The compelling case that climate change is occurring and is caused in large part by human activities is based on a strong, credible body of evidence, says Advancing the Science of Climate Change, one of the new reports. While noting that there is always more to learn and that the scientific process is never "closed," the report emphasizes that multiple lines of evidence support scientific understanding of climate change. The core phenomenon, scientific questions, and hypotheses have been examined thoroughly and have stood firm in the face of serious debate and careful evaluation of alternative explanations.
"Climate change is occurring, is caused largely by human activities, and poses significant risks for — and in many cases is already affecting — a broad range of human and natural systems," the report concludes. It calls for a new era of climate change science where an emphasis is placed on "fundamental, use-inspired" research, which not only improves understanding of the causes and consequences of climate change but also is useful to decision makers at the local, regional, national, and international levels acting to limit and adapt to climate change. Seven cross-cutting research themes are identified to support this more comprehensive and integrative scientific enterprise.
The report recommends that a single federal entity or program be given the authority and resources to coordinate a national, multidisciplinary research effort aimed at improving both understanding and responses to climate change. The U.S. Global Change Research Program, established in 1990, could fulfill this role, but it would need to form partnerships with action-oriented programs and address weaknesses that in the past have led to research gaps, particularly in the critical area of research that supports decisions about responding to climate change. Leaders of federal climate research should also redouble efforts to deploy a comprehensive climate observing system.
So what to do? A carbon tax is the solution most economists favor, at least in part because if the relative simplicity. Here is Ed Glaeser on the current bill:
This bill is a behemoth for three reasons. First, it tries to do far more than just charge for carbon emissions. The bill starts by providing “incentives for the growth of safe domestic nuclear and nuclear-related industries.” It supports carbon capture in coal plants, expands offshore drilling, establishes an Office of Consumer Advocacy and promotes “clean energy career development.” Standard economics suggests that many of these interventions would be unnecessary if we had the right tax on carbon emissions; if companies pay the full social costs of their actions, they have the right incentives to invest in greener technologies without any further help from Uncle Sam.
The second reason that the bill is so big is that it uses a complicated cap-and-trade system rather than a simple Pigouvian tax. In theory, a permit system can be identical to a tax. Selling permits to emit carbon at $50 a ton is equivalent to taxing carbon emissions at $50 a ton. But tradeable permits, typically and as promulgated in the American Power Act, differ from a tax for two reasons: the quantity of permits is relatively fixed, and many permits will be given away rather than sold.
Fixing the number of permits may actually be the right thing to do. As my colleague Martin Weitzman wrote almost 40 years ago, quantity controls are better than prices if we are more certain about the right quantity than we are about the right tax. In the case of global warming, we may arguably be more confident that the amount of carbon should stay relatively flat than we are about the per-ton damage from carbon emissions.
Giving away permits rather than selling them is often defended as a means of ensuring that global warming doesn’t become an excuse for higher taxes. A carbon tax could easily get out of hand if the public sector starts seeing it as a solution to America’s budgetary shortfalls. Freely distributing permits seems to be crucial in building support for the bill, but the cost in simplicity is significant.
International trade is a third reason that this bill is so complicated, because we are trying to use domestic legislation to handle a global externality. If America charges for the carbon emissions involved in making an industrial product but our trading partners do not, then American producers will be at a competitive disadvantage.