Send money, not gas

One area in which I do think the debate over greenhouse gases has gone wrong is the extent to which many commenters, particularly on the left, focus on allocating carbon permits as a distributional justice question. To wit, they are willing to exempt India and China from global trading regimes, because these places are very poor.

Or, even more weirdly, they want to not cap emissions in developing countries, and then buy reduction credits from those countries for reducing the emissions they would have made if the developed countries had not stepped in with a suitcase full of money. This seems like a boon to the emerging business of building highly polluting industrial installations that can be shut down, but not actually likely to produce much in the way of real reductions.

The purpose of a global greenhouse-gas reduction scheme should, it seems to me, be to reduce the emissions of greenhouse gasses. It should not be to simply transfer the emissions of those gasses to other, more "deserving" countries. If Bangladesh floods, the Bangladeshis will not much care whether the carbon dioxide that caused it was released by worthy shoe factories in China, or gluttonous American SUVs.

To the extent that capping emissions results in global wealth differentials that are unjust, I think there is a better way to redistribute that wealth. For the purposes of this discussion, I will call it "money".

Having a global emissions scheme which does not do anything about Chinese or Indian emissions seems only slightly better than doing nothing at all; China is on track to surpass US emissions by the end of this decade, and India's emissions, while still low, have taken some large leaps forward in recent years. To the extent that we are aiming to reduce the burning of easily transshippable fossil fuels--oil and natural gas, and regionally, coal--an emissions cap that doesn't cover the developing world will result in no net reduction in greenhouse gasses. Consumers in the developed world will get some small boost from demand reduction in the industrialized world; and a further boost as we effectively outsource our carbon intensive industries to the developing world, stimulating their economies.

But such a transfer is extremely inefficient. It benefits, not the neediest, but the least needy among poor nations--the ones that have already industrialized somewhat. It also imposes rather large administrative costs. Moreover, because fuel efficiency often imposes high capital costs, even though it offers lower operating costs, poor countries tend to invest in machinery which is relatively less efficient than that in the developed world. That means that a unit of GDP produced in China is relatively more carbon intensive than a similar unit of GDP produced in a developed country, so the world overall will be poorer if we redistribute carbon rather than money.

To be sure, there are some aspects of improved material consumption which require carbon to be transferred to the developing world, such as electricity and transportation. But this can be readily achieved by capping emissions and then transferring enough money to the developing world to buy gasoline and natural gas and so forth. The bonus is, if there are things that the developing world wants to buy even more than carbon, they can purchase those things instead, rather than having us constrain their purchasing choices.

All this is purely theoretical, of course, since I don't see any serious global emissions regime emerging any time soon. But as long as we're discussing ideals, I don't see why we want to leave China and India out of it.

Presented by

Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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