This thread is far from Noah's best work. With any policy, you're going to have to pick a stringency. Yes, there are fat tails, but there's also another Weitzman paper to worry about - prices vs quantities. Which can we say more about re: GHGs? P or Q. Locally, P. 1/n
Is there uncertainty? Of course there is. As Noah says, fat-tailed uncertainty makes cost-benefit analysis harder or less informative. But, somehow he ignores the fact that all of the other policy interventions he'd advocate for have a similar requirement for analysis. 2/
How do you set taxes, Noah asks? With flawed economic models, he says. Great. How are you going to determine where to deploy your green tech? Which solutions are cost effective where? Noah's alternative is far more technocratic, i.e. far more dependent on models than ctax. 3/
He says carbon taxes are a blunt instrument - that's true in the sense that they target all emissions in the economy. If you knew where the low cost abatement was, where the likely innovations were, etc. then you could target them. We don't know those things. 4/
Today, solar and EVs are much cheaper than we might have imagined years ago. Other techs, the hydrogen highway and carbon capture have not evolved as we might have expected. 10-15 years ago, no one expected we were setting policy in a North America with sub $3 nat gas. 5/
All of that matters - what looked like
a cheap abatement option 10 years ago (CCS on coal, for example) is now far out-of-the-money because of other innovations. Expecting that government bets on tech will be able to keep up with that pace? No. 6/
a cheap abatement option 10 years ago (CCS on coal, for example) is now far out-of-the-money because of other innovations. Expecting that government bets on tech will be able to keep up with that pace? No. 6/
Noah's right that, "switching to green energy and other green technology requires lots of INFRASTRUCTURE. The private sector won't build much of it. Government has to." Gov't has always played a role in infrastructure through regulation. 7/
Are we going to need more transmission for green electricity? Yes. But I'm not sure how this is an argument against carbon pricing any more than it's an argument against a market for electricity. Carbon pricing levels the playing field for different generation sources. 8/
Next, the question of climate being a global problem. Yes, of course it is, but this isn't an argument against carbon taxes any more than other policies. Regulations and mandates can still have competitiveness implications, and we have tools to deal with those. 9/
In fact, if you're worried about trade and competitiveness, a carbon price is relatively easy to adjust for with border adjustments or output-based allocations of credits. 10/
Noah's idea that we can pick winners and drive specific technologies is fine as far as it goes - if you pick the right ones, you'll do well. If you don't, you won't. Question is whether, on balance, you're going to win more than you lose. I think the evidence is clear.
It's easy to pick on carbon pricing when you know what the winners are. It's easy to pick on carbon pricing when you know that ctax opponents would support alternatives. It's easy to pick on carbon pricing when you're smarter than the market. But you might be wrong.
