John Abraham and Dana Nuccitelli write critically at the Guardian today of Ross Douthat’s defense of the reform conservative position on global warming. In part, they criticize my arguments that the expected costs of proposed actions to price carbon are higher than expected benefits. Abraham and Nuccitelli write:
In his piece, Ross Douthat also said that he doesn’t support carbon pricing proposals because he believes the costs of such a system will exceed the benefits. To support this belief, Douthat referred to articles written by Jim Manzi, who’s a software entrepreneur with a background in math, not economics. Manzi in turn supports his argument with references to the work of climate economist William Nordhaus. Now we’re finally getting to a credible source with supporting research and evidence!
The problem is that Nordhaus’ work unambiguously concludes that we should put a price on carbon pollution – 180 degrees from Douthat’s argument. In fact, Nordhaus got so sick of his work being misrepresented in the way Manzi and Douthat have done that in 2012 he wrote an article bluntly titled Why the Global Warming Skeptics Are Wrong.
This is a pretty unconvincing rebuttal. I have always been clear when citing Nordhaus that his analysis leads him to argue for a carbon tax. For example, in the exact 2007 piece that they cite, I stated this plainly: “Nordhaus further estimates that we could avoid the remaining $5 trillion to $6 trillion of damages by ‘spending’ about $2 trillion on a carbon tax designed to encourage abatement.”
Then how can my argument against a carbon tax somehow be consistent with the Nordhaus modeling exercise? To understand that would have required Abraham and Nuccitelli to read all the way to the next paragraph of the same article:
So why shouldn’t we implement such a tax?
To understand why we shouldn’t, let’s move from the world of academic model-building to the real world of geostrategic competition and domestic politics. To realize this gain of $3.4 trillion, we would have to agree to, and enforce, a global, harmonized tax on all significant uses of carbon in any material form. This would require the agreement of — just to take a few examples — the French National Assembly, the Parliament of India, the Brazilian National Congress, the Chinese Politburo, Vladimir Putin, John Dingell, and the U.S. ethanol lobby. As is well known, all these players are completely incorruptible and solely concerned with the comprehensive good of all mankind through all time, and will not let their better judgment be overruled by any narrow, sectarian interests.
All this aside, let’s imagine we actually could negotiate such a binding agreement. Isn’t it possible that all the side deals that would be required to get this done would create enough economic drag to more than offset the benefit of 0.17 percent of present value of global output? Our track record in closing and implementing such deals as the Kyoto Protocol, or even the current round of the GATT process — which, remember, is supposed to make the signatories richer — shouldn’t inspire much confidence that the theoretical net benefits will outweigh the costs created by the agreement.
Further, even if we got to an agreement de jure, we would then have to enforce a set of global laws for many decades that would run directly contrary to the narrow self-interest of most people currently alive on the planet. How likely do you think a rural Chinese official would be to enforce the rules on a local coal-fired power plant? These bottom-up pressures would likely render such an agreement a dead letter, or at least make it in effect a tax applicable only to the law-abiding developed countries that represent an ever-shrinking share of global carbon emissions.
In summary, then, the best available models indicate that 1) global warming is a problem that will have only a marginal impact on the world economy, and 2) it is economically rational only to reduce slightly this marginal impact through global carbon taxes. Further, practical knowledge of the world indicates that 1) such a global carbon-tax regime would be very unlikely ever to be implemented, and 2) even if it were implemented, the theoretical benefits it might create would probably be more than offset by the economic drag it would produce.
You might or might not agree with the practical judgments that I expressed in 2007 (though I think the actual track record of the past 7 years has tended to bear them out) — but to wave your hand at the idea that I am somehow misrepresenting Nordhaus as saying the opposite of what he intended is disingenuous, and collapses as a charge upon simple inspection.