Free Markets and Climate Change

Kevin Drum writes:

I mean, suppose you accepted that climate change was both real and catastrophic. What options would you have if you insisted on sticking solely to free market principles? Beats me. Hell, it’s hard enough to address even if you don’t. But that’s where we are these days: an awful lot of our most pressing problems simply can’t be solved unless you accept that the government has to be involved. So conservatives are stuck.

I think this is far too kind to the behavior of right-of-center institutions — Heritage, AEI, Cato, National Review, Weekly Standard, the Chamber of Commerce, Rush Limbaugh, etc. — on the issue of climate change. It implies that there’s some genuine ideological dilemma that makes it impossible for a committed free marketer to propose constructive policies to avert catastrophic climate change. But how about reductions in subsidies for fossil fuel production and consumption? The free market credentials seem impeccable. Or how about a “green tax shift” in which carbon is taxes or carbon emission permits are auctioned and the revenue is used to finance deficit-neutral reductions in other taxes? Again, it surely can’t be that free market principles commit people to the precise series of revenue streams currently used in the United States.

Now of course in the real world it’s going to be impossible to legislate a pure free market “tax shift” policy just as it’s going to be impossible to legislate a pure “tax polluters to subsidize clean energy” approach or a pure “cap and rebate” or a pure anything. But if people started from the premise that emissions need to be reduced, and then debated the extent to which this needs to be done in a free market way versus some other kind of way, then compromise would be easy to reach and a solution could be within reach. But that’s not what we have. Not because market-oriented approaches are inadequate to the challenge but because too many of the key institutions that espouse market-oriented approaches are run by people who are too corrupt, incompetent, immoral, stupid, or cowardly to get their side to take the problem seriously.


It doesn’t have to be this way. The German Federation of Industry had a bunch to say, not all of it sensible on the merits, about making German climate policy friendly to export-oriented manufacturers, but none of it involved ranting about “cap and tax” or denouncing “socialism” or pretending that the whole problem was made up by Al Gore.