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Bite Size News, November 10: Cuts That Hurt Edition
We learn from today's Globe that a pact among New England states to reduce the industrial emissions that cause global warming is hitting the skids because our dear governor has reservations (even though he initially said he supported it). Not surprisingly, these reservations have to do with limiting any cost increases for the business sector. What's curious, though, is that this particular plan to reduce pollution is just the kind of arrangement that free-market guys like Mitt are supposed to love.
The agreement would put an overall limit on the amount of greenhouse gases that could be emitted in the region, then allow would-be polluters to buy and sell the right to pollute. Known as free-market environmentalism, this trading system is supposed to be efficient and business friendly, because it automatically shifts the costs of pollution to those most able to bear them, while encouraging innovation as a cost-saving measure. (Economists think markets are some kind of magical creature with invisible hands that make everything work right and everyone happy. Bostonist has some doubts about this theory, but that's beside the point.) Romney, of course, has long been a champion of finding free-market solutions for various problems. But in this case, he wants to put price caps on how much any polluter would have to pay for the right to keep emitting forbidden gases. Do price caps go together with free-market ideology? Google "price caps free market" and see for yourself. (OK, don't bother, Bostonist will tell you the answer: no, price caps and free markets are definitely not BFF.) If this ideological weirdness (in favor of free markets, against price caps, except for sometimes) seems familiar, you may be thinking of the initial opposition to the health plan recently approved by the state House of Representatives. Remember? Business groups (and the guv) said they objected because the plan unfairly taxed certain companies that were already providing healthcare to their employees, but added that, by the way, they would oppose the plan even if the problem were fixed.
Illustration courtesy of NASA, whose science website is full of wicked awesome pictures and diagrams.
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Dear Bostonist, the New England CO2 pact is an example of "market socialism," not "free market environmentalism." Free market environmentalism seeks to extend private property rights and common law liability rules to previously unowned portions of nature. It views the market primarily as a discovery process to determine what is to be done (which of the many possible uses of finite resouces are most valuable), and only secondarily as a system of incentives to promote efficiency. Market socialists, in contrast, seek to use "market mechanisms," such as emissions trading, to advance objectives chosen by politicians rather than by private actors in the marketplace. Government steers and business rows. Government picks the ends, the marketplace selects the means. This may be more efficient than old-fashioned, command-and-control socialism (government selecting both means and ends), but the result is likely to be smarter ways of doing dumb things.
The Kyoto Protocol and kindred schemes like the New England CO2 Pact are a case in point. Kyoto, by the estimate of its own supporters, would avert a hypothetical and unverifiable 0.07C of warming by 2050. Yet, Kyoto could easily cost industrial nations upwards of $150 billion per year. Nobody in a free (private) marketplace would invest trillions of dollars to achieve undetectable changes in global climate that would not benefit people or the planet one whit.
Well, you're right that the New England pact would "advance objectives chosen by politicians rather than by private actors in the marketplace." But private actors in the marketplace are presumed to be rational actors who maximize their own economic benefits, and the long-term benefit of reducing pollution doesn't motivate nearly as well as the near-term gains to be had by ignoring pollution. That's where government comes in: unconstrained by concerns over profitability, it can act to advance interests (like public health) not accounted for by market forces. As for whether global warming is so uncertain as you make it out to be, I'll take the word of accomplished scientists (http://www.sciencemag.org/cgi/content/full/306/5702/1686) over the word of political analysts, no matter how accomplished they are. (When you talk about a reduction in temperature increases of only .07 degrees c., it seems paltry, but an accompanying rise in the sea level of between .09 and .88 meters during the next 100 years ( http://lwf.ncdc.noaa.gov/oa/climate/globalwarming.html) would, at the very least, make my commute more complicated.)