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Bjorn Lomborg, wrong with a dash of socialism

Bjorn Lomborg isn’t genuine in his arguments against putting a price on carbon. His latest op-ed in the Washington Post is a prime example.

Take a look at Lomborg’s calculation of costs:

All the major climate economic models show that to achieve the much-discussed goal of keeping temperature increases under 2 degrees Celsius, we would need a global tax on carbon emissions that would start at $102 per ton (or about 90 cents per gallon of gasoline) — and increase to $4,000 per ton (or $35.51 per gallon of gasoline) by the end of the century. In all, this would cost the world $40 trillion a year. Most mainstream calculations conclude that this is 50 times more expensive than the climate damage it seeks to prevent.