The strong version of this argument is much simpler. Carbon prices aren't credible over 30-year investment horizons, and learning spillovers aren't priced, so we need deployment policy alongside the price to build the future supply curve. Say that plainly instead of a long convoluted argument.
Of course then the author would owe readers a test for which expensive deployments actually bend the cost curve (solar did, corn ethanol didn't). Instead, "don't judge us by $/ton" becomes "don't judge us by outcomes." The fix for a flawed scorecard is a better scorecard, not no scorecard.
Part of the value of thinking about the cost of carbon is that it helps frame it properly as an optimization problem with trade-offs. If you have a ton you can save for 35 dollars, you should certainly rather do so than a ton for 200 dollars even if social cost of carbon is difficult to price. As Rustbelt Andy states the learning spillovers etc should also be priced to make things a fair comparison but that principle is basically true.
Also even if social cost of carbon is difficult to price we still have to make our choice on how much we are willing to give up for less carbon. Obviously have no clue if it's 50 dollars or 5000 but having a guess helps us to properly evaluate this against other considerations.
Also in the example of the EV's being perfectly adequate substitutes to gas powered cars you could achieve the same result by pricing carbon at any nonzero price as there would be no reason to buy a new gas powered EV so this is still effectively free. The reason you'd price carbon higher than the price required to get that switch is because it's optimal for providing the incentives for people with gas cars to substitute to public transit, walking, or selling their car and buying an EV earlier and that this tax is a cheaper method of lowering use of carbon than your next ones.
There are certainly political constraints where certain pricing of carbon is more salient than others but that's still an inefficiency we (reasonably) bend to.
My thanks to Noah for writing with such care and cognitive humility. A few points:
1. Three cheers for recognizing that many forms of economic modeling break at the scale of “the world economy over centuries.’ Or even decades.
2. He does not observe that many forms of economic analysis break *on their own terms* when they scale to encompass one polity in the short term: voters care about policies, economic or otherwise, that affect their lives, requiring that you model politics in order to model economics. He just lived this dynamic as a member of a Democratic administration that raised the political salience of climate economics, eliciting backlash.
3. I suggest starting with a triad: the psychological point that most people see their future selves mostly as strangers, the political point that no human is part of a majority smaller than humanity[1], and the political point that most people have a very limited budget for taxing themselves to spend on others (including their future selves). The only way to inspire people to tax themselves substantially to pay for emissions reductions is to persuade them to adopt a core identity which embraces 2075-born Brazilian, Belgian, and Bangladeshi babies. A few million weirdos, including myself and presumably Noah, will do that. 99% of people will not.
3.5 (A sad demonstration of this point is happening right now. Europeans, the most climate-conscious electorates on the planet, suffered this summer through brutal-to-them heat waves which killed about 60,000 of their neighbors, dominated the news, and were attributed to climate change. What topics are determining their votes in hotly contested elections three *months* later? Pensions, inflation, and immigrants.)
4. The weirdos (including myself c. 2010-2023) who have done that mostly formed their climate understanding *as part of their moral identity* and *based on their understanding of climate when they adopted “I am a climate crusader!” as their identity*, and often *as part of a broader skepticism of industrial prosperity they already held*. So you get opposition to BAAJA as an expression of core identity which brushes aside analyses showing it makes sense in terms of future emissions.
5. A subtler problem, which Matt Yglesias has pointed out several times, is that small-polity short-term decarbonization does not make much sense in terms of emissions. It really doesn't matter whether Albuquerque or Alabama reduces their emissions by 20% between now and 2030. We literally will not see the effects when we measure atmospheric concentrations of GHG or global temperature, because they will be smaller than we can detect.
6. Conversely, real progress has been dominated by Chinese manufacturing of solar panels, batteries, and EVs (and European and Chinese manufacturing of wind turbines). The mechanism driving their emergence is learning-by-doing aka Wright’s Law: https://www.ark-invest.com/wrights-law .
7. Future progress continues to require civilization-scale deployment of clean technology, which requires making the economics of that technology win. Subsidies have to happen when the technology is too small to have political pull in the electorate, contra the Biden Administration’s strategy: by the time a technology is big enough to move votes, the subsidies required for step-change increase in deployment are enormous.
