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Paul Krugman is a very smart guy. I get that. He is a Nobel laureate in economics, advises presidents and routinely appears on talk shows. The only thing we have in common is that we both have B.A.’s in economics. So it’s good to know that even he can go too far, like the rest of us mere mortals.

In an enlightening piece in the New York Times Magazine, Mr. Krugman gives an 8000 word dissertation on the economics of climate change.  Everyone should read it.  He spends the first 2000 words discussing the types of economic solutions that can be used to address climate change and concludes that a workable, market-based approach to regulation, such as cap and trade, is the logical solution. It is a great explanation of a confusing subject.  He should have stopped there. But he didn’t:

This is an article on climate economics, not climate science. But  [insert Wilhelm Scream here]  before we get to the economics, it’s worth establishing three things about the state of the scientific debate.

Mr. Krugman then feels compelled to discuss the science of climate change -- something in which he is not an expert. He makes the same conclusory statements that are the hallmark of climate change advocates and quickly falls into the compulsory lexicon of massive destruction:

“the upward trend [in temperature] is unmistakable”

“precipitation pattern will change . . . sea levels will rise”

"a rise in global temperatures that will be little short of apocalyptic"

“we will eventually face drastic changes in the climate”

“we’re talking about massively disruptive events, like the transformation of the Southwestern United States into a permanent dust bowl over the next few decades”

“avoiding planetary catastrophe is a lot more important”

It’s not that I disagree with any of his doom and gloom conclusions -- it’s that he isn’t a believable messenger. He doesn’t have the scientific background to support his statements. He’s just undermining his own credibility.  And for what?  Let others with the proper credentials get into that fight (and they will).

Now if Paul Krugman wants to opine on matters outside of his areas of expertise and wants to do so using incendiary and calamitous language, far be it from me to tell him otherwise.  However, it will inevitably cause some people to view him as a politician rather than an economist.  Once that happens, about half of the people will stop listening, no matter how much sense he makes.  And that would be a catastrophe.

RELATED POST:  The Precautionary Principle and Climate Change

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Well, it has begun.

The posturing that one would expect before an important environmental conference like the United Nations Framework Convention on Climate Change in Copenhagen is in full swing.  To date, China and India have made it clear that they are not going to accept mandated targets to reduce greenhouse gas emissions.  Their arguments are:

• They are new to the industrial scene and they should have the same opportunity as the other industrialized nations (i.e. the United States) to pollute their way to prosperity;
• Their per capita emissions are, and will remain, well below those of the U.S.;
• Their "dirty" products are consumed primarily by industrialized nations so those nations should pay for the added costs of the emissions.

Politically speaking, these are pretty strong arguments.  The only real response is "Well, yes, but we're in a desperate situation and we need everybody to join in."  That response isn't very effective if you don't believe that global warming is in a "desperate situation" or, more importantly, you don't care. 

So what happens if China and India refuse to agree to any limits?  The practical impact is that if the industrialized nations agree to limits but China and India won't come along, then China and India will have the ability to sell their products cheaper than the U.S.  Jobs will shift  to those countries and imports of cheaper products will increase, while greenhouse gas emissions from China and India will presumably continue to increase. 

Since the U.S. has little power to push around the mountains that are China and India, we will need to look to what we can control -- tariffs on goods coming into the country (though the World Trade Organization could limit that control).  By adding tariffs to the products, we would discourage movement of jobs overseas and the importing of cheap products.  The tariffs could be adjusted as the country ramps up environmental compliance.  Once the country is in compliance with whatever environmental limits are agreed upon, we could eliminate the tariffs and all goods would be back on an even playing field.  Simple, right?  The only problem is that most countries get very upset when tariffs are imposed on their goods. 

China and India have been watching the Congressional climate change debates closely and saw the tariff issue coming.  They have been warning that tariffs are unacceptable.  Ten swing-vote Democrats are now posturing to require that the U.S. insist on full participation by all countries or the imposition of tariffs on the non-conforming countries.  If this is done, China and India may retaliate by imposing their own tariffs and we'll be off to the races.  Relatively smart people have come down on both sides of the issue.

