A Realpolitik Defense of Cap and Trade

albeit a not very vigorous one, comes from J B Rosser in Econospeak:

The other is the fact that for all its current troubles, there is already a nascent mechanism in place in the form of the troubled European carbon market. While the price is down now, when the European economy finally recovers (notice my breathless optimism here), demand for carbon credits will resume, and indeed it was fear of the price rising too much if the cap is tightened that was a central argument by the Poles and other opponents of tightening the cap in Strasbourg. Particularly in Europe there is much annoyance with how the US has handled this whole issue, with the US pushing carbon markets at Rio and then Kyoto, with the Europeans being the ones supporting taxes. They went along with carbon markets in order to please the US, who then failed to ratify the Kyoto Protocol. Now with prominent US economists pushing the idea of a carbon tax, the attitude in Europe is highly negative, along the lines of “Why should we try to do what you want us to do yet again when you shafted us the last time we did so?” For better or worse, the remnant Kyoto mechanisms probably remain the best chance for any future global agreement on this matter.

Well, the reason is that the US is utterly self-absorbed and incapable of taking the wishes of other countries into account. Is that news to you?

If a Pigouvian tax can pass in America, the world can make progress. Otherwise it’s hard to see us getting off the dime.

Given the spectacular political failure of the attempt to create a carbon market nationally here, that’s the best we can hope for in the foreseeable future from America, and America is pretty much indispensable.


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