An interesting post. Canada's been very active on climate policy in the last few years, and economists have played a major role. We seem to have settled on a carbon tax as the backbone of climate policy, despite the high political cost. There's complementary measures, like phasing out coal-fired power by 2030, and some provinces have put a zero-emissions-vehicle mandate in place, but the national carbon price floor - currently C$40/t, rising to $170/t by 2030 - is the centerpiece of the plan. (It's a "price floor" because each province can either set up carbon pricing itself, in which case none of the money leaves the province, or the federal government will do it for them via a federal carbon tax backstop, with the revenue divided up and returned directly to households in the province as a dividend.)
In the Canadian context, a big challenge is that Alberta and Saskatchewan are responsible for a very large share of emissions. One of the advantages of the national carbon price floor is that it lets us coordinate action across provinces, without having to sit down and work out a distribution of Canada's total carbon budget. (That would be a recipe for endless bitter wrangling, since it's zero-sum.) https://twitter.com/andrew_leach/status/1381823072181776385?s=20
I expect that the Biden and Trudeau governments will be working together on climate policy, likely on a sector-by-sector basis - power, transport, etc. Maybe some kind of carbon tariff (given tensions with China, and China's relatively new fleet of coal-burning power plants). I'm curious to see how this will play out.
Hilarious that politicians don't trust economists, as if they listened to us before. Deregulate housing, occupational licensing, and listen to Alex Tabarrok on Covid and THEN come talk about how economic advice don't work. Don't confuse your inability to act with economists' inability to offer advice.
You're stomping in my playground. And I pretty much agree with you on all points, and why have change my focus of research to renewable energy integration. From what I can tell so far, it's very doable at very low cost, with obstacles mainly being things that climate economists don't study.
Thank you for again writing such an excellent piece.
Looking forward to your input on what should be the economists proposal on what to do (yes I read the previous ones, I would love an update looking at what has being picked up by the current administration and what has not been :-) ).
Nordhaus was (unsurprisingly) aware of tail risks, so I am not sure why his academic work did not make more of them. His book for the general reader was "The Climate Casino" and here is what Sachs said in blurb on back: "Nordhaus repeatedly and rightly reminds the reader of the risks of catastrophic tipping points and the huge unknowns concerning the ability of societies and ecosystems to adapt to the changes ahead".
I'd really like to see Nordhaus respond to the point that DICE ignores solar power etc.
Hi, thanks for this post. I'm currently entering the grad research life and it helped me to rethink on the variety of good puzzles that is still there to rethink.
You make a compelling argument. I continue to believe though that the elephant in the room is alternative voting methods that can make climate change politically tractable. Approval voting is probably the most practical.
I know that it's always fun to dunk on economists, but doesn't the silo-ing criticism apply equally the other way around (i.e. that climate scientist have also failed to reach out to economists to better understand the broader impacts of climate change)?
Why are economists the way they are? Much more status-driven than comparable scientists in other fields, extremely confident that they have all the tools anyone could need, and not interested in learning from other disciplines. This is of course an overgeneralization but it's one with some truth in it.
My best guess is that as a field, economists have to deal with opinionated cranks harassing them a lot more than most fields, and this drives them to defensively close off to outsiders and overvalue symbols of authority.
But I don't know for sure, it would be nice to get an insider perspective on this.
I love the parts of this post that nail climate economists for not publishing enough research, putting out simplistic models of climate change damages, and ignoring tail risks. I don’t love the part that takes climate economists to task for “their carbon tax fetish.”
Smith argues that voters grasp (but economists have ignored) that “the people who pay the costs of a carbon tax don’t reap the benefits.” That’s because “carbon taxes are enacted locally, but climate change is a global phenomenon.”
Well, sure. But Smith himself appears to ignore that the costs of carbon taxes are themselves benefits. They’re revenues! Governments can use those revenues to mitigate or even offset the costs of the higher energy prices from the carbon tax. His account of why WA state voters rejected a carbon tax in 2016 and 2018 fetishizes that point but overlooks the accompanying sales tax cut that, in the 2016 referendum, would have offset the costs. He also underplays the electoral damage from social justice forces’ opposition to the referendum. (I wrote about that opposition here: https://www.carbontax.org/u-s-states/washingtons-2016-carbon-tax-defeat/.)
Still, I highly recommend this post. It’s informed, thoughtful, graceful, and lively. But Noah, please, next time, mention the revenue!
I have a theory that there's a type of economist stupid that is a pretty common failure mode for economists. It's like asking a physicist to fix a car. The physicist will be able to tell what the most thermodynamically efficient engine, but if you want to get your car fixed to take it to a mechanic, and if you want to build a better car you find an engineer, not Brian Cox.
Many of the problems mentioned here don't seem specific to climate, but also present whenever there's economists trying to analyse relatively complex phenomena. While there's been way more work done on, for instance, trade or fin svcs, there too the streetlight effect and oddly parametrised (both too much and too little) models abound. Are there other areas where despite these limitations we've come to a point of better common understanding?
Since you start with the premise that global warming is terrifically costly, you deride the work that economists do. In our current political climate, could it be that good economic research would continue to show that warmer temperatures don't hurt much, or even help, and that anyone who publishes in that area is treading in a minefield and would get cancelled? Going against the religiously held principles of the Establishment is something professors are reluctant to do. This very essay of yours shows why economists are reluctant to write articles on whether the US would be better off if Chicago's climate were more like Atlanta's.
An interesting post. Canada's been very active on climate policy in the last few years, and economists have played a major role. We seem to have settled on a carbon tax as the backbone of climate policy, despite the high political cost. There's complementary measures, like phasing out coal-fired power by 2030, and some provinces have put a zero-emissions-vehicle mandate in place, but the national carbon price floor - currently C$40/t, rising to $170/t by 2030 - is the centerpiece of the plan. (It's a "price floor" because each province can either set up carbon pricing itself, in which case none of the money leaves the province, or the federal government will do it for them via a federal carbon tax backstop, with the revenue divided up and returned directly to households in the province as a dividend.)
