I seldom watch TV, but I recall last year seeing what seemed like a zillion times reporters asking economist to forecast how the recovery from the COVID recession would go. And they all had no problem answering with come econ-nonsense, when the only sensible answer should have been: Why are you asking be? Ask an epidemiologist!
I'm no economist, but I'll cop to being an ex-carbon pricing acolyte. (Well, semi-ex.)
The thing is, prior to oh, about 2010, most of the politically viable alternatives to carbon pricing were either grossly inadequate or outright counterproductive. Wind and solar were still expensive. Nuclear costs were high and rising. Carbon capture was (is?) mostly vaporware. Outside of piecemeal victories on efficiency, the "winning" climate policy was subsidies for biofuels--which had minimal impact on emissions at best, and at worst boosted emissions from deforestation. This was also the time when the "progressive" climate solution was shifting from coal power to gas: cue today's methane crisis. (See, e.g., RFK Jr. shilling for gas. https://grist.org/article/game-changer-5-rfk-jr-how-to-end-americas-deadly-coal-addiction-natural-ga/)
In that context, putting a price on carbon seemed pretty appealing: if you get the carbon accounting right, you could stop all the political infighting and sniping and dumb debates over stupid ideas. And if you acted fast enough and decisively enough, you could get a price before the various interests coalesced around an effective "no" campaign. It seemed like the inverse of the eventual political reality: carbon pricing was the one thing that everyone could get behind.
Turns out that this was all mostly wrong, but I'm not sure it was *obviously* wrong from the get-go.
The cost of solar electricity from large arrays went down nearly 90% in the decade beginning in 2010. Now it is going for around 1.45 cents per kwh, less than a third the cost of electricity from a natural gas plant. Solar with 4 hours of storage is cheaper than operating a fossil fuel plant. In other words we can close fossil fuel generating facilities as fast as we can build solar and storage to replace them. Solar costs are continuing to fall as are storage costs. Before even considering climate costs, environmental costs, or health costs solar is cheaper. So, why are the utiltities resisting cheaper energy? There is a topic to consider. Also, why not talk to Tony Seba, the only person who has accurately predicted the falling costs of solar, wind and batteries. He also blows LCOE analysis out of the water.
Thanks, David. I think you make some excellent points. I also think economics fails us when we evaluate the price of action in today's dollars. When don't consider the cost of disruption or of property loss or of human health as the ultimate cost, we can't possibly determine if that price is appropriate. So when I speak on climate issues, I try to ask people, what would you pay for some thing now to prevent you from losing in the future. Sure it seems expensive, but when compared with the spector of loss, it seems more reasonable. It is internalizing the externality and pricing it accordingly. Stated a different way, what is the cost of preventing when compared to the repairs in the future?
As long as we continue to subsidize fossil fuels, the first-order impact of any Carbon Tax will be merely to offset the market distortion caused by subsidies. Thus, we'll be consuming both tax revenue and consumer wealth to pay for fossil fuels. This doesn't make sense. If raising the price of fossil fuels would have a useful impact (it would), then we should first eliminate the subsidies and only then determine if a Carbon Tax is the right thing to do. Of course, many will argue that we don't have the political will to reduce subsidies. But, if we aren't willing to reduce subsidies, then how in the world would anyone think that we might have the political will to impose Carbon Taxes?
Sector-specific carbon taxes or fees can have unintended and counter-productive impacts. For instance, New York's NYISO has been working for years on a plan to impose carbon pricing in New York's wholesale electricity market. But, carbon-pricing for electricity would increase the cost of electricity in many areas, particularly downstate, and make electricity less-competitive with fossil fuels. Doing this would discourage the adoption of the Beneficial Electrification which is seen by many as the primary means to reduce emissions from at least buildings and vehicles. (i.e. you won't "Electrify Everything" if electricity is significantly more expensive than alternative energy carriers.)
The Carbon Tax/Fee/Pricing discussion usefully reminds us to be aware of prices' impacts on markets. However, as Dave points out, this does not mean that Carbon Taxes are the "right thing to do."
