Saturday, December 15, 2007

Global Warming

I accept that there are more pressing priorities than global warming. But the following logic makes sense to me:

1. Higher carbon dioxide concentrations mean higher global temperatures.

2. Faster changes in global temperatures mean higher damage and abatement costs.

3. These damage and abatement costs are not reflected in the market price of fossil fuels.

Therefore, the market price of fossil fuels will be too low without political action.

Since future generations have little political clout, it is more likely that we will underreact to this problem than overreact to it.

Further, and in any event, assuming that carbon taxes are introduced on a revenue-neutral basis (and they pretty much would have to be) taxing carbon is bound to be more efficent than whatever tax it replaces. It would basically be flat and correlated to consumption, not spending. And since every advanced economy is bound to become less carbon intensive in the future, in the long run it would mean smaller government. It's hard to see why the right hasn't embraced this wholeheartedly.

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