So, like so many other things environmental, it comes down to money.  The new environmental question is likely to become, can we afford a trade war?  I don't have the answer but I remember the words of my father before our first camping trip (paraphrased slightly):  "If you are going to poke a bear with a stick, you'd better have a really good backup plan."  I told him, "I wouldn't poke the bear."  His reply, "That's a pretty good plan, got any others?"

RELATED POST: Environmental Legislation Won't Wait For China

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 Mediation of legal disputes (as opposed to time-consuming and expensive trials) has been a great benefit to the justice system. In mediation, the parties voluntarily meet with a neutral third party who listens to both sides and then splits the parties up. The mediator shuttles between the parties and tries to broker a deal to end the dispute. The success rate is remarkably high.

I’ve had the opportunity to participate in many mediations and I have found that sometime early in the process, after the parties have been split up, you’ll inevitably hear the following finger-pointing exchange between one party and the mediator:

Party 1 (with a slight pout): “They are really bad people. They’re doing bad things and they need to be the first one to make an offer.”

Mediator: “Ok, I’ll go talk to them.” 

The mediator goes to the other party and hears: 

Party 2 (with an air of indignation): “These people are the real villains. Their demands are outrageous. We can’t possibly make any offer. Tell them to make a reasonable proposal.”

Mediator: “Ok, let me talk to them.”

This goes back and forth until one party finally realizes that making the first move isn’t the end of the world, and an offer is made, and then countered, and on it goes until a resolution is reached. That first offer can take five minutes or five hours. It doesn’t matter too much to the mediator – he/she is being paid by the hour. And the mediator knows something the other two parties don’t; that is, sooner or later, someone will make the first offer.

When it comes to international climate change action, China (and India) and the United States are at the beginning of the mediation. Everyone is finger pointing:

U.S.: “China is beginning to be a huge contributor to CO2 emissions. They must commit to a huge reduction."

China: “The U.S. has historically generated much more CO2 than China and has done nothing over the last eight years. The U.S. needs to make the commitment to change, and then we’ll see what we’ll do.”

U.S.: “We’re not going to pass climate change legislation until China does."

China: “ We won’t move.”

Let me shorten this mediation by about four hours by making a suggestion – United States, pass your legislation. Be the first to make the offer. Keep the pressure on China (consider trade policy, for example), but take the lead.  You're just wasting a lot of effort if you insist that China take action at the same time. 

Further, though it certainly has significant environmental problems, it isn’t as though China is just sitting on its 2.6 billion hands. Pop quiz: As between the U.S. and China, which country:

• Committed to reduce the energy intensity of its economy – energy used per dollar of goods produced – by 20% in five years?
• Will increase its total installed capacity for solar power 75 times in just over ten years?
• Plans to install 100 million energy-efficient light bulbs in 2009?
• Has committed $462 billion to scaling up renewable energy by 2020?
• Has increased wind power by 100% in each of the last four years?
• Is the world’s top producer of solar photovoltaic panels?
• Has the more stringent automotive fuel economy standards?
• Invested $12 billion in renewable energy in 2009, placing it second in the world in absolute dollars spent, just behind Germany?
• In 2009 will be the largest installer of wind power.

The correct answer to each question is China. I’ve graded the quiz. The West Coast did well and the Midwest was great but you people on the East Coast, particularly the D.C. area, failed miserably.

My point is that if the U.S. goes first, it won’t be the end of the world. (I won’t pull an Al Gore and say that if we don’t go first, it will be the end of the world. I wouldn’t do that.) Whether its cap and trade, nuclear, or something more creative, legislation is going to happen.  I'm not saying that that is good or bad, just that the genie is out of that bottle.  Insisting that China must act benefits no one – unless you’re being paid by the hour.

RELATED POST:  Tariffs and the Environment: Are We Ready For a Trade War?

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