Rants & Reasons

If there is a single approach to policy that conservatives have consistently endorsed over the past 30 years, it is that free-market solutions to problems are always better than government mandates.

The argument for free market solutions is that, in a free market, the price at which a commodity is sold represents the real preferences of the people involved in the transaction, and the profit motive provides an incentive for buyers and sellers to use their ingenuity to find the most efficient solution.

Proposals to institute a cap-and-trade system to reduce carbon emissions is one such free market solution.

A cap-and-trade system is a mechanism that sets an overall limit on the emission of greenhouse gases, but allows companies that can easily reduce emissions to sell credits to other companies for which such reduction would be difficult, thus creating a market for emissions credits. The cap ensures that emissions will not exceed a desired amount. Companies that limit their emissions can make a profit on their efforts; companies that do not limit their emissions must buy a permit to emit. All parties have an incentive to reduce emissions but can make their own decisions about how much to emit, when to purchase abatement equipment, how to price their product in light of their decisions, etc.

One of the reasons liberals have endorsed a cap-and-trade system, rather than a straight tax on carbon emissions, is the hope that, because it is a market-based solution, conservatives would endorse it.

But cap-and-trade proposals in Congress are receiving no love from Republicans. Conservative spokesperson Newt Gingrich has withdrawn his former support for it and legislation in Congress  is opposed by most if not all Republicans.

Why?

Granted, there will be costs to firms who must limit their CO2 emissions in order to sell emissions credits (or refrain from buying them), although current estimates are that the overall costs over time will not be an excessive drag on economic growth.

As Paul Krugman pointed out recently, complaints about restrictions on economic growth

…nearly always come from people who claim to believe that free-market economies are wonderfully flexible and innovative, that they can easily transcend any constraints imposed by the world’s limited resources of crude oil, arable land or fresh water.

So why don’t they think the economy can cope with limits on greenhouse gas emissions? Under cap-and-trade, emission rights would just be another scarce resource, no different in economic terms from the supply of arable land.

Republican opposition can be explained only if we infer (1) they deny that global warming is the product of excessive CO2 emissions, or (2) they simply do not care about the fate of the planet.

(2) is morally indefensible. But as I recently argued, (1) is as well, since whatever skepticism one has about anthropogenic global warming is outweighed by the potential dire consequences, given the probability that current science is roughly correct.

One of the enduring puzzles of our age is why anybody thought modern conservatism represented a defense of moral values. One way of understanding the current political climate is that Democrats and Republicans agree on what is good for the country but disagree on how to get there.

It is increasingly difficult to believe that Republicans have a concern for the good of anything.