8. Two American technologies which promise learning-by-doing-driven civilization-scale clean energy at competitive prices are novel geothermal and hydrocarbons generated from air and water[2]. Both have less awareness among technocrats than nuclear fusion, which will not contribute meaningfully for decades if ever and is a terrible candidate for Wright’s Law.
9. Nuclear fission has order(s) of magnitude more mindshare among technocrats than geothermal or clean hydrocarbons, but has struggled to take advantage of learning-by-doing. If we can get polities to accept < 100 MW reactors in < 5 years from initial proposal to full production, learning-by-doing could get traction. I am not hopeful.
10. A much larger technocrat problem than economism is progressive-establishment[3] legal brain. Most Congress-critters don't accomplish much and never have. Far too many of them are attorneys. They have chosen a role of high status and little agency. The idea of building at civilization scale bewilders and often repels them.
[1] Women are technically but not psychologically or politically: *world* feminism does not stir passion among billions.
Discounting future people isn't really about morality or values, but because the future is hard to predict.
Maybe in the future there will be massive improvements in carbon capture technology that will make climate change a non-issue. Or maybe concerns about climate change will seem quaint in comparison to the much more serious threats from an AI apocalypse. Or a whole host of other unpredictable things may happen.
For example, back in the 60s there was a reason to think that overpopulation could become a major problem. They couldn't know that reproduction rates would soon plummet. But if they had taken extremely strong actions based on their faulty assumptions about the future then they would have done far more harm than good.
The reason we discount the future is not simply about "morality", but because we can't predict the future, and can't be sure that the actions we are taking are actually beneficial to those future generations.
> "in addition to the political challenges of imposing high carbon prices, that approach is likely to cost more than other strategies."
Does this assume that the carbon taxes paid by consumers are pure "cost"? The next paragraph states: "a carbon price could shift those new-car decisions only by jacking up gasoline prices for the entire existing fleet, taxing millions of drivers who own gasoline-powered cars they won’t replace for years, all to influence the far smaller group choosing a new vehicle today." This seems to neglect that (i) high gas prices also influence marginal choices of *how much* to drive; and (ii) the taxes could be used for good purposes, or simply rebated back to consumers.
I may be missing something. Would a rebated carbon tax still "cost more", on net, than other strategies?
I absolutely refuse to take anyone seriously on the issue of climate change if they don’t mention nuclear power. The Linear No-Threshold model is factually wrong, and the ALARA model means that any gain in efficiency will result in redundant safety measures, not reduced cost. The environmental movement has done more to cause climate change than anyone, including Exxon.
Love most of your articles, love the pod, and this is one of the few pieces I have scoffed at 😅
I think Jerusalem Demsas herself would cringe at some of the logical jumps, implicit assumptions, and meandering writing in this article (all of which are well-identified in earlier commentary), and for that reason I am surprised this article was run at all
Maybe not what the comments section is for but I am a paid, loyal, and emoji-loving, subscriber so … 🤷♀️
Thanks for this smart, well-written article. I am neither an economist nor a climate scientist - just a person who dreams about a sustainable world freed from carbon-based pollution and destructive extractive capitalism. My dream, naive and wishful as it may be, is that we commit to discovering a free to all, non-polluting, renewable energy source capable of handling most, if not all, activities of daily living. In my dream we pursue our energy goal with the same zeal and dedication that characterized our national goal of “putting a man on the moon.” I enjoy thinking about the ‘unknown unknowns’ of such an endeavor. If we weren’t fighting and dying over oil, what could we be doing instead? If we weren’t stymied by the economic inequalities made possible by monopolistic policies, what societal benefits might be realized by the return of a thriving middle class? Or, the downside: would we just find new things to covet and fight over? Would we become even more divided over race and class? If we no longer needed to scrap and claw for energy, would we become excessively lazy and self-focused? I don’t know but I am so tired of the endless energy wars and so frightened by the potential climate collapse currently in the making that at times I fall into despair.
