Posted by Jeffrey Brown on Nov 4, 2009
Filed Under (Environmental Policy, Uncategorized)
I am posting a day later than usual this week because I spent a good part of yesterday participating in a fascinating discussion about U.S. policy towards climate changes sponsored by the Center for Business and Public Policy, the Institute for Government and Public Affairs, and the Environmental Change Institute (all at the University of Illinois). Three highly accomplished experts on climate change (Charlie Kolstad, Don Fullerton, and Nat Keohane) discussed the various approaches to tackling this global policy priority. The conversation was refreshing for its analytical clarity, its recognition of both the benefits and costs of alternative policies, and for the fact that it was good economics set against a backdrop of political realism. It left me wishing that more of our policymakers in Washington would have such high quality conversations when making their decisions.
In preparing my own thoughts for this event, I read through some of the material from two of the many “sides” in the debate over climate policy legislation – the views of the U.S. Chamber of Commerce and the views of the Obama Administration. Doing so brought back memories of my own days in the White House (in 2001-02 under President Bush). Specifically, it made me remember the constant struggle between the economists and policy wonks who want to have honest and nuanced discussions about complex issues, and the “spin masters” whose job it is to effectively communicate to the public in a simple way. I understand the value of simplicity for communication, but all-too-often, the truth gets “simplified away.”
Economics is fundamentally about trade-offs. Perhaps no phrase is more famous for capturing this idea than “there’s no such thing as a free lunch.” But to listen to the opponents and proponents of climate change legislation – at least after they have been filtered through the communications shops – one could be forgiven for thinking that our policy makers do not understand this.
Let me give two examples – one from each side.
The U.S. Chamber of Commerce has an official position on climate policy that states:
“Our position is simple: There should be a comprehensive legislative solution that does not harm the economy, …”
What is remarkable about this statement is that they do not say that the legislative solution should be one in which “the benefits clearly outweigh the costs.” Rather, they are imposing a truly impossible standard – that the solution “does not harm the economy.” The most straightforward interpretation of this is that they are unwilling to accept any cost or slowdown in economic growth in order to reduce emissions. Unless you believe that there are no costs to climate change and/or no benefit to any solution, this cannot possibly be an optimal – or even rational – policy.
Proponents of climate change often make equally vacuous statements. To hear many in the Obama Administration speak of climate change, you would think that environmental regulation is good for the economy rather than a cost. They focus their attention on the number of “green jobs” that will be created, while largely ignoring the large number of jobs in other industries that will be destroyed. I’ve yet to see a single study showing that environmental regulation is a NET positive for economic growth or job creation in the U.S.
What we need – on this and so many other issues – is a “grown-up conversation” about the costs and benefits. Of course we know that reducing emissions levels will be costly. Of course we know that it will require changes in the way we consume and produce energy. The question is not whether climate policy can be done at no harm to the economy or can even benefit the economy – the question is whether the benefits of reducing emissions is worth the cost.
Fortunately, even if the “talking heads” are not having these discussions, serious thought leaders like those at our forum yesterday are. Let’s just hope that policymakers listen.