Everyone is entitled to his own opinion, but not his own facts. Founded by Mark Kleiman (1951-2019)
Carbon charge continues to confuse
The Economist letters editor went on holiday (or something) and let two missives into print that need a knuckle rap even though letters aren’t exactly a critical outlet for consequential policy analysis.Â Both writers are articulate and thoughtful and one is a real live economist with a whole career under his belt.
They are also howlingly wrong about this: “First, a ‘one size fits all’ tax requires an impossible calculation of the average cost of reducing emissions over a given period of time.”Â A carbon charge has lots of interesting problems and challenges (so does a cap and trade scheme, of course) but this is exactly, precisely, not one of them: its principal advantage is that to get it right, we only need to know the marginal damage from additional greenhouse gas releases at current levels, whereas to get a cap right, we need to know the whole marginal cost-of-carbonrelease curve and the cost of carbon reduction over the same range.Â To set a cap at some level or another requires no knowledge whatever, but (as is easy to forget) the point of all this is to stabilize climate, not to have a policy.Â The right cap is at the level where marginal cost of further reduction equals marginal benefit thereof, so we have to know where these lines cross and keep updating them (and adjusting the cap) as things change. The cost of reduction, in particular, moves quickly (down) as new policies like this induce technical and managerial learning.
To set a tax, we only have to know the marginal cost of carbon release at the level we’re at now, which is much less daunting (though as carbon releases fall, marginal damage probably also falls and the tax can be reduced some).
None of this means a carbon tax (I wish we could learn to call it a carbon charge, the price of using the air as a greenhouse gas dump) will solve everything. Some ways to efficiently reduce GHG emissions are market failures and require parallel government action (for example, to drive less I need not only shoes and a bicycle, but nice streets to walk on or a bike path (or a tram!) none of which I can buy without government help.
Author: Michael O'Hare
Professor of Public Policy at the Goldman School of Public Policy, University of California, Berkeley, Michael O'Hare was raised in New York City and trained at Harvard as an architect and structural engineer. Diverted from an honest career designing buildings by the offer of a job in which he could think about anything he wanted to and spend his time with very smart and curious young people, he fell among economists and such like, and continues to benefit from their generosity with on-the-job social science training.
He has followed the process and principles of design into "nonphysical environments" such as production processes in organizations, regulation, and information management and published a variety of research in environmental policy, government policy towards the arts, and management, with special interests in energy, facility siting, information and perceptions in public choice and work environments, and policy design. His current research is focused on transportation biofuels and their effects on global land use, food security, and international trade; regulatory policy in the face of scientific uncertainty; and, after a three-decade hiatus, on NIMBY conflicts afflicting high speed rail right-of-way and nuclear waste disposal sites. He is also a regular writer on pedagogy, especially teaching in professional education, and co-edited the "Curriculum and Case Notes" section of the Journal of Policy Analysis and Management.
Between faculty appointments at the MIT Department of Urban Studies and Planning and the John F. Kennedy School of Government at Harvard, he was director of policy analysis at the Massachusetts Executive Office of Environmental Affairs. He has had visiting appointments at UniversitÃ Bocconi in Milan and the National University of Singapore and teaches regularly in the Goldman School's executive (mid-career) programs.
At GSPP, O'Hare has taught a studio course in Program and Policy Design, Arts and Cultural Policy, Public Management, the pedagogy course for graduate student instructors, Quantitative Methods, Environmental Policy, and the introduction to public policy for its undergraduate minor, which he supervises. Generally, he considers himself the school's resident expert in any subject in which there is no such thing as real expertise (a recent project concerned the governance and design of California county fairs), but is secure in the distinction of being the only faculty member with a metal lathe in his basement and a 4Ã—5 Ebony view camera. At the moment, he would rather be making something with his hands than writing this blurb.
View all posts by Michael O'Hare
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