Tuesday, March 27, 2007

Global Warming: A Modest Proposal

I believe that global warming is a real problem, and the result, even if non-catastrophic, of continuing the status quo will be billions of dollars of net economic damage over the next century. A good first step would be a tax on carbon emissions.

Economist William D. Nordhaus has estimated that an optimal carbon tax might start at $16 a ton (less than five cents a gallon of gasoline) and rise over time. Such a policy would be a good first step, but would still leave some countries as net losers. Nordhaus argues convincingly that a tax that reduced climate change to zero would cost more than the economic benefits it provided. Even this was not the case, imposing such a high tax would be politically impossible. Countries that were already hot, highly dependent on agriculture, low lying, and relatively low per capita producers of greenhouse gasses would be net losers, and many of these countries are already poor.

What can be done for them? One option might be for countries that are net beneficiaries of the production of greenhouse gasses to send the governments of the disadvantaged countries a check. This may not always be the best option. Here are some other ideas:

Cut or reduce tariffs on their products
Stop subsidizing our agricultural production so that it’s harder for them to compete with it.

Farmers are a powerful and concentrated interest that will fight a simple elimination of these benefits tooth and nail, so a third step will probably be required as a matter of practical politics: replace current agricultural subsidies and protective tariffs with payments simply for keeping arable land green.

This is a change that makes some sense on its own merits. Having green fields to look at rather than strip malls is arguably a public good that the rest of us should be willing to subsidize. Less so low cost corn syrup.

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