Climatologist James Hansen Does Not Understand the Economics of Pollution Control
Fortunately, Paul Krugman does:
Unhelpful Hansen: [T]oday’s op-ed article suggests that he really hasn’t made any effort to understand the economics of emissions control. And that’s not a small matter, because he’s now engaged in a misguided crusade against cap and trade, which is — let’s face it — the only form of action against greenhouse gas emissions we have any chance of taking before catastrophe becomes inevitable.... [A]n emissions tax of the form Hansen wants and a system of tradable emission permits, aka cap and trade, are essentially equivalent.... A tax puts a price on emissions, leading to less pollution. Cap and trade puts a quantitative limit on emissions, but from the point of view of any individual, emitting requires that you buy more permits... so the incentives... for individual action to reduce emissions are the same under the two systems. This is true even if some emitters are “grandfathered” with free allocations of permits, as will surely be the case. They still have an incentive to cut their emissions, so that they can sell their excess permits to others.
The only difference is the nature of uncertainty over the aggregate outcome. If you use a tax, you know what the price of emissions will be, but you don’t know the quantity... if you use a cap, you know the quantity but not the price.... [T]he question about uncertainty is secondary; the fact is that cap and trade works. Hansen admits that the sulfur dioxide cap has reduced pollution, but argues that it didn’t do enough; well, it did as much as it was designed to do. If Hansen thinks it should have done more, he should be campaigning for a lower cap, not trashing the whole program...
