Jim Manzi was recently installed as an “In-House Critic” blogger at The New Republic. His first post on the economics of climate change was widely criticized — see “In a bizarre self-inflicted wound, TNR hires right-wing misinformer to debunk its articles.
Among its flaws, the piece argued that the only economically justified action on climate change was government subsidies for new technologies. It’s a stance which cuts far against the mainstream economic view, as guest blogger Michael A. Livermore explains.
Livermore is the executive director of the Institute for Policy Integrity at New York University School of Law, which gave us the study, “The Other Side of the Coin: The Economic Benefits of Climate Legislation” (see House clean air, clean water, clean energy jobs bill creates $1.5 trillion in benefits). He is the author, with Richard L. Revesz, of Retaking Rationality: How Cost-Benefit Analysis Can Better Protect the Environmental and Our Health.
Manzi makes several important concessions: he acknowledges that denying climate science is nonsense, that we face a genuine threat, and that we should take some steps to address that threat. But Manzi goes off track with his argument that the economics and science of climate change are insufficient to justify actually trying to control greenhouse gas emissions.
Looking at the costs and benefits of greenhouse gas reductions is a sensible way to set climate change policy. Many environmentalists are wary of cost-benefit analysis because, in the past, it has had a strong anti-regulatory bias. Since President Reagan officially instituted its use, cost-benefit analyses have too often been used as a club to fight necessary protections, giving heighted attention to costs and giving benefits short shrift.
But when done fairly, the benefits of environmental controls””from protecting lives to reducing fuel costs””often dwarf the modest costs of reducing pollution. As an example, the EPA did a retroactive assessment of the Clean Air Act and found that the protections in that law generated between $6 trillion and $50 trillion in benefits, at a comparatively tiny price of $523 billion.
Over the past year, EPA and several other federal agencies undertook an extensive effort to review the science and economics of climate change and come up with a dollar value for the benefits of reducing greenhouse gas emissions””the “social cost of carbon.” This interagency taskforce reviewed the most sophisticated economic models available (including those cited by Manzi). It included many top-notch economists, including the co-chair of the meetings, Michael Greenstone, professor of economics at MIT and Chief Economist of the Council of Economic Advisors at the time. The conclusion: greenhouse gas emissions impose serious economic costs, up to $65 per ton of emissions, justifying expenditures right now to cut carbon pollution.
There are many good reasons to believe the taskforce arrived at a low-ball estimate. The taskforce used too high a discount rate, and did not adequately take into account the potential for catastrophic risks that even Manzi recognizes is a good reason to cut emissions now. These are the Weitzman “fat tails” that argue for even more aggressive action to limit emissions. They also were unable to include many unquantified risks, like threats from ocean acidification. (Here are the 50-page public comments we submitted with the Environmental Defense Fund that go into greater detail.) The taskforce itself recognized that “any effort to quantify and monetize the harms associated with climate change will raise serious questions of science, economics, and ethics and should be viewed as provisional.”
But even with these conservative estimates, action on climate change is well justified. Using numbers from an earlier version of the taskforce report, we found that the benefits of the Waxman-Markey bill outweighed the costs by as much as nine-to-one. The proposals that are currently on the table will impose only modest economic costs, while helping to reduce the threats that climate change poses. Given the high cost-benefit ratios of current proposal, much stricter controls are likely justified.
In a survey of leading climate economists, we also found broad consensus that action on climate change is justified. The vast majority agreed that climate change poses a risk to the U.S. and global economies, that carbon pricing is the best tool available to reduce emissions, and that uncertainly about the effects of climate change increases that case for controls. A strong majority agreed that the U.S. should reduce emissions, even if other countries refuse to join the bandwagon.
Experts that know the science and economics of climate change best recognize that reducing emissions is the only sensible path forward. Exposing ourselves to extreme risks in the future, and potentially locking future generations into serious negative costs””from heat waves to sea level rise””to avoid the small economic drag that carbon controls would create, just doesn’t make sense.
Manzi’s argument has a second major flaw: he says investment in technology is a sufficient fix. Reducing greenhouse gas emissions is not about finding a silver bullet technology, it is about shifting the entire economy, from production to consumption, from households to Fortune 500 economies in subtle but vital ways. The only way to get that kind of broad based action is through a pricing mechanism, like a carbon cap. Otherwise, we have to trust governments to pick the right technologies to invest in, an unlikely prospect when lobbyists are banging down the door for their favored approaches (like clean coal), and we forgo all of the cheap and easy fixes available in the economy right now to cut emissions. (The deservingly famous McKinsey report details many options that are negative cost.)
Ultimately, Manzi unhelpfully reinforces the idea that economics and cost-benefit analysis are opposed to environmental regulation, when in fact the opposite is often true. Admittedly, it can be awkward to put a price on things like coral reefs, rainforests and lives. But doing so can help to ensure their survival. These things do have value and must be accounted for when governments want to talk about the costs and benefits of protecting the planet.
— Michael A. Livermore