Arnold Kling

Goldilocks Green?

Arnold Kling, Great Questions of Economics
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James Glassman says that the Bush Administration's environmental proposals are too strong.

Now, don't get me wrong. If the goal is to limit the emission of carbon dioxide, trading permits is a far better approach than command-and-control decrees from Washington...

Starry-eyed over the beauty of trading, the administration's economists have lost sight of the justification for the mechanisms in the first place...

The truth is that, right now, we just don't know enough -- which is why it's smart to commit billions of dollars more to research. In the future, we may find that warming is real and that a cost-benefit analysis shows it is worth fixing. The worst-case scenarios show we will still have lots of time to mitigate.

Paul Krugman thinks that the proposals are too weak.

What is this thing called greenhouse gas intensity? It is the volume of greenhouse gas emissions divided by gross domestic product. The administration says that it will reduce this ratio by 18 percent over the next decade. But since most forecasts call for G.D.P. to expand 30 percent or more over the same period, this is actually a proposal to allow a substantial increase in emissions.

Guess which critic calls the Bush policy "a disingenuous attempt to appear concerned about the environment"? (answer below)

The Administration's Glenn Hubbard thinks that the proposals are just right.

an 18 percent decline in greenhouse gas intensity over 10 years implies a 4.5 percent reduction in annual greenhouse gas emissions, relative to what they would be if we moved ahead according to current forecasts...

President Bush's plan makes sense: focus on a reasonable approach to slow, stop and then reverse growth in greenhouse gas emissions; don't wreck the economy in the process; and adjust future policy in response to scientific and technical progress. He has added a fresh, reasoned voice to the debate.

I tend to agree with Hubbard. Where feasible, the Administration is proposing a market-based system of pollution controls that is advocated by economists of every stripe. The case is made eloquently by Democrat Alan Blinder in his book Hard Heads, Soft Hearts, and it is made also in this year's Economic Report of the President, chapter 6.

Discussion Question. Some of the worst pollution exists in other countries. Does this suggest that the most cost-effective environmental policies for the United States might involve subsidies to foreign entities for emissions reduction?

(The "disingenuous" quote comes from Glassman, although Krugman expresses the same sentiments)

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