Thursday, August 25, 2016

Richard Tol on climate policy

As Paul Matthews pointed out in the comments section of a previous thread,  Richard Tol has a new paper, called The Structure of the Climate Debate. In it he argues for a specific climate policy (low but rising carbon tax); celebrates the Paris agreement for handing back the responsibility to nation states; and discussing possible reasons for the lack of progress in climate policy over the past two decades.

The paper is well written and I suggest you read it in full. I will restrict myself to a few comments for now. These comments relate to the proposed carbon tax and the reasons for the lack of progress.

Richard writes:

"First-best climate policy is simple: A uniform carbon tax, rising steadily over time, is all we need... A carbon tax is ... the cheapest way to reduce greenhouse gas emissions. ... Over time, the carbon tax should rise. ... Higher carbon taxes would lead to deeper emission cuts... The above discussion about the impacts of climate change suggests that a modest carbon tax can be justified, but that more ambitious goals may be hard to defend."

The argument presupposes a switch from carbon intensive processes and products to less intensive. However, making fossil based energy more expensive will hurt consumers, especially the poor. Politicians are therefore not in a position to guarantee a long term policy a la Tol. Given enough pressure they will bow.

Rather than relying exclusively on welfare economics applied to climate policy, it would be useful to take on board some insights from political scientists about voting behaviour and the political process.

The modest carbon tax would make sense if complemented by a policy of innovation in the energy sector so that it makes economic sense to switch to low and zero-carbon products. Existing renewable energy systems cannot be scaled up to provide us with such an alternative path (nuclear aside--which is politically contested in many countries). As is well known, these arguments have been made in the Hartwell Paper and by others.

With regard to the lack of progress Richard points to the self-interest of bureaucracies and politicians. The former want to extend their remit and resource base, the latter want to engage in grand-standing. While this may be true, he overlooks the direct motive of trying to pre-empt a rise of green votes. After all, as Richard remarks, a majority in all countries is in favour of doing something about climate change (I am not so sure one can believe the added clause "even if energy becomes more expensive"--this seems to be the crux, see above). Politicians engage in cheap talk when pandering to these potential voters. At the same time it opens up opportunities to engage them in serious debates about practical solutions.


Warren Pearce said...

Section 4 suggests that RT does not subscribe to the idea that climate change is a wicked problem.

Unknown said...

Tim Worstall has long argued a slightly more extreme version of this conclusion, e.g. So Britain has solved Climate Change then.

Werner Krauss said...


in your working paper, there are so many stereotypes involved that it nearly kills your argument. Environmentalists are hysterical, especially PIK; scientists are like monks without worldly interests; politicians and bureaucrats are driven by their interests, and all the activists are simply jumping on the bandwagon. And then there is instinct.
This kind of rhetoric reminds me of current populism, they would subscribe to most of these arguments - except the carbon tax, of course.

Unknown said...

People finding Richard's text too long might enjoy this video which says very much the same things: Yes Prime Minister 2013 (Global Warming).

Paul Matthews said...

It's an interesting paper and very wide-ranging - perhaps too wide-ranging. I think he said on twitter that it would annoy everyone, or something like that.
As Warren points out he does say climate change can be "easily solved" by a carbon tax, but how is that to be achieved in a fair and global manner, now that China is the biggest emitter? If the UK introduces a carbon tax, production just moves to China, which of course has already happened. On the other hand he says at the beginning that climate policy has moved slowly and has not reduced emissions.

The part that caught my eye, having just read Reiner's Nature article, was where he says that "Environmentalists and politicians have the unfortunate habit of phrasing the need for climate policy as a scientific imperative ....The science has spoken, and we must act. This is a categorical error" which seems to agree very much with Reiner's argument.

The section on the Paris agreement is also provocative. He describes it as "a major step in the right direction" while acknowledging that "The Paris Agreement discarded legally binding emission targets." and that "climate policy is aspirational" with countries essentially free to do what ever they like.

richardtol said...

oh no, have I plagiarized a comedy show?

Anonymous said...

finde ich nicht gut... und irgendwie unlogisch. Grundmann behauptet, dass die Gruppen, die einen Fortschritt in der Klimapolitik wollen, Schuld daran haben, dass es keinen Fortschritt gibt. Und zwar außschließlich diese!!! Hm. Man muss schon einen Knoten im Hirn haben oder ein Rechtskonservativer sein, um das zu verstehen.

Aber egal: ich stimme Grundmann in einem Punkt zu: die Ergebnisse der Wissenschaft sind EINE Grundlage für eine Entscheidung. Es gibt viele andere Punkte, die man beachten kann. Und aus meiner Erfahrung: Diktaturen sind viel schlechter im Umweltschutz als Demokratien. Von Storch oder Grundmann haben ja eher keine Erfahrungen mit Diktaturen, was man an vielen ihrer schlechten Beiträge immer wieder sieht.


jo, stimme ihnen zu: die alten Kalten Krieger... Verräter der Zwiebel, wenn man melodramatisch sein will.

@ReinerGrundmann said...

Over at Paul Matthews's blog there is a civilized but lively debate on this topic, with Richard Tol being involved in the discussion. Shame it did not work here.

richardtol said...

Paper revised and resubmitted. Your comments are gratefully acknowledged.