Nordhaus has argued that climate change should be considered a “global public good,” like public health and international trade, and regulated accordingly, but not through a command-and-control approach. Instead, by agreeing on a global price for burning carbon that reflects its whole cost, this primary cause of rising temperatures could be traded and taxed, putting market forces to work on the problem.
Yes, taxing carbon emissions will create pressure on polluters to find creative solutions, and that’s good. But unless we also couple that with laws that enshrine the actual goal, there is no guarantee that the new pressure on the market won’t find an outlet that is just as bad, either to the environment or the populace.
What if polluters find a way to store solid carbon, but it releases an enormous amount of methane? Or they do it by tearing down huge swaths of forest (without burning it)? Well, they avoided being taxed on carbon, so I guess all’s well that ends well!
At minimum, we need some laws so that no wealthy polluter is at liberty to treat the tax as the cost of doing business. Polluters must be required to take reasonable steps to reduce their emissions or mitigate the effects, even if they can afford to pay the tax.
It is a false dilemma to say that we can have either laws or market solutions but not both. Only the willfully ignorant or unimaginative think it is impossible for government to craft regulations that draw a bright line around what kinds of outcomes are necessary, while still leaving broad flexibility for industry and society to look for ways to meet it.
Typically solid Krugman thread, with a gut-punch of a conclusion.