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Ronald Bailey: Before we began this session, Fred Smith asked me would it be all right if he referred to me as a commie symp. I think that might be a little harsh. I hope I can persuade you of that.
I stand before you as somebody who’s been reporting and writing on environmental issues for over 20 years. To the extent that I’m known at all, I’ve been known as someone very skeptical of all kinds of environmentalist dooms. My first book was called Ecoscam: The False Prophets of Ecological Apocalypse. It pains me to have concluded, following the scientific data, that one of the dooms is a real problem.
As Lynne very ably pointed out, one of the problems with global warming is that it exists in a commons—that means the atmosphere is very hard to divide up and make into private property.
When you have an environmental commons, we typically have two ways of handling that problem. One is that we privatize it. In many environmental issues, we’re moving in that direction. Fisheries, for example, are being privatized. Forests are being privatized. Water resources can be privatized as well.
The problem with air pollution—and global warming is a form of air pollution—is that I don’t see a good, easy way to privatize it. The transaction costs are too large. And if you can’t privatize it, you have to regulate it. So now the question is: What’s the least bad way to regulate? And that is why I’ve come out in favor of a carbon tax.
As a good libertarian, I thought I would like cap and trade. The problem is I’ve been watching the European attempt to do this, and it’s a complete disaster. The governments, not surprisingly, cheat constantly. Their carbon market collapsed a year ago because the governments allocated more permits for carbon emissions than were necessary to cover what was being emitted, so naturally the price went to zero. And if the Europeans can’t pull this off, how could you expect the world to pull this off?
I understand the diffuse knowledge problem—how markets can and,
in fact, do marshal that kind of information in very good ways. The
problem is that there’s no baseline for the rest of the
Idiotically, the Kyoto Protocol set it at 7 percent below what was emitted in 1990 for the 36 countries that signed the treaty. Well, how are you going to do that for China and India? We don’t know what they’re going to be emitting in 30 years. So I come out in favor of the tax because you have a baseline. You have a way of internationally monitoring that. The baseline is a zero tax and from that, you can build up. You could start the tax low and, as you gain more information about what the atmosphere is likely to do, you could adjust the tax over that time.
For consumers, for inventors, for innovators, a tax offers price stability in a way that the cap-and-trade markets don’t. For example, in the sulfur dioxide market, sulfur permits have ranged in price from $50 a ton to over $1,000 a ton. And for sulfur dioxide, it’s a smaller market. A carbon market would encompass the world.
Fred L. Smith: What’s the best way of addressing whatever risks there are in global warming? Should the risk of catastrophic global warming justify abandoning our general preference for freedom over coercion? Should we free market advocates champion carbon taxes or carbon rationing, some form of suppressing energy use, or should we favor economic liberalization?
We’ve been working on that issue for two decades now. In that early period, I noticed that the catastrophists, the global warming alarmists, had to have answers to three questions positively.
First: Does the science indicate significant evidence of imminent catastrophe? That is, is the earth warming significantly in a human-relevant way? Is the 0.7 degree centigrade increase over the last century offset or not by the 1,800 percent increase in wealth over that same period?
Second: Is the warming impact negative or positive overall? I note in passing that more people seem to retire to Florida and Arizona than Lake Woebegone.
Third: Can the political tools now available realistically restrict carbon use? We may endorse economic suicide. Europe may join us, but should we expect India and China to go back to the Stone Age just because of our political elites?
Over the last decade, I think the evidence for all those questions has moved against the global warming catastrophists. There is evidence that there has been some warming, moderate amounts, but the idea that we’re facing imminent catastrophe has weakened. Our ability to do anything about CO2 increases for the next half-century is now obviously nonexistent. And the tensions we could create by pushing the world into some form of energy rationing, I think, are underestimated. Recall that in World War II, one of the incidents that pushed the war party into power in Japan was an energy boycott on that Asian nation. We are going to do that again with China. It doesn’t make a lot of sense to me.
Shouldn’t we be asking whether the risks of global warming are more or less than the risk of global warming policies?