Notes & Letters

Letters from Robert Stavins, S. Fred Singer, Ian Parry, Senator Joseph Lieberman and Roger Carstens

Global Warming

In “Taking Global Warming to Market” (Autumn 2005), Senator Joseph Lieberman argues on behalf of the Climate Stewardship Act. Unfortunately, support for the domestic program in the McCain-Lieberman legislation is not sufficient for this fundamentally global problem. In addition, the United States should work to develop a new international agreement that is acceptable to the President, the Senate, and the international community. I recommend three key elements.

First, both industrialized and developing countries must have serious responsibilities. A well structured international emissions trading program, combined with targets for developing countries that become more stringent as they become wealthier, can do the job cost-effectively and fairly.

Second, long-term targets are required for this long-term problem. Costs can be kept low in the short-term by employing moderate targets, but the anticipated future severity of climate change requires that more ambitious long-term targets be put in place now, to motivate needed technological change.

Third, market-based instruments can keep down costs of emissions reductions in the short term and bring them down even lower in the long term. Domestically, a system of tradable permits can be used, as Senator Lieberman would suggest. Internationally, such a system can reduce costs by as much as 75 percent by financing more climate-friendly development paths in poor countries while sparing rich countries the most wrenching and least politically realistic adjustments.

By working with other nations to develop the architecture of a new international agreement, the United States can place itself in a position of international leadership on this global issue. Domestic actions are not sufficient, and at worse, may be a distraction.
Robert Stavins
Harvard University

If my goal were simply to limit the emission of the greenhouse gas CO2 in the least costly way, I might choose the cap-and-trade scheme Senator Lieberman proposes, despite its real problems. But why impose such a costly constraint on our economy?

Senator Lieberman alludes to “the debate whether carbon-dioxide emissions can warm the earth” and “whether [warming] would be a good thing, leading to greater agricultural productivity.” Indeed. While the atmosphere has warmed by about 0.3 degrees Celsius in the past 25 years-after nearly four decades of cooling-there is no scientific agreement on whether and how much of the warming is manmade or part of a natural cycle. Further, reputable economists have concluded that such modest warming would produce net benefits, raising GNP and average incomes.

There is no debate whatsoever about the effectiveness of various schemes proposed-be they the Kyoto Protocol or McLieberman. Their combined impact would not be detectable but each would raise the cost of energy and create another bureaucracy.

Tony Blair, one of Kyoto’s most vocal proponents, has changed his mind. On September 15 the Prime Minister said “no country is going to cut its growth or consumption” despite environmental fears. Blair’s comments mark a U-turn and have dismayed environmentalists.

Cap and trade does nothing to limit growing emissions from vehicles and airplanes, or from home heating with oil or gas. It raises costs on certain electric utilities that must pass them along to ratepayers. It penalizes the use of domestic coal in favor of ever scarcer and costlier natural gas. It may favor construction of nuclear plants-although that is uncertain. One thing is certain: Energy costs will rise rapidly as energy consumption and CO2 emissions bump up against the cap.

Amidst costly natural disasters and possible terrorist acts, we should not waste finite resources on a putative global warming. Preparation and adaptation may be our best response.
S. Fred Singer
University of Virginia

Senator Lieberman’s CO2 reduction proposal has considerable merit. It would give firms the flexibility to reduce emissions at low cost, and the incentives to develop advanced emissions control technologies. But a tax imposed on the carbon content of fossil fuels would have these advantages and others as well.

The revenue from the tax could be used to lower income taxes that distort the economy by discouraging work effort and savings. This “revenue-recycling” is a cost-advantage over permits. Studies estimate that the economic costs of a $20 per ton tax on carbon (which would reduce emissions by about 10 percent and raise annual revenues of almost $30 billion) would be about a third of the costs of a permit program that reduced emissions by the same amount.

Another reason for a carbon tax is fairness: households bear the brunt of the costs of controlling emissions in higher prices for electricity, gasoline and so on. With a carbon tax, all household groups, including low-income ones, can be partly compensated through reductions in income taxes. Under the permit policy, firms that are given permits with market value for free may experience an overall increase in their equity values; this ultimately benefits stock owning households, but they are primarily only high-income groups.

The main disadvantage of carbon taxes is political rather than economic: energy companies are opposed to them because of the taxes they would have to pay. However, studies show that most of the tax payment would be passed to consumers in higher energy prices; hence it would only require a small tax rebate to prevent energy companies from losing equity value under a carbon tax.
Ian Parry
Resources for the Future

Lieberman responds:

During the two-year period when Senator John McCain and I developed the Climate Stewardship and Innovation Act, we reviewed all of the issues raised by Messrs. Stavins, Singer and Parry.

We chose a cap and trade approach because we believe it is the best mechanism-for both domestic and international approaches to climate change-to meet the host of environmental, economic and social objectives and concerns flagged by the writers.

If the international community is to produce a truly global climate treaty that encompasses both industrialized and industrializing nations, then U.S. leadership through domestic policy action, in addition to diplomacy, is indispensable. That is why adopting a mandatory climate policy-in the form of a cap and trade program-is vital. By creating a true market for emissions reductions, such an approach arguably engenders an element of economic dynamism more powerful than the negative effect of a tax-thus leading to greater cost savings and investment in innovation. Moreover, the flexible structure of a cap and trade design can be used by policymakers to redress any inequities that may result from a mandatory emissions control policy.

However effective a long-term target may be in triggering investment in technological innovation, societies must also make a succession of sustainable short-term commitments in order to initiate that investment process. Both long-term and short-term policy mandates are necessary, and the latter is instrumental to the former. Our bill also addresses the need for technology innovation, and some of the conundrums that plague would-be investors in innovation in the short-term, by establishing an innovation promotion program that complements the cap and trade mechanism.

Finally, we believe that the vast body of scientific research on climate change dictates immediate action. The weight and scope of the evidence is too great and the stakes too grave to justify further inaction in the name of resolving secondary and tertiary scientific details-especially since our proposal would impose no more than modest economic costs on the U.S. economy.

Warrior Honor

Robert Kaplan’s excellent piece, “Warrior Honor” (August 2005), shows that the author has his finger squarely on the pulse of the American military.

As a career Army Special Forces officer whose last posting was commanding the unit that trains all incoming Special Forces soldiers, I had the honor of conversing with a large cadre of instructors who had recently returned from the battlefields of Iraq, Afghanistan, and other places. I also talked to hundreds of soldiers who had gravitated toward Green Beret training in hopes of joining its ranks.

The many conversations I had seem to confirm Kaplan’s themes. These soldiers indeed adhere to a culture of warrior honor, one that invites a good fight with the enemy, believes in the essential “goodness of their nation’s mission”, and does not desire anyone’s pity.

This culture is often reinforced experientially during service. Most soldiers have seen enough of the world to know that there is evil out there-and that evil is often times best confronted by force. After walking the mass graves of Srebrenica, searching for civilian bodies through the still-smoking rubble that days before housed a family of Kosovo Albanians, or finding video tapes showing the torturing of political prisoners-be that in Panama or Iraq-one gets a sense that executing your nation’s foreign policy decisions sometimes means leading a combat patrol.

Kaplan gets this-and he accurately conveys the thoughts and feelings of those who refer to themselves as the “Quiet Professionals.”

My thanks, then, to Kaplan, who in essay after essay shows that he seems to know soldiers better than we know ourselves.
Roger Carstens
Lieutenant Colonel, U.S. Army

Appeared in: Volume 01, Number 2 | Published on: December 1, 2005
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