The Agenda

Has Cass Sunstein Successfully Overcome the ‘Sophisticated Objection’?

Proponents of carbon pricing and other tax and regulatory measures designed to curb carbon emissions and mitigate the impact of climate change tend to focus on those who question whether the rising atmospheric concentration of carbon will have a measurable impact on the global climate system. Cass Sunstein instead wisely chooses to address what he calls the “Sophisticated Objection,” i.e., that unilateral climate change policy is likely to prove expensive while at the same time being unlikely to meaningfully contribute to reducing or even stabilizing the atmospheric concentration of carbon, as the carbon-intensity of emerging economies will continue to rise regardless of actions taken in the U.S. (Indeed, carbon regulation might actually exacerbate the atmospheric concentration of carbon if carbon-intensive economic activities shifted to countries in which the cost of carbon remained low.)

One thing that surprised me about Sunstein’s column, on a tangential note, is that he didn’t make reference to the essay he co-authored with Eric Posner on “Climate Change Justice” back in 2007. In it, the authors conclude, congenially, that:

Arguments from distributive and corrective justice fail to provide strong justifications for imposing special obligations for greenhouse gas reductions on the United States.

Posner and Sunstein made a strong case, and my sense is that the arguments in the paper would appeal to partisans of the Sophisticated Objection.

Sunstein’s first reply to the Sophisticated Objection is that if we are going to have a “international action” on climate change, the U.S. must lead the way. This may or may not be true. It is more likely to be true if Sunstein has in mind a binding international agreement, but I question whether the moral authority of the U.S. is enough to persuade, for example, India or China to take a step that will prove economically damaging in the short-term, and perhaps in the long-term as well. One could imagine a scenario in which a disruptive low- or zero-carbon technology emerges in a non-U.S. country and that it diffuses rapidly, but this is not a binding international agreement. Basically, this reply is weak, as it is grounded in an America-centric view that is misplaced.

His second reply is that domestic carbon regulation will spur innovation in low- or zero-carbon energy technology. This is possible. But much depends on the nature of domestic carbon regulation. Recent experience suggests that legislators will turn to unite around “green industrial policy” efforts that are likely to channel resources to less-than-promising technologies, like corn ethanol and loan guarantee programs for politically attractive initiatives. 

Sunstein’s strongest reply is his third, i.e., that unilateral action to mitigate domestic carbon emissions will have broader benefits for the U.S. public. He goes too far, in my view, by suggesting that recent regulations “have easily passed” the test of producing “significant emissions reductions at justifiable expense.” Yet I think that there is a nontrivial reason to believe that the health benefits of reducing carbon emissions, e.g., the impact on infant brain health, might be large enough to justify some kind of carbon price even if we disregard the climate change question entirely, as MIT economist Christopher Knittel has suggested.

Given the breadth of the subject Sunstein is addressing, he doesn’t offer much in the way of discussion of the kind of unilateral strategy we might pursue, apart from referencing rules concerning the fuel efficiency of motor vehicles and other small-bore measures that, frankly, don’t strike me as good bets. 

One promising — if decidedly unconventional — strategy was recently floated by Matt Frost, and it has the added advantage of having global implications for the price of one of the most readily-available carbon-intensive forms of energy:

The U.S. government should borrow {$x} from citizens of the year 2120 and use the funds to buy up mining rights to the country’s abundant coal resources, beginning with the most economically viable reserves and continuing down the supply curve until the spot price for coal meets that of natural gas. The purchased reserves would be placed off-limits to extraction in perpetuity. Since the U.S. contains the largest share of the world’s coal reserves.pdf), and is projected to export 124 million tons in 2012, domestic market shifts could cause natural gas and renewable energy sources to become more competitive with coal on a global basis without the need for internationally binding agreements. Finally, because coal deposits are so widely distributed, this policy is one that could be reproduced and extended by other coal-producing nations where policy elites endorse carbon mitigation.

Replacing coal-fired electric generation with natural gas builds on an existing trend: thanks to the shale gas boom and recent regulations restricting coal, the shift from coal to natural gas is already underway in the U.S. Additional regulations, like treating power plant ash as a hazardous waste, or the monitoring and control of mercury emissions, are likely to nudge the relative price of coal higher still. Since natural gas has about half the carbon content of coal per unit of energy, the switch to gas reduces the country’s carbon intensity, allowing us to generate the same amount of economic output for fewer tons of CO2. A government-induced shock to coal prices could accelerate this domestic shift, perhaps permanently.

Matt hasn’t formally written up this proposal, so it ought to be treated as a sketch. It’s central virtue, however, is that it does not rely on unrealistic assessments of the likelihood of global cooperation or the potential success of technocratic efforts to spur technological innovation, nor does it “create artificial markets in ephemeral government-enforced carbon credits.” I hope Matt continues to pursue this concept.


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