How to Think About Waxman-Markey: A Response

I've generally kept my climate change monomania off this business blog, but Ryan Avent has brought the bacillus here. He starts his post with a very generous set of compliments about me that could be more accurately directed toward him. So I'll just say that if you have to disagree with somebody on this topic, Ryan's the guy.

His points are, as usual, well-considered and well-intentioned. Let me try to take them one at a time.

The first trouble-spot is one Manzi acknowledges. It is difficult to justify the bill because it imposes costs on the current American electorate, and the current electorate will barely suffer at all from the effects of climate change. If you think that current taxpayers ought to be concerned only with the benefits of the bill to themselves relative to costs they'll have to pay, then you probably should not support it. But of course, you shouldn't think that; it's a pretty deplorable outlook.

Now there are two conceptually distinct entities that are not "the current American electorate": (1) future members of what is normally considered a common polity, and (2) current and future residents of other countries.

Ryan takes these in turn, immediately addressing the first of these when he says:

There are obviously some serious moral issues involved in bequeathing to future generations a much less hospitable climate and the resulting geopolitical chaos.

This is referencing, of course, the endlessly-fascinating argument about what discount rate should be used to compare future effects to current ones.  This is sometimes thought not to be amenable to technical resolution because it is really a numerical form of a moral judgment.  While all decisions, at some level, embed moral judgments, I don't this is true as a practical matter in this case, because any discount rate that would make emissions mitigation economically rational on a cost-benefit basis is so low as to be a discount rate that we would never use for real-life decisions. I have a long post about this here.

Ryan goes on to address the second in impassioned language:

More offensive still is the burden we impose on other nations. Americans are carbon gluttons. Our per capita emissions are twice those of most developed nations, four to five times greater than those in large emerging markets, and 20 to 100 to 1,000 times larger than those in places like sub-Saharan Africa. But our emissions don't stop at our border. Rather, because of our temperate location, we will be spared many of the most severe consequences of warming to come this century, which will instead be focused overwhelmingly on poor countries. This is illiberal and immoral. We don't have the right to invade whomever we please for the sake of a few percentage points of GDP growth, and we don't have the right to conclude that since this generation needn't worry about warming there's no need to change our behavior.

I think this argument does not hold water.  In short form, the reason is because this ignores the point that the reason the U.S., Europe and similar geographies have historically emitted carbon dioxide is that these societies invented the modern economy.  Along with all that carbon dioxide the West put in the air, it also invented polio vaccine, the limited liability corporation, the high-efficiency power turbine and so on. While the West made a ton of money selling these things to what we now call developing countries, there were and are huge externalities because inevitably a lot of this knowledge leaks. The West invented the basic tools for increasing wealth that the successful parts of the developing world are now using to escape poverty, and incidentally emit more carbon dioxide.  It is less than obvious why we would select only one of these items, and determine that we have a moral duty to make reparations for it, without considering that the net global effect of the overall system that created these emissions has been extremely positive.  Ask yourself this question: Would you rather be born at the median income level in Bangladesh today, or at the median income level in Bangladesh in the alternative world where the entire Northern Hemisphere had never escaped life at the subsistence level. That is, to live in a world of lower carbon emissions, but no Western science, none of the economic development inside Bangladesh that would not have occurred had the West not developed, no hospitals, no foreign aid, and no meaningful chance of ever changing the material conditions of your life?  If advocates of Waxman Markey intend this to be, in effect, a voluntary increase of $80 billion dollars per year in spectacularly inefficient foreign aid for people not yet born in low-lying equatorial regions of the globe, they should be clearer about this.  I have a long post that attempts to consider this more fully here.

Ryan moves on to a different argument:

Another tricky but important consideration is that whatever version of W-M passes is extremely unlikely to be the final word in climate policy. Obviously, there is no responsible way to build the potential for future emendations into a current cost-benefit analysis. Still, this should be taken into consideration.

I agree - both that one must consider that this is a long game with many steps, and that this is hard to do analytically.  In the end, I think if one accepts the premise (as I do, for reasons described in detail in the posts of mine to which Ryan links; see here for a detailed version of my argument) that even a fully-formed international regime of emissions mitigation would destroy net economic value, it's very hard to see this long game ending up creating value.  If one accepts the alternative premise (as does Ryan) this argument about option value seems pretty compelling.  So really this becomes a debate about premises, and I continue to hold mine.

Ryan then goes on to his final argument:

Another knock on W-M is its effect on potential international negotiations. Manzi says we're giving away our trump card by preemptively limiting emissions. This is a little nuts. Recall, for starters, that an American emits five times more carbon than a Chinese person. Recall, also, that we've been emitting in this fashion for decades, during which period China has been very poor, and therefore not much of a contributor to climate change. If I were China, I'd be reluctant to even talk to America before they had a law on the table.

I think this conflates an argument about our moral duties with a separate argument about negotiating strategy to get what we want (whatever the moral provenance of these wants).  For the reasons referenced above, I don't believe that the United States has a moral obligation to make reparations to the rest of the world for prior and ongoing CO2 emissions.  Ryan goes on to say that those negotiating on our behalf say they want us to do this, but I've yet to see an argument for why, in a hard-headed view of negotiations, we are advantaged by unilaterally surrendering leverage without taking any concessions for it.