I’m attending the McCormick Energy Solutions Conference for journalists this week at Ohio State University. Andy Keeler, an economist with the John Glenn School of Public Affairs here at the university, offered six things journalist should know about greenhouse gas reduction.
1. It makes economic sense to reduce greenhouse gases. Even though doing so costs money, it will end up costing us even more if we do nothing. Dealing with the effects of global warming, of seeing Texas and the Southwest become a dustbowl, could be financially devastating.
2. Cap and trade, which is the method Congess is considering to regulate greenhouse gases, does two distinct things. By issuing tradable allowances for greenhouse gas emissions, the system raises the price of energy produced from greenhouse gas-heavy fossil fuels. It also generates revenue for the government by selling those allowances, and the money can be used for anything.
“Criticism of cap and trade which mixes these two together is deliberately misleading,” Keeler said.
3. Cap and trade creates broad and efficient incentives. Using market signals as part of our response to climate change risk is good public policy.
4. Who gets the money the government makes by selling allowances is a public expenditures question, not an environmental question.
5. A carbon tax and a cap and trade program have strong similarities. But the details of the program are more important than the choice between the two.
Keeler concludes that, even though economists tend to agree that a tax is cleaner and more elegant than a system of trading allowances, the current bill includes reasonable goals. Therefore, rather than starting from scratch and renegotiating the cap, which leads to a 20 percent reduction in greenhouse gas emissions by 2020 and an 80 percent cut by 2050, Keeler prefers to stick with the current bill.
6. Trade and competitiveness concerns exist, but are neither broad nor large. The bill could have significant effects on the iron, steel, aluminum, cement and paper industries, but those problems could be solved with targeted rules, rather than broad regulations.
“It’s not to belittle the problem for people in these industries, but it’s misleading to cast it as an overall disaster from a trade point of view,” he said.