Thursday, October 09, 2014
Conservatives ask: What would Milton Friedman do about warming?
Really? Friedman would put a price on carbon dioxide -- a harmless, odorless chemical that is essential for plant growth? Friedman spent most of his life defying the consensus so the present semi-consensus is unlikely to have impressed him. But Milt was a clever guy and good at making people think. He might therefore have said that what they should do is what Ross McKitrick says - set the price of carbon based on the rate of warming. i.e. $0.00
If the late free-market economist Milton Friedman were alive today, he'd probably support pricing carbon.
That was the argument made by two economists on a panel today at the University of Chicago, where Friedman taught for more than 30 years.
Steve Cicala of the university's Harris School of Public Policy and Michael Greenstone, a former adviser to President Obama who holds a chair named for Friedman, argued that the anti-regulatory economist would have supported government policies aimed at protecting and compensating victims of man-made warming. Friedman, who died in 2006, would have viewed climate change as a negative externality associated with burning fossil fuels and would have believed that society was entitled to recover its losses from those who emit carbon to advance their economic interests, they said.
While there is a market for the products that are associated with greenhouse gas emissions -- like electricity, fuel and steel -- there is no market for the pollution inflicted by their manufacturers on the public.
"It is theft," said Cicala. "That's a loaded term, but if someone else has a better term for taking something from someone without their consent and without compensating them, I'd be happy to hear it."
"We do have a climate policy, and it's just that it's fine to pollute," said Greenstone, who now directs the Energy Policy Institute at the University of Chicago.
The way to internalize greenhouse gas emissions is for the government to create a market for emissions and then get out of the way, he said. The cost to emit should track with a rigorous estimate of the social cost of carbon -- the incremental cost to society of each additional metric ton of CO2 emissions. The Obama administration's often-controversial figure is $37 per metric ton.
The panel was moderated by former Rep. Bob Inglis (R-S.C.), whose stance on climate change contributed to his 2010 loss in the Republican primary. He now heads the Energy and Enterprise Initiative at George Mason University.
Inglis, who still describes himself as a conservative, argues that his colleagues on the right would be more receptive to the issue of climate change if there were a conservative policy model to address it. His initiative proposes a revenue-neutral carbon tax, which would return all the revenue from a levy on emissions to the public in the form of other tax cuts.
Inglis said any carbon tax that could garner support from conservatives like himself would have to include border protections to keep emissions from relocating overseas and would have to be revenue neutral.
Cicala said the key was to give high-emitting industries in other countries an incentive to reduce their emissions rather than just hitting them with a border adjustment cost that might spark a trade war.
While it may be difficult to persuade developing companies to tax their fossil fuels resources, he said, taxing consumption in wealthy countries will cover most emissions for the simple reason that rich countries consume more.
Posted by John J. Ray (M.A.; Ph.D.).