Krugman: No, Cracking Down on Coal Won't Cripple the Economy

Paul Krugman takes on the arguments against  the Environmental Protection Agency’s proposed rules on carbon in his Friday column, entitled "The Climate Domino." But first notes that he is a little surprised that the right-wing outrage has been a bit "muted and unfocused." We'll agree with unfocused, not so sure about muted

Sober economist that he is, Krugman takes on the economic arguments against the plan—rather than the all-out crazy conspiracy theories claiming that climate change is a hoax—and he does concede that rules limiting emissions may indeed cause some economic pain.

But ruinous pain? No. He writes:

Claims that the effects will be devastating are, however, not just wrong but inconsistent with what conservatives claim to believe. Ask right-wingers how the U.S. economy will cope with limited supplies of raw materials, land, and other resources, and they respond with great optimism: the magic of the marketplace will lead us to solutions. But they abruptly lose their faith in market magic when someone proposes limits on pollution — limits that would largely be imposed in market-friendly ways like cap-and-trade systems. Suddenly, they insist that businesses will be unable to adjust, that there are no alternatives to doing everything energy-related exactly the way we do it now.

That’s not realistic, and it’s not what careful analysis says. It’s not even what studies paid for by opponents of climate action say. As I explained last week, the United States Chamber of Commerce recently commissioned a report that was intended to show the terrible costs of the forthcoming E.P.A. policy — a report that made the least favorable assumptions possible in an attempt to make the costs look bigger. Even so, however, the numbers came out embarrassingly small. No, cracking down on coal won’t cripple the U.S. economy.

Another favorite argument against taking any action to limit our carbon emissions whatsoever is China. The U.S., Krugman acknowledges, is only responsible for 17 percent of the whole world's carbon dioxide emissions. China kicks out butt in this department with 27 percent, and rising. Therefore, say the handwringers, why bother doing anything?

Krugman's answer: a little thing called leadership. As he says:

America can’t expect other countries to take strong action against emissions while refusing to do anything itself, so the new rules are needed to get the game going. And it’s fairly certain that action in the U.S. would lead to corresponding action in Europe and Japan.

That leaves China, and there have been many cynical declarations over the past few days to the effect that China will just go ahead and burn any coal that we don’t. And we certainly don’t want to count on Chinese altruism.

But we don’t have to. China is enormously dependent on access to advanced-country markets — a lot of the coal it burns can be attributed, directly or indirectly, to its export business — and it knows that it would put this access at risk if it refused to play any role in protecting the planet.

If he world's wealthy countries take real action on emissions, chances are they will impose "carbon tariffs" on countries that don't, Krugman predicts. This gets a little technical, but here is Krugman's take:

Such tariffs should be legal under existing trade rules — the World Trade Organization would probably declare that carbon limits are effectively a tax on consumers, which can be levied on imports as well as domestic production. Furthermore, trade rules give special consideration to environmental protection. So China would find itself with strong incentives to start limiting emissions.

Krugman, and every other reasonable human being in the universe, acknowledges that the new rules are just a start. But a start is better than nothing. Way better. And with any luck, could lead to more urgently needed action to limit climate catastrophe.


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