Paul Krugman wrote an excellent OP-ED "An Affordable Salvation" on New York Times, April 30, 2009. I wrote a letter-to-editor to comment on it (see bottom).

First, here are the highlights of what he wrote:

"It’s important to understand that just as denials that climate change is happening are junk science, predictions of economic disaster if we try to do anything about climate change are junk economics."

My survey of cost estimates for mitigation+adaptation range from half to several percentage points of the world's GDP, but even if it turns out to be much higher, this is certainly an investment for life that is worth every penny, because the alternative is an uninhabitable planet. Krugman cites similar findings from credible sources, then said:

"To be sure, there are many who insist that the costs would be much higher. Strange to say, however, such assertions 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."

Here is how he sums up junk economics views:

"Limits on the world supply of oil, land, water — no problem. Limits on the amount of CO2 we can emit — total disaster. Funny how that is."

And, here is his best argument against the notion 'climate investment will kill the economy':

"Right now, the biggest problem facing our economy is plunging business investment. Businesses see no reason to invest, since they’re awash in excess capacity, thanks to the housing bust and weak consumer demand.

But suppose that Congress were to mandate gradually tightening emission limits, starting two or three years from now. This would have no immediate effect on prices. It would, however, create major incentives for new investment — investment in low-emission power plants, in energy-efficient factories and more.

To put it another way, a commitment to greenhouse gas reduction would, in the short-to-medium run, have the same economic effects as a major technological innovation: It would give businesses a reason to invest in new equipment and facilities even in the face of excess capacity. And given the current state of the economy, that’s just what the doctor ordered."

Below are my comments submitted to NYT as a letter-to-editor:

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In his otherwise very well written op-ed "An Affordable Salvation" Published April 30, 2009, Mr Krugman said that even though revenue from permit auctioning could be used to give consumers rebates or reduce other taxes, the relief would only be partial, and that "Consumers would end up poorer than they would have been without a climate-change policy."

This is inaccurate, because if the revenue is given back to taxpayers in equal portions per taxpayer, and a significant part, if not all of the revenue is given back, then the poorer segments of the population, to whom the extra costs caused by a price on carbon matter the most, would also generally receive more in rebates or tax cuts than they paid, coming out ahead of the richer segment of the population. This is because carbon emission is well known to be positively correlated with income (richer people have larger houses, swimming pools, jet planes, yachts, etc.). By dividing up the total revenue into equal portions, rich people who emitted more carbon get back less than they paid in carbon prices, while poorer people who emitted less carbon get back more than they paid. This is fair, because carbon emission is harming the future of all mankind, therefore low emission consumer practices must be rewarded. The competitive edge of low/zero carbon technologies will kick in and reduce the cost of currently carbon intensive goods and services, replacing our carbon intensive economy.

This was the spirit of the proposal by the nation's top climatologist, James Hansen, director of NASA's Goddard Institute for Space Studies, and the first to blow the whistle on global warming over 20 years ago. He advocates for a carbon tax couple with equal dividends. Carbon tax is much more transparent, straight forward, less prone to loopholes and corporate tactics, and can be administered upstream at the source/port of entry of fossil fuels, cutting out the messy process of allocating emission permits in numerous downstream sectors (which don't even cover all sectors). See option13.org for an article co-authored by Ralph Nader for excellent explanations. Most economists favor carbon tax, but the majority of corporations push for cap & trade, especially with offsets, which climate blogger Joe Romm dubbed "carbon rip-offsets".

Also, the cost of inaction or delayed action is much much greater than swift, decisive action, according to the consensus of economists who have studied this issue to any length, as exemplified by the Stern Report for the UK government, and the January 2009 McKinsey report. In fact late action most likely will not be able to avoid cataclysmic climate change, condemning our species and countless others to inexonerable sea level rise, food and water shortage, spread of diseases previously seen only in tropical areas, mass migration, war & conflicts, and mass extinction.

Maggie Zhou
Arlington, MA May 1, 2009

The writer is a member of Massachusetts Coalition for Healthy Communities.
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