Paul Krugman on Climate Change's Surprising Analogy

On the one hand, Paul Krugman gives former Treasury Secretary Henry Paulson some credit for breaking ranks with his fellow Republicans and acknowledging that climate change is real and urgent in an Op-Ed article in Sunday's New York Times. (Of course, these kudos are a sad sign of just how unreasonable Republicans have become—to give them credit for bravery for simply acknowledging reality. But that's where we are.)

On the other hand, as Krugman points out in his Monday column, Paulson's call for a national tax on carbon emissions is an empty gesture. It ain't gonna happen. "A carbon tax may be the best thing we could do," Krugman writes, "but we won’t actually do it."

The question, Krugman suggests, is whether we will do any of the second-best things to combat catastrophic climate change. And given today's political climate, it's a big question. But here are the second-best things that Krugman asks Paulson if he (and his fellow Republicans) will support:

First, consider rules like fuel efficiency standards, or “net metering” mandates requiring that utilities buy back the electricity generated by homeowners’ solar panels. Any economics student can tell you that such rules are inefficient compared with the clean incentives provided by an emissions tax. But we don’t have an emissions tax, and fuel efficiency rules and net metering reduce greenhouse gas emissions. So a question for conservative environmentalists: Do you support the continuation of such mandates, or are you with the business groups (spearheaded by the Koch brothers) campaigning to eliminate them and impose fees on home solar installations?

Second, consider government support for clean energy via subsidies and loan guarantees. Again, if we had an appropriately high emissions tax such support might not be necessary (there would be a case for investment promotion even then, but never mind). But we don’t have such a tax. So the question is, Are you O.K. with things like loan guarantees for solar plants, even though we know that some loans will go bad, Solyndra-style?

Finally, what about the Environmental Protection Agency’s proposal that it use its regulatory authority to impose large reductions in emissions from power plants? The agency is eager to pursue market-friendly solutions to the extent it can — basically by imposing emissions limits on states, while encouraging states or groups of states to create cap-and-trade systems that effectively put a price on carbon. But this will nonetheless be a partial approach that addresses only one source of greenhouse gas emissions. Are you willing to support this partial approach?

Then Krugman suggests that Paulson's analogy of the climate crisis to the 2008 financial crisis is a little off. The financial crisis was one in which one could say disaster was days away. The climate crisis, while disastrous, is one more likely to unfold over the course of decades.
A better analogy is also a more depressing one in terms of political realities. "In policy terms, Krugman writes, "climate action — if it happens at all — will probably look like health reform. That is, it will be an awkward compromise dictated in part by the need to appease special interests, not the clean, simple solution you would have implemented if you could have started from scratch. It will be the subject of intense partisanship, relying overwhelmingly on support from just one party, and will be the subject of constant, hysterical attacks. And it will, if we’re lucky, nonetheless do the job."

If we're lucky.

It's a big if.


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