What’s Wrong With Cap and Trade? Klein on Climate Change

I read many pieces this week on Naomi Klein’s recent book on climate change. Since she is widely read, I’m happy that she decided to zero in on global warming and climate change. Since my children are young, I often think that they will hold it against my generation that we didn’t act with more conviction and determination to slash green house gas emissions. As far as I can tell—I’ll get the book this weekend—she argues against market-based solutions for halting climate change, and she advises against thinking that modest reforms compatible with capitalism will be sufficient.

I agree with her that it would be foolish to place our hopes in the hands of rich philanthropists who think that their business acumen will enable them to tackle complex collective problems. I argued before that philanthropy cannot replace higher marginal tax rates for the wealthy, and that a philanthropist deciding how and where he will give his money is not the same as democratic decision-making. I applaud the well off who decide to give a lot, but this is not an argument for lowering taxation levels or deregulating. Klein is also right when she suggests that we should not count on corporate self-regulation and be wary of greenwashing.

However, I was disappointed to find out that she apparently dismisses cap and trade schemes. This is not surprising, as many on the left are intuitively sceptical of any market-based policies.. Cap and trade schemes reward environmentally responsible companies and charge a fee to polluters who emit more emissions that the limit set by the legislator. The cap might be too low, or there might be implementation problems—I’m open to such demonstrations—but one should not dismiss an efficient policy a priori for ideological reasons. Cap and trade constrains industries to internalize some of the cost of their externalities and reward those who are greener; how can the left not support that?

It turns out that Paul Krugman had an interesting column on Thursday. I’m not ready to believe that “saving the planet” can be “cheap” or even “free”, but he debunked the belief that cutting carbon emissions would necessarily harm economic growth. This is because

putting a price on carbon would have large “co-benefits” — positive effects over and above the reduction in climate risks — and that these benefits would come fairly quickly. The most important of these co-benefits, according to the I.M.F. paper, would involve public health: burning coal causes many respiratory ailments, which drive up medical costs and reduce productivity. And thanks to these co-benefits, the paper argues, one argument often made against carbon pricing — that it’s not worth doing unless we can get a global agreement — is wrong. Even without an international agreement, there are ample reasons to take action against the climate threat.

If Klein’s point is that we should not put all our eggs in the cap and trade basket, I’m in. We need to take loads of cars off the streets by making public transit more efficient and affordable, and by making drivers pay more. People also need to eat less meat. But cap and trade schemes are surely part of the solution, and I’m concerned that criticisms such as Klein’s will undermine the already weak support for them.

That said, I didn’t read the book yet. I’ll get it this weekend if it’s available at my local bookstore.


What’s Wrong With Cap and Trade? Klein on Climate Change — 1 Comment

  1. Looking around, it is clear that we have difficulty predicting the actions of other humans in circumstances where there is much information available. Re — any recent news. And yet we claim accurate insight into the results of how a much larger population of people interacting with the very complicated climate system — of which there are new revelations. One suspects that any claim that doing ‘x’ will somehow halt or reverse the current changes in climate are doomed to failure. It might be suggested that rather than pursuing legalistic ‘fault finding’ and miracle cures there was more of a focus on adaptation and helping those already being harmed by change. Burning stuff is just dumb and we should be walking away from these technologies. But not with any belief that this will ‘save’ the planet. No chance for that — there are far too many people and more all the time.