Krugman on Climate Economics

Paul Krugman has a long, beautiful article on the economics of the climate change problem in this weekend's New York Times Magazine, and you really ought to read it. (Really.) He has a wonderful way of cutting through all the crap that is out there and getting to the heart of the matter, and explaining his ideas concisely and forcefully.

For example, here is his summary of the science:

But before we get to the economics, it’s worth establishing three things about the state of the scientific debate. The first is that the planet is indeed warming. Weather fluctuates, and as a consequence it’s easy enough to point to an unusually warm year in the recent past, note that it’s cooler now and claim, “See, the planet is getting cooler, not warmer!” But if you look at the evidence the right way — taking averages over periods long enough to smooth out the fluctuations — the upward trend is unmistakable: each successive decade since the 1970s has been warmer than the one before.

Second, climate models predicted this well in advance, even getting the magnitude of the temperature rise roughly right. While it’s relatively easy to cook up an analysis that matches known data, it is much harder to create a model that accurately forecasts the future. So the fact that climate modelers more than 20 years ago successfully predicted the subsequent global warming gives them enormous credibility.

Yet that’s not the conclusion you might draw from the many media reports that have focused on matters like hacked e-mail and climate scientists’ talking about a “trick” to “hide” an anomalous decline in one data series or expressing their wish to see papers by climate skeptics kept out of research reviews. The truth, however, is that the supposed scandals evaporate on closer examination, revealing only that climate researchers are human beings, too. Yes, scientists try to make their results stand out, but no data were suppressed. Yes, scientists dislike it when work that they think deliberately obfuscates the issues gets published. What else is new? Nothing suggests that there should not continue to be strong support for climate research.

And this brings me to my third point: models based on this research indicate that if we continue adding greenhouse gases to the atmosphere as we have, we will eventually face drastic changes in the climate. Let’s be clear. We’re not talking about a few more hot days in the summer and a bit less snow in the winter; we’re talking about massively disruptive events, like the transformation of the Southwestern United States into a permanent dust bowl over the next few decades.

Now, despite the high credibility of climate modelers, there is still tremendous uncertainty in their long-term forecasts. But as we will see shortly, uncertainty makes the case for action stronger, not weaker. So climate change demands action.

Who has ever said this better in as many words?

In terms of the economics, Krugman favors a cap-and-trade system augmented with strong restrictions on the usage of coal. He's not in favor of a carbon tax because he thinks it offers too little incentive to individuals -- but I wish he had considered Hansen's idea of a "green check" returned to individuals and households every month (quarterly would probably be better). Personally I think that would be a real winner -- Hansen says most American's (and especially the right ones) would receive more in green checks than they would pay in carbon taxes.

The other major point Krugman makes is that regulating a resource market to control temperature is no different than a market's response to a dwindling supply of that resource.

Plus, let's not forget that the conservative's method choice to control acid rain was a cap-and-trade on SO2. There's little basis for objecting to its as a solution to the CO2(e) problem. (Hence their need to deny reality.)

Anyway, be sure to read the entire article.