysis, the total cumulative emissions reductions over the life of all vehicles sold under the standards between 2011 and 2025 will be 4.7 gigatons. Sounds impressive, except that annual global emissions are more than 30 gigatons; 4.7 gigatons is about two months worth. In other words, the total impact over decades of doubling the fuel efficiency of American vehicles will be to push the level of atmospheric carbon that we would have had in January 2040 out to March 2040. Sunstein’s analysis would place the value of this virtually meaningless two month respite at (4.7 billion tons * $23) more than $100 billion, justifying extraordinarily expensive regulation to achieve it.

Ultimately, it is not clear to what extent Sunstein himself takes this point of view seriously. He manages to avoid offering any actual policy prescriptions, instead offering only the bland guidance that “the U.S. should not overlook opportunities to produce significant emissions reductions at justifiable expense,” a rather conclusory and question-begging statement. Of course that is true. Those who take the threat of climate change seriously while opposing unilateral action would agree with it. But what is “justifiable”? Is a cap-and-trade system or carbon tax justifiable, if it costs less than $20 per ton of emissions reduction? Sunstein doesn’t say.

The debate is far from academic because we can expect President Obama to wrap his upcoming regulatory action on climate change in this same cost-benefit language, claiming the mantle of rational action and moral leadership while positioning rejection-of-science as the only possible objection. The response must be to quantify the costs carefully and then ask for the scientific evidence that would suggest his proposal meets his own stated goal of “mak[ing] sure that this is not something we’re passing on to future generations that’s going to be very expensive and very painful to deal with.”

Any proposal from any corner that can produce such evidence deserves careful consideration. But we should not accept proposals whose bold rhetoric and high costs do not produce commensurate results. Sunstein may consider such an objection “Sophisticated,” but it seems fairly straightforward to me.

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.