Carbon compromise?

In a remarkable and clear oped "A Conservative Answer to Climate Change" James Baker and George Shultz lay out the case for a carbon tax in place of the complex , cronyist and ineffective regulatory approach to controlling carbon emissions.

A plea to commenters. Don't fall in to the trap of arguing whether climate change is real or whether carbon (and methane) contribute to it. That's 5% of the debate. The real debate is how much economic damage does climate change actually do. Science might tell us that the temperature will warm 2 degrees in a century , with a band of uncertainty. But the band of uncertainty of the economic , social and political consequences of 2 degrees is much bigger. Moreover , the band of relative uncertainty is bigger still. Does "science ," as the IPCC claims , really tell us that climate change is the greatest danger facing us -- above nuclear war , pandemic , state failure , and so on?

And most of all , given that our governments are going to do something about climate change , how can we do something much more efficient , and (plea to environmentalists) much more effective? That's the question worth debating.

Both sides have fallen in to the trap of arguing about climate change itself , as if it follows inexorably that our governments must respond to "yes" with the current system of controls and interventions. The range of economic and environmental effects from the "how" question are much , much larger than the range of the effects of the "is climate change real" question.

So , Baker and Shultz lay out in gorgeous clarity the kind of compromise we all hope our governments can still occasionally achieve: Given that we're going to do something , trade a carbon tax for the removal of intrusive regulation. You get more economy and less carbon.

The oped refers to a report from the Climate Leadership Council , previous post , I suggested carbon rights instead: Each American owns the rights to emit X tons of carbon , which he or she sells on an electronic marketplace. Or throws away , if they want to do their bit. That too gives people a stake in keeping the system going.

But we should be clear when as economists we are treading into political waters. Giving up on a optimal tax in order to produce political support for a project is the kind of tradeoff that we're not as good at as we are at figuring out optimal taxes in the first place , and figuring out compromises between current political groupings is really not our strong point. Perhaps it would be better to outline the possibilities -- rebate if you think it's politically necessary , use to eliminate other distorting taxes if you can -- and let politicians figure that one out.

Quibbles over.

I must add that Shultz is an inspiration. I hope that at 96 I can write opeds half this good. Heck , I wish I could do it now!

Update: A Conservative Case for Climate Action by Martin Feldstein , Ted Halstead , and N. Gregory Mankiw in the New York Times , describing the same plan , also excellent.