Great analysis. I confess I went from Economics to Philosophy, with a detour into Eco-religion during the 2000's. I've become convinced that climate change and the collapse of biodiversity are moral issues. And it's interesting that the political party that has gone furthest to deny the reality of climate change is also the closest thing to a fascist movement that we have seen in United States. Spreading misinformation, directing hate and rage at low status minority groups, and rejecting the guardrails of democracy is now there modus operandi. Ethics is really about living so that we protect and sustain future generations. Otherwise, what's the point? In my view, global warming deniers and fossil fuel apologists are actively getting in the way of our building a sustainable future, so I see it as a form of moral corruption. And that view is reinforced by the present trajectory of Trumpism. However, my moral stance is unpopular philosophically, because of the deep polarization that is going on. The theory is that if we just tamp down the moral judgement on both sides, we can all get along. I don't see how you can get along with Fascists. It's a survival thing. It seems to me that when you create a political movement that motivates people by inciting moral outrage over dubious causes such as the anti-abortion movement it's a lot like the boy who cried wolf: when a real sociopath like Trump comes along, you've lost the ability to discern a real moral threat and your in a Weimar moment. This is kind of an existential crisis for Western civilization, where the economics, politics, and ethics intersect.
The lack of understanding of building broad political support amongst voters via policy that benefits the voters is staggering.
Let’s say the us needs to install 40 million solar panels a year and will pay 90% of the cost (like highways). Economists would insist and rage that the maximally efficient and only acceptable way to do so is large utility scale solar. (And wail it was stupid because it wasn’t the least most amount of subsidy of spreadsheet efficiency perfection the us could get away with).
Economists win, all 40 million are allocated to utilities and republicans and environmental groups team up to fight tooth and nail against every massive utility installation, even at 90% subsidy, as a result only 2 million a year are installed (starting in year three since utilities can’t mobilize to do anything right away, year one and two are totally wasted) the program is a global laughing stock and by year five it is repealed by a new political majority, with only six million installed over five years instead of the promised 200 million panels over five years because we chose the economists path of spreadsheet perfection. A 97% underperformance from baseline that economists never accounted for because their perfect policy was bad politically.
Or consider a different political route, 40 million panels a year, at 90% subsidy, 20 million are allocated to utilitys, 20 million are allocated to home installation. Since the subsidy covers total installed cost, this costs significantly more, but all 20 million home owner panels are installed in year one, a massive job creation boom happens everywhere, labor incentives in the policy result in a strong new home solar installers union and wages and benefits vastly increase with unionization driving more people to seek employment in the sector (this also drives up installed cost but it mostly doesn’t matter with a 90% subsidy). The first year utilities can not mobilize and install nothing, but homeowners installed all 20 million and installers have a massive backlog. There’s now a massive political constituency demanding that homeowners get what utilities are unable to install, and so an amendment is made and in year two 60 million panels are allocated to home installation since utilities can’t mobilize for year two either and the unused utility year one is reallocated to home owners as well. Year three utilities finally start installation but because of two years of rabid home installation a lot of the political alliances opposing utility scale solar have evaporated or flipped, since you now have millions of homes with solar, as a result utilities are able to install six million panels in year three and by year five are installing their full twenty million panels a year.
This is obviously a silly thought experiment, but it kind of gets at the point that a perfectly efficient policy can be massively less effective and even counter productive than a less efficient policy that has the benefit of being popular.
This rant inspired by my irritation that the Obama era 30% subsidy for home solar might have been optimized by economists but that low of a subsidy means home solar stayed pretty small and self restricted to mostly the very top tier of incomes in the highest payroll states. at a 90% installed subsidy, states like Missouri would be installing proportionally as much rooftop solar as states like California but a 30% subsidy locks most of the country and most of the electorate out of participating and in doing so it locks the scale way down.
And the 90% is modeled on highway. You want to build massive amounts fast everywhere that level should be the floor of subsidy levels considered, because that’s the level we know effectively initiates a universal nationwide blitz of infrastructure deployment. Rapid and at scale. But no one wants to do that in the chattering classes because the poors would benefit too and the chattering classes only value home solar because it is scarce and a status symbol. Scarcity confers value and that’s what they like about keeping home solar scarce and a symbol of elite status class membership.
