Friday, July 7, 2006
Now, we need to talk solutions. My first premise is that, while we bear great responsibility for the climate crisis now, effective US leadership is urgently required to convince India and China to make the necessary adjustments in their development paths to contain global warming. If so, we need to look at what sort of US response to global warming might create the momentum throughout the world to address this problem. In this post, I suggest several criteria for evaluating proposed US responses. Subsequent posts will evaluate competing proposals, including Waxman, Kerry, Bush, McCain/Lieberman, and any others that you care to nominate.
Here are my criteria:
(1) dramatic and attention-compelling
For a US program to have the desired global leadership effect, it must convince the rest of the world of the magnitude of the crisis and the US commitment to an effective response.
(2) contains incentives for global responses that mirror the level of US commitment
Americans are generally willing to do "their part" to solve problems. But, the US cannot and will not solve the climate crisis on its own. Rather than negotiate endlessly about Kyoto plus -- perhaps we should try something straightforward: a carbon tariff on imported goods and services from nations that fail to achieve equivalent improvements in their level of CO2 efficiency. Then, as we become more CO2 efficient, our goods will enjoy an advantage compared to those from nations that are not doing their part.
(3) market based
A US program largely relying market incentives approaches (e.g. carbon taxes or marketable rights) will provide a relatively economically efficient regulatory system. That economic efficiency is critical given the pervasiveness of the system throughout the US economy.
(3) grandfathers portions of existing emissions through allotments or entitlements
A US program must grandfather a portion of existing emissions by providing cost-free allotments or entitlements. Otherwise, if the full social cost/value of CO2 emissions are captured through a carbon tax or auctioning marketable rights, the transfer payments to the government will make the system wholly unacceptable.
No one will buy it unless they can understand it.
(5) effectively monitored and enforced
Whether we use marketable rights or taxes, we need to quantify existing emissions, calculate potential emissions, and monitor future emissions. Already the EU experience suggests this is more difficult than it might seem. And our experience with offsets and NSR demonstrate the potential for outright fraud. So we need to have the full array of enforcement devices...from administrative tickets to criminal enforcement available to deter the cheats.<>
(6) politically sustainable
There will be a moment in time when the US can create an effective response to global warming. At that moment, we can surmount the usual obstacles to change. Yet, the program enacted at that critical moment must withstand the test of time. The program does not need to be "flexible," which is frequently a synonym for ineffective and capable of manipulation by those who seek to avoid the economic impacts of regulation. Instead, it needs to be sufficiently effective in addressing a vital problem that it can withstand political pressures down the road.
So, on this barometer, how do the currently proposed solutions rate? Stay tuned.