Bootleggers and Baptists and Carbon Policy

Lynne Kiesling

In today’s Wall Street Journal, Bjorn Lomborg has one of the clearest articulations of the bootleggers and Baptists dynamic in carbon policy, and nails one of the fundamental reasons why the Waxman-Markey bill is bad policy:

Naturally, many CEOs are genuinely concerned about global warming. But many of the most vocal stand to profit from carbon regulations. The term used by economists for their behavior is “rent-seeking.” …

U.S. companies and interest groups involved with climate change hired 2,430 lobbyists just last year, up 300% from five years ago. Fifty of the biggest U.S. electric utilities — including Duke — spent $51 million on lobbyists in just six months.

The massive transfer of wealth that many businesses seek is not necessarily good for the rest of the economy. …

The partnership among self-interested businesses, grandstanding politicians and alarmist campaigners truly is an unholy alliance. The climate-industrial complex does not promote discussion on how to overcome this challenge in a way that will be best for everybody. We should not be surprised or impressed that those who stand to make a profit are among the loudest calling for politicians to act. Spending a fortune on global carbon regulations will benefit a few, but dearly cost everybody else.

That pretty much sums up why I think that Congress can’t be trusted to design an economically beneficial carbon policy.

6 thoughts on “Bootleggers and Baptists and Carbon Policy

  1. Congress does not have the capability to design an economically beneficial carbon policy, as W-M clearly demonstrates. However, more importantly, Congress does not have the power to implement either an effective or economically beneficial carbon policy, since no carbon policy can be effective, no less economically beneficial, unless it is GLOBAL in scope. There is no country or group of countries which could halt global warming, assuming that reducing CO2 emissions could halt global warming.

    W-M is not about reducing CO2 emissions; it is about raising revenue. Reducing CO2 emissions requires massive investments in low/no emissions facilities and equipment, by utilities and industries, commercial businesses and residential consumers. My estimate is ~$700 billion per year over the period, or nearly #30 trillion between now and 2050. Of course, with all of the spare investment capital floating around in the world economy today, investments at that level should be no major issue. However, the potential holders of senior secured debt may have some questions before they put their money on the line.

  2. I would amend that to Congress can be trusted to design a carbon policy that will maximize corruption and political payoffs while doing absolutely nothing about CO2 emissions.

    I am will to bet real American Money on that statement.

  3. There are some of us “bootleggers” who are genuinely concerned about the stability of our global climate and the impact rapid change will have on communities and ecosystems. I believe that meeting these challenges at the required scale and speed will require profitable businesses models. Sure…putting a price on carbon to reflect its cost to society will help our business. Does that mean we’re rent seekers? Is there a major policy that has been enacted in a democratic society that did not have the support of job creating businesses? DuPont benefited from CFC regulations. Does that mean the Montreal protocol was therefore “bad policy”?

    Such critiques of the very idea of federal legislation due to these regulatory failures beg the question: What is the alternative?…voluntary Coasian bargaining (e.g. Chicago Climate Exchange) has led to very little greenhouse gas emission reduction so far for this classic global commons problem?

  4. Derek has a point. Some folks pursue careers in, for example, low-carbon energy supply because they believe it is important. Lomborg acknowledged as much in the first line quoted: “many CEOs are genuinely concerned about global warming.”

  5. I do not understand the fascination with “putting a price on carbon”.

    Supposedly, the objective is to reduce carbon emissions by 83% by 2050. The clearest, simplest approach to communicating that objective and measuring progress toward it is a declining emissions cap which begins at the current annual emissions rate and declines by 2% each year until 2050.

    The ability for those who must reduce emissions to trade allowance among themselves adds a degree of flexibility to the process. The “price” of carbon is established in every transaction between a willing seller and a willing buyer. It may very well not be the same “price” for every transaction in every year.

    Allowance sales, carbon taxes, etc. merely increase the overall compliance cost while providing a revenue stream to government.

    Regrettably, no matter how it is done, carbon emissions would continue to increase. All pain – no gain!

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