Excellent post, David. Economists have every right to offer what they see as the best path forward but only, as you rightly say, as citizens, not because they have some special economist's insight as to what policy is feasible and sustainable.
Really, any policy recommendation based on carbon pricing that doesn't take into account the near impossibility of raising the gas tax a few cents is adding nothing to the public debate.
It's fine to be on a desert island surrounded by cans of tuna and say, "Step one, assume you have can opener," but if you don't in fact have a can opener, you're not really addressing the starvation problem.
Very well put, David. My own work has been from a cultural perspective. We look at frames of reference--observers versus participants. The carbon tax has a problem in that from strictly an observer's perspective, it is an excellent idea. From that of a participant, it is a terrible idea, much like any tax.
It is difficult to find any common ground where a majority of participants--people who vote, will endorse what seems uncertain and punitive. Because our use of energy has been encouraged for decades, it seems ridiculously unfair to now want to punish us with additional and non specific costs for having done what we were supposed to do--were we not? People mostly do not yet feel responsible for the present climate, and a carbon tax assigns a responsibility without any understanding of individual or group participation.
It is highly unlikely to get "buy in" from participants--especially those who find they are disadvantaged, or historically have been disadvantaged for decades or centuries. As you point out so well, there is no easy mechanism for sorting people into groups of responsible versus less responsible. Participants naturally and reasonably turn to look at just who did this anyway?
That attention will naturally focus on fossil fuel interests, who are so often the motivators to political action, and well placed to dampen any response that includes their interests and future. The fact that their dollars are valued more than votes by SCOTUS makes this worse. Sorting all this out is not within either the attention span nor the education of a majority of the population. They are easily directed by "influencers" who may not have a participants perspective due to financial and social rewards.
What this perspective has to share is the revelation that a major conflict is occurring. Not all participants are powerless--those who are the investors behind fossil fuel and insurance for such interests, do have a vested and deeply personal interest in understanding their risk, managing that risk, and demanding a fair playing field.
The fossil fuel interests have a major conflict in that they have to build a future on a lie, or risk admitting that their futures plans are dangerous and will certainly fail. Trillions of dollars of investment and powerful people behind those dollars are now asking difficult questions, and are growing ever more unhappy with the glib and often obvious lies.
None of this will help the participants with the least resources to meet the future. But for the wiser heads of finance, these people become valuable assets, as they do matter in our nation, and many others. Arguing for ones future investment portfolio is unlikely to change any minds or bring joy to anyone's heart. Arguing for environmental justice, and letting those who have much to gain understand the argument creates a new dynamic that continued lies cannot bury.
The important dynamic is to not let the apparent easy solution of a carbon tax hypnotize those interests into a non solution that will make the future worse. Why worse? Because our representative government will quickly whittle it down to a meaningless inconvenience to fossil fuel interests, and increase the risk for all of us. Like net zero, it is an illusion of safety, with no ability to provide for that safety. Worse, by the time people understand they were scammed again, they suffer, become angry, and react. In a hotter world, we do not need more and hotter heads.
California just acknowledged this week that heat deaths are likely 6 times more frequent than prior statistics state. They will increase enormously if we fail to meet the challenge of switching away from fossil fuels for our energy needs. It will not take so long for people to understand that threat, as it will soon become a majro cause of death and disability--possibly surpassing autos by 2030.
There is nothing new in what I am saying--your arguments already cover the topic well. This is simply an amplification via a different perspective and vocabulary. It may help people to understand why their gut feels so different from their heads. I can assure you that if it does not feel right in the gut, people will not go there, will not do that, and therin lies our doom. We have to find that path that captures and fascinates the participants, so they willingly and even demand that their best interests come first.
of course, this report might illustrate the very thing you are ranting about - 'efficient pricing' - but still, I take your point to be not that we abandon such ideals, but that we work on them in the context of actual politics not just on spreadsheets...