The strong version of this argument is much simpler. Carbon prices aren't credible over 30-year investment horizons, and learning spillovers aren't priced, so we need deployment policy alongside the price to build the future supply curve. Say that plainly instead of a long convoluted argument.
Of course then the author would owe readers a test for which expensive deployments actually bend the cost curve (solar did, corn ethanol didn't). Instead, "don't judge us by $/ton" becomes "don't judge us by outcomes." The fix for a flawed scorecard is a better scorecard, not no scorecard.
Part of the value of thinking about the cost of carbon is that it helps frame it properly as an optimization problem with trade-offs. If you have a ton you can save for 35 dollars, you should certainly rather do so than a ton for 200 dollars even if social cost of carbon is difficult to price. As Rustbelt Andy states the learning spillovers etc should also be priced to make things a fair comparison but that principle is basically true.
Also even if social cost of carbon is difficult to price we still have to make our choice on how much we are willing to give up for less carbon. Obviously have no clue if it's 50 dollars or 5000 but having a guess helps us to properly evaluate this against other considerations.
Also in the example of the EV's being perfectly adequate substitutes to gas powered cars you could achieve the same result by pricing carbon at any nonzero price as there would be no reason to buy a new gas powered EV so this is still effectively free. The reason you'd price carbon higher than the price required to get that switch is because it's optimal for providing the incentives for people with gas cars to substitute to public transit, walking, or selling their car and buying an EV earlier and that this tax is a cheaper method of lowering use of carbon than your next ones.
There are certainly political constraints where certain pricing of carbon is more salient than others but that's still an inefficiency we (reasonably) bend to.
My thanks to Noah for writing with such care and cognitive humility. A few points:
1. Three cheers for recognizing that many forms of economic modeling break at the scale of “the world economy over centuries.’ Or even decades.
2. He does not observe that many forms of economic analysis break *on their own terms* when they scale to encompass one polity in the short term: voters care about policies, economic or otherwise, that affect their lives, requiring that you model politics in order to model economics. He just lived this dynamic as a member of a Democratic administration that raised the political salience of climate economics, eliciting backlash.
3. I suggest starting with a triad: the psychological point that most people see their future selves mostly as strangers, the political point that no human is part of a majority smaller than humanity[1], and the political point that most people have a very limited budget for taxing themselves to spend on others (including their future selves). The only way to inspire people to tax themselves substantially to pay for emissions reductions is to persuade them to adopt a core identity which embraces 2075-born Brazilian, Belgian, and Bangladeshi babies. A few million weirdos, including myself and presumably Noah, will do that. 99% of people will not.
3.5 (A sad demonstration of this point is happening right now. Europeans, the most climate-conscious electorates on the planet, suffered this summer through brutal-to-them heat waves which killed about 60,000 of their neighbors, dominated the news, and were attributed to climate change. What topics are determining their votes in hotly contested elections three *months* later? Pensions, inflation, and immigrants.)
4. The weirdos (including myself c. 2010-2023) who have done that mostly formed their climate understanding *as part of their moral identity* and *based on their understanding of climate when they adopted “I am a climate crusader!” as their identity*, and often *as part of a broader skepticism of industrial prosperity they already held*. So you get opposition to BAAJA as an expression of core identity which brushes aside analyses showing it makes sense in terms of future emissions.
5. A subtler problem, which Matt Yglesias has pointed out several times, is that small-polity short-term decarbonization does not make much sense in terms of emissions. It really doesn't matter whether Albuquerque or Alabama reduces their emissions by 20% between now and 2030. We literally will not see the effects when we measure atmospheric concentrations of GHG or global temperature, because they will be smaller than we can detect.
6. Conversely, real progress has been dominated by Chinese manufacturing of solar panels, batteries, and EVs (and European and Chinese manufacturing of wind turbines). The mechanism driving their emergence is learning-by-doing aka Wright’s Law: https://www.ark-invest.com/wrights-law .
7. Future progress continues to require civilization-scale deployment of clean technology, which requires making the economics of that technology win. Subsidies have to happen when the technology is too small to have political pull in the electorate, contra the Biden Administration’s strategy: by the time a technology is big enough to move votes, the subsidies required for step-change increase in deployment are enormous.