Mark Jaccard, a veteran of the battles over BC's carbon tax, argues that flexible regulations aimed at the power and transport sectors would arouse far less political resistance, while still being reasonably cost-effective. Like you, he thinks that economists who say that a carbon tax is the optimal policy are ignoring political reality. https://www.cambridge.org/core/books/citizens-guide-to-climate-success/we-must-price-carbon-emissions/66AEBB8BE9A7F7760DC1BCE3A9C50748/core-reader
In the Canadian context, a big challenge is that Alberta and Saskatchewan are responsible for a very large share of emissions. One of the advantages of the national carbon price floor is that it lets us coordinate action across provinces, without having to sit down and work out a distribution of Canada's total carbon budget. (That would be a recipe for endless bitter wrangling, since it's zero-sum.) https://twitter.com/andrew_leach/status/1381823072181776385?s=20
I expect that the Biden and Trudeau governments will be working together on climate policy, likely on a sector-by-sector basis - power, transport, etc. Maybe some kind of carbon tariff (given tensions with China, and China's relatively new fleet of coal-burning power plants). I'm curious to see how this will play out.
Happy Birthday!!! Thanks for the consistently thought-provoking newsletter!
Hilarious that politicians don't trust economists, as if they listened to us before. Deregulate housing, occupational licensing, and listen to Alex Tabarrok on Covid and THEN come talk about how economic advice don't work. Don't confuse your inability to act with economists' inability to offer advice.
You're stomping in my playground. And I pretty much agree with you on all points, and why have change my focus of research to renewable energy integration. From what I can tell so far, it's very doable at very low cost, with obstacles mainly being things that climate economists don't study.
Thank you for again writing such an excellent piece.
Looking forward to your input on what should be the economists proposal on what to do (yes I read the previous ones, I would love an update looking at what has being picked up by the current administration and what has not been :-) ).
Nordhaus was (unsurprisingly) aware of tail risks, so I am not sure why his academic work did not make more of them. His book for the general reader was "The Climate Casino" and here is what Sachs said in blurb on back: "Nordhaus repeatedly and rightly reminds the reader of the risks of catastrophic tipping points and the huge unknowns concerning the ability of societies and ecosystems to adapt to the changes ahead".
I'd really like to see Nordhaus respond to the point that DICE ignores solar power etc.
Hi, thanks for this post. I'm currently entering the grad research life and it helped me to rethink on the variety of good puzzles that is still there to rethink.
Are there any economists still working who have been exceptionally good on climate? Other than Nordhaus, dubiously.
You make a compelling argument. I continue to believe though that the elephant in the room is alternative voting methods that can make climate change politically tractable. Approval voting is probably the most practical.
I know that it's always fun to dunk on economists, but doesn't the silo-ing criticism apply equally the other way around (i.e. that climate scientist have also failed to reach out to economists to better understand the broader impacts of climate change)?
Why are economists the way they are? Much more status-driven than comparable scientists in other fields, extremely confident that they have all the tools anyone could need, and not interested in learning from other disciplines. This is of course an overgeneralization but it's one with some truth in it.
My best guess is that as a field, economists have to deal with opinionated cranks harassing them a lot more than most fields, and this drives them to defensively close off to outsiders and overvalue symbols of authority.
But I don't know for sure, it would be nice to get an insider perspective on this.
I love the parts of this post that nail climate economists for not publishing enough research, putting out simplistic models of climate change damages, and ignoring tail risks. I don’t love the part that takes climate economists to task for “their carbon tax fetish.”
Smith argues that voters grasp (but economists have ignored) that “the people who pay the costs of a carbon tax don’t reap the benefits.” That’s because “carbon taxes are enacted locally, but climate change is a global phenomenon.”
Well, sure. But Smith himself appears to ignore that the costs of carbon taxes are themselves benefits. They’re revenues! Governments can use those revenues to mitigate or even offset the costs of the higher energy prices from the carbon tax. His account of why WA state voters rejected a carbon tax in 2016 and 2018 fetishizes that point but overlooks the accompanying sales tax cut that, in the 2016 referendum, would have offset the costs. He also underplays the electoral damage from social justice forces’ opposition to the referendum. (I wrote about that opposition here: https://www.carbontax.org/u-s-states/washingtons-2016-carbon-tax-defeat/.)
Still, I highly recommend this post. It’s informed, thoughtful, graceful, and lively. But Noah, please, next time, mention the revenue!
I have a theory that there's a type of economist stupid that is a pretty common failure mode for economists. It's like asking a physicist to fix a car. The physicist will be able to tell what the most thermodynamically efficient engine, but if you want to get your car fixed to take it to a mechanic, and if you want to build a better car you find an engineer, not Brian Cox.
Many of the problems mentioned here don't seem specific to climate, but also present whenever there's economists trying to analyse relatively complex phenomena. While there's been way more work done on, for instance, trade or fin svcs, there too the streetlight effect and oddly parametrised (both too much and too little) models abound. Are there other areas where despite these limitations we've come to a point of better common understanding?
Since you start with the premise that global warming is terrifically costly, you deride the work that economists do. In our current political climate, could it be that good economic research would continue to show that warmer temperatures don't hurt much, or even help, and that anyone who publishes in that area is treading in a minefield and would get cancelled? Going against the religiously held principles of the Establishment is something professors are reluctant to do. This very essay of yours shows why economists are reluctant to write articles on whether the US would be better off if Chicago's climate were more like Atlanta's.
But...I like carbon taxes...