I'm not an economist, but I'm intimately familiar with the law and economics movement. Something similar happened with lawn economics starting around the 1990's: a realization that 1.) first-best is usually silly because political economy and 2.) Ludwig Boltzmann was right: conceptual "elegance is for shoemakers and tailors." Pretty models often misdescribe the world. (If you want to cow an economist, quote a great physicist they've barely heard of.)
On the other hand, I've been around policy folk long enough to know they also commit the opposite kind of error--completely ignoring strong arguments simply because they sound too weird.
A carbon tax's most attractive aspect has always been that it is a comprehensive federal policy that (theoretically) could pass via reconciliation...which until or unless the filibuster dies is our only hope. That is what makes it feasible. Given the make-up of the Senate, I can't imagine a political movement large enough to pass a non-revenue based climate policy.
Two observations. First, as my history of economic thought professor Warren Samuels emphasized, economists divide into two broad classes. The first seek to understand the operation of the economy, including the social and political environment, for instrumental purposes, I.e. to improve the functioning of the economy. The second group serves as high priests of our secular religion of markets as the solution to every problem. Interestingly, both groups for Adam Smith as the prophet of their religion.
My second observation is that one of the reasons for faith in carbon pricing as a solution to climate change was prior success of such an approach. The mid-90s revision of the Clean Air Act established the basis for a market in sulfur dioxide emissions. Intended to ameliorate the problem of acid rain killing lakes in the Northeast, it succeeded. With that serving as a template, carbon pricing seemed an excellent approach to climate change. Except that acid rain was much more regionally specific. Also, the legislation had significant unintended consequences, I.e. displacement of Eastern and Midwestern coal with low sulfur Power River coal.
I seldom watch TV, but I recall last year seeing what seemed like a zillion times reporters asking economist to forecast how the recovery from the COVID recession would go. And they all had no problem answering with come econ-nonsense, when the only sensible answer should have been: Why are you asking be? Ask an epidemiologist!
Can we listen to the wisdom of economists like Herman Daly or Rate Raworth!
I'm no economist, but I'll cop to being an ex-carbon pricing acolyte. (Well, semi-ex.)
The thing is, prior to oh, about 2010, most of the politically viable alternatives to carbon pricing were either grossly inadequate or outright counterproductive. Wind and solar were still expensive. Nuclear costs were high and rising. Carbon capture was (is?) mostly vaporware. Outside of piecemeal victories on efficiency, the "winning" climate policy was subsidies for biofuels--which had minimal impact on emissions at best, and at worst boosted emissions from deforestation. This was also the time when the "progressive" climate solution was shifting from coal power to gas: cue today's methane crisis. (See, e.g., RFK Jr. shilling for gas. https://grist.org/article/game-changer-5-rfk-jr-how-to-end-americas-deadly-coal-addiction-natural-ga/)
In that context, putting a price on carbon seemed pretty appealing: if you get the carbon accounting right, you could stop all the political infighting and sniping and dumb debates over stupid ideas. And if you acted fast enough and decisively enough, you could get a price before the various interests coalesced around an effective "no" campaign. It seemed like the inverse of the eventual political reality: carbon pricing was the one thing that everyone could get behind.
Turns out that this was all mostly wrong, but I'm not sure it was *obviously* wrong from the get-go.
The cost of solar electricity from large arrays went down nearly 90% in the decade beginning in 2010. Now it is going for around 1.45 cents per kwh, less than a third the cost of electricity from a natural gas plant. Solar with 4 hours of storage is cheaper than operating a fossil fuel plant. In other words we can close fossil fuel generating facilities as fast as we can build solar and storage to replace them. Solar costs are continuing to fall as are storage costs. Before even considering climate costs, environmental costs, or health costs solar is cheaper. So, why are the utiltities resisting cheaper energy? There is a topic to consider. Also, why not talk to Tony Seba, the only person who has accurately predicted the falling costs of solar, wind and batteries. He also blows LCOE analysis out of the water.