8. Two American technologies which promise learning-by-doing-driven civilization-scale clean energy at competitive prices are novel geothermal and hydrocarbons generated from air and water[2]. Both have less awareness among technocrats than nuclear fusion, which will not contribute meaningfully for decades if ever and is a terrible candidate for Wright’s Law.
9. Nuclear fission has order(s) of magnitude more mindshare among technocrats than geothermal or clean hydrocarbons, but has struggled to take advantage of learning-by-doing. If we can get polities to accept < 100 MW reactors in < 5 years from initial proposal to full production, learning-by-doing could get traction. I am not hopeful.
10. A much larger technocrat problem than economism is progressive-establishment[3] legal brain. Most Congress-critters don't accomplish much and never have. Far too many of them are attorneys. They have chosen a role of high status and little agency. The idea of building at civilization scale bewilders and often repels them.
[1] Women are technically but not psychologically or politically: *world* feminism does not stir passion among billions.
[2] https://roadmap.terraformindustries.com
[3] https://www.slowboring.com/p/the-invisible-faction-that-dominates
Discounting future people isn't really about morality or values, but because the future is hard to predict.
Maybe in the future there will be massive improvements in carbon capture technology that will make climate change a non-issue. Or maybe concerns about climate change will seem quaint in comparison to the much more serious threats from an AI apocalypse. Or a whole host of other unpredictable things may happen.
For example, back in the 60s there was a reason to think that overpopulation could become a major problem. They couldn't know that reproduction rates would soon plummet. But if they had taken extremely strong actions based on their faulty assumptions about the future then they would have done far more harm than good.
The reason we discount the future is not simply about "morality", but because we can't predict the future, and can't be sure that the actions we are taking are actually beneficial to those future generations.
> "in addition to the political challenges of imposing high carbon prices, that approach is likely to cost more than other strategies."
Does this assume that the carbon taxes paid by consumers are pure "cost"? The next paragraph states: "a carbon price could shift those new-car decisions only by jacking up gasoline prices for the entire existing fleet, taxing millions of drivers who own gasoline-powered cars they won’t replace for years, all to influence the far smaller group choosing a new vehicle today." This seems to neglect that (i) high gas prices also influence marginal choices of *how much* to drive; and (ii) the taxes could be used for good purposes, or simply rebated back to consumers.
I may be missing something. Would a rebated carbon tax still "cost more", on net, than other strategies?
I absolutely refuse to take anyone seriously on the issue of climate change if they don’t mention nuclear power. The Linear No-Threshold model is factually wrong, and the ALARA model means that any gain in efficiency will result in redundant safety measures, not reduced cost. The environmental movement has done more to cause climate change than anyone, including Exxon.
Love most of your articles, love the pod, and this is one of the few pieces I have scoffed at 😅
I think Jerusalem Demsas herself would cringe at some of the logical jumps, implicit assumptions, and meandering writing in this article (all of which are well-identified in earlier commentary), and for that reason I am surprised this article was run at all
Maybe not what the comments section is for but I am a paid, loyal, and emoji-loving, subscriber so … 🤷♀️
Thanks for this smart, well-written article. I am neither an economist nor a climate scientist - just a person who dreams about a sustainable world freed from carbon-based pollution and destructive extractive capitalism. My dream, naive and wishful as it may be, is that we commit to discovering a free to all, non-polluting, renewable energy source capable of handling most, if not all, activities of daily living. In my dream we pursue our energy goal with the same zeal and dedication that characterized our national goal of “putting a man on the moon.” I enjoy thinking about the ‘unknown unknowns’ of such an endeavor. If we weren’t fighting and dying over oil, what could we be doing instead? If we weren’t stymied by the economic inequalities made possible by monopolistic policies, what societal benefits might be realized by the return of a thriving middle class? Or, the downside: would we just find new things to covet and fight over? Would we become even more divided over race and class? If we no longer needed to scrap and claw for energy, would we become excessively lazy and self-focused? I don’t know but I am so tired of the endless energy wars and so frightened by the potential climate collapse currently in the making that at times I fall into despair.