Thanks, David. I think you make some excellent points. I also think economics fails us when we evaluate the price of action in today's dollars. When don't consider the cost of disruption or of property loss or of human health as the ultimate cost, we can't possibly determine if that price is appropriate. So when I speak on climate issues, I try to ask people, what would you pay for some thing now to prevent you from losing in the future. Sure it seems expensive, but when compared with the spector of loss, it seems more reasonable. It is internalizing the externality and pricing it accordingly. Stated a different way, what is the cost of preventing when compared to the repairs in the future?
As long as we continue to subsidize fossil fuels, the first-order impact of any Carbon Tax will be merely to offset the market distortion caused by subsidies. Thus, we'll be consuming both tax revenue and consumer wealth to pay for fossil fuels. This doesn't make sense. If raising the price of fossil fuels would have a useful impact (it would), then we should first eliminate the subsidies and only then determine if a Carbon Tax is the right thing to do. Of course, many will argue that we don't have the political will to reduce subsidies. But, if we aren't willing to reduce subsidies, then how in the world would anyone think that we might have the political will to impose Carbon Taxes?
Sector-specific carbon taxes or fees can have unintended and counter-productive impacts. For instance, New York's NYISO has been working for years on a plan to impose carbon pricing in New York's wholesale electricity market. But, carbon-pricing for electricity would increase the cost of electricity in many areas, particularly downstate, and make electricity less-competitive with fossil fuels. Doing this would discourage the adoption of the Beneficial Electrification which is seen by many as the primary means to reduce emissions from at least buildings and vehicles. (i.e. you won't "Electrify Everything" if electricity is significantly more expensive than alternative energy carriers.)
The Carbon Tax/Fee/Pricing discussion usefully reminds us to be aware of prices' impacts on markets. However, as Dave points out, this does not mean that Carbon Taxes are the "right thing to do."
Great analysis. I confess I went from Economics to Philosophy, with a detour into Eco-religion during the 2000's. I've become convinced that climate change and the collapse of biodiversity are moral issues. And it's interesting that the political party that has gone furthest to deny the reality of climate change is also the closest thing to a fascist movement that we have seen in United States. Spreading misinformation, directing hate and rage at low status minority groups, and rejecting the guardrails of democracy is now there modus operandi. Ethics is really about living so that we protect and sustain future generations. Otherwise, what's the point? In my view, global warming deniers and fossil fuel apologists are actively getting in the way of our building a sustainable future, so I see it as a form of moral corruption. And that view is reinforced by the present trajectory of Trumpism. However, my moral stance is unpopular philosophically, because of the deep polarization that is going on. The theory is that if we just tamp down the moral judgement on both sides, we can all get along. I don't see how you can get along with Fascists. It's a survival thing. It seems to me that when you create a political movement that motivates people by inciting moral outrage over dubious causes such as the anti-abortion movement it's a lot like the boy who cried wolf: when a real sociopath like Trump comes along, you've lost the ability to discern a real moral threat and your in a Weimar moment. This is kind of an existential crisis for Western civilization, where the economics, politics, and ethics intersect.
The lack of understanding of building broad political support amongst voters via policy that benefits the voters is staggering.
Let’s say the us needs to install 40 million solar panels a year and will pay 90% of the cost (like highways). Economists would insist and rage that the maximally efficient and only acceptable way to do so is large utility scale solar. (And wail it was stupid because it wasn’t the least most amount of subsidy of spreadsheet efficiency perfection the us could get away with).
Economists win, all 40 million are allocated to utilities and republicans and environmental groups team up to fight tooth and nail against every massive utility installation, even at 90% subsidy, as a result only 2 million a year are installed (starting in year three since utilities can’t mobilize to do anything right away, year one and two are totally wasted) the program is a global laughing stock and by year five it is repealed by a new political majority, with only six million installed over five years instead of the promised 200 million panels over five years because we chose the economists path of spreadsheet perfection. A 97% underperformance from baseline that economists never accounted for because their perfect policy was bad politically.
Or consider a different political route, 40 million panels a year, at 90% subsidy, 20 million are allocated to utilitys, 20 million are allocated to home installation. Since the subsidy covers total installed cost, this costs significantly more, but all 20 million home owner panels are installed in year one, a massive job creation boom happens everywhere, labor incentives in the policy result in a strong new home solar installers union and wages and benefits vastly increase with unionization driving more people to seek employment in the sector (this also drives up installed cost but it mostly doesn’t matter with a 90% subsidy). The first year utilities can not mobilize and install nothing, but homeowners installed all 20 million and installers have a massive backlog. There’s now a massive political constituency demanding that homeowners get what utilities are unable to install, and so an amendment is made and in year two 60 million panels are allocated to home installation since utilities can’t mobilize for year two either and the unused utility year one is reallocated to home owners as well. Year three utilities finally start installation but because of two years of rabid home installation a lot of the political alliances opposing utility scale solar have evaporated or flipped, since you now have millions of homes with solar, as a result utilities are able to install six million panels in year three and by year five are installing their full twenty million panels a year.
This is obviously a silly thought experiment, but it kind of gets at the point that a perfectly efficient policy can be massively less effective and even counter productive than a less efficient policy that has the benefit of being popular.
This rant inspired by my irritation that the Obama era 30% subsidy for home solar might have been optimized by economists but that low of a subsidy means home solar stayed pretty small and self restricted to mostly the very top tier of incomes in the highest payroll states. at a 90% installed subsidy, states like Missouri would be installing proportionally as much rooftop solar as states like California but a 30% subsidy locks most of the country and most of the electorate out of participating and in doing so it locks the scale way down.
And the 90% is modeled on highway. You want to build massive amounts fast everywhere that level should be the floor of subsidy levels considered, because that’s the level we know effectively initiates a universal nationwide blitz of infrastructure deployment. Rapid and at scale. But no one wants to do that in the chattering classes because the poors would benefit too and the chattering classes only value home solar because it is scarce and a status symbol. Scarcity confers value and that’s what they like about keeping home solar scarce and a symbol of elite status class membership.
David, you may be interested in this link in which I specifically spotlight you and this economists piece. You will have to scroll a bit until you see your photo. https://www.dailykos.com/stories/2021/10/9/2056910/-Climate-Brief-Ignoring-code-red-Illinois-far-sighted-new-energy-law-fossil-fuel-protest-in-DC?_=2021-10-09T21:22:39.000-07:00
Excellent post, David. Economists have every right to offer what they see as the best path forward but only, as you rightly say, as citizens, not because they have some special economist's insight as to what policy is feasible and sustainable.
Really, any policy recommendation based on carbon pricing that doesn't take into account the near impossibility of raising the gas tax a few cents is adding nothing to the public debate.
It's fine to be on a desert island surrounded by cans of tuna and say, "Step one, assume you have can opener," but if you don't in fact have a can opener, you're not really addressing the starvation problem.
Very well put, David. My own work has been from a cultural perspective. We look at frames of reference--observers versus participants. The carbon tax has a problem in that from strictly an observer's perspective, it is an excellent idea. From that of a participant, it is a terrible idea, much like any tax.
It is difficult to find any common ground where a majority of participants--people who vote, will endorse what seems uncertain and punitive. Because our use of energy has been encouraged for decades, it seems ridiculously unfair to now want to punish us with additional and non specific costs for having done what we were supposed to do--were we not? People mostly do not yet feel responsible for the present climate, and a carbon tax assigns a responsibility without any understanding of individual or group participation.
It is highly unlikely to get "buy in" from participants--especially those who find they are disadvantaged, or historically have been disadvantaged for decades or centuries. As you point out so well, there is no easy mechanism for sorting people into groups of responsible versus less responsible. Participants naturally and reasonably turn to look at just who did this anyway?
That attention will naturally focus on fossil fuel interests, who are so often the motivators to political action, and well placed to dampen any response that includes their interests and future. The fact that their dollars are valued more than votes by SCOTUS makes this worse. Sorting all this out is not within either the attention span nor the education of a majority of the population. They are easily directed by "influencers" who may not have a participants perspective due to financial and social rewards.
What this perspective has to share is the revelation that a major conflict is occurring. Not all participants are powerless--those who are the investors behind fossil fuel and insurance for such interests, do have a vested and deeply personal interest in understanding their risk, managing that risk, and demanding a fair playing field.
The fossil fuel interests have a major conflict in that they have to build a future on a lie, or risk admitting that their futures plans are dangerous and will certainly fail. Trillions of dollars of investment and powerful people behind those dollars are now asking difficult questions, and are growing ever more unhappy with the glib and often obvious lies.
None of this will help the participants with the least resources to meet the future. But for the wiser heads of finance, these people become valuable assets, as they do matter in our nation, and many others. Arguing for ones future investment portfolio is unlikely to change any minds or bring joy to anyone's heart. Arguing for environmental justice, and letting those who have much to gain understand the argument creates a new dynamic that continued lies cannot bury.
The important dynamic is to not let the apparent easy solution of a carbon tax hypnotize those interests into a non solution that will make the future worse. Why worse? Because our representative government will quickly whittle it down to a meaningless inconvenience to fossil fuel interests, and increase the risk for all of us. Like net zero, it is an illusion of safety, with no ability to provide for that safety. Worse, by the time people understand they were scammed again, they suffer, become angry, and react. In a hotter world, we do not need more and hotter heads.
California just acknowledged this week that heat deaths are likely 6 times more frequent than prior statistics state. They will increase enormously if we fail to meet the challenge of switching away from fossil fuels for our energy needs. It will not take so long for people to understand that threat, as it will soon become a majro cause of death and disability--possibly surpassing autos by 2030.
There is nothing new in what I am saying--your arguments already cover the topic well. This is simply an amplification via a different perspective and vocabulary. It may help people to understand why their gut feels so different from their heads. I can assure you that if it does not feel right in the gut, people will not go there, will not do that, and therin lies our doom. We have to find that path that captures and fascinates the participants, so they willingly and even demand that their best interests come first.
of course, this report might illustrate the very thing you are ranting about - 'efficient pricing' - but still, I take your point to be not that we abandon such ideals, but that we work on them in the context of actual politics not just on spreadsheets...
Great insights! And on that bit about underestimating costs of action and inaction: https://www.imf.org/en/Publications/WP/Issues/2021/09/23/Still-Not-Getting-Energy-Prices-Right-A-Global-and-Country-Update-of-Fossil-Fuel-Subsidies-466004
I'm not an economist, but I'm intimately familiar with the law and economics movement. Something similar happened with lawn economics starting around the 1990's: a realization that 1.) first-best is usually silly because political economy and 2.) Ludwig Boltzmann was right: conceptual "elegance is for shoemakers and tailors." Pretty models often misdescribe the world. (If you want to cow an economist, quote a great physicist they've barely heard of.)
On the other hand, I've been around policy folk long enough to know they also commit the opposite kind of error--completely ignoring strong arguments simply because they sound too weird.
A carbon tax's most attractive aspect has always been that it is a comprehensive federal policy that (theoretically) could pass via reconciliation...which until or unless the filibuster dies is our only hope. That is what makes it feasible. Given the make-up of the Senate, I can't imagine a political movement large enough to pass a non-revenue based climate policy.
Two observations. First, as my history of economic thought professor Warren Samuels emphasized, economists divide into two broad classes. The first seek to understand the operation of the economy, including the social and political environment, for instrumental purposes, I.e. to improve the functioning of the economy. The second group serves as high priests of our secular religion of markets as the solution to every problem. Interestingly, both groups for Adam Smith as the prophet of their religion.
My second observation is that one of the reasons for faith in carbon pricing as a solution to climate change was prior success of such an approach. The mid-90s revision of the Clean Air Act established the basis for a market in sulfur dioxide emissions. Intended to ameliorate the problem of acid rain killing lakes in the Northeast, it succeeded. With that serving as a template, carbon pricing seemed an excellent approach to climate change. Except that acid rain was much more regionally specific. Also, the legislation had significant unintended consequences, I.e. displacement of Eastern and Midwestern coal with low sulfur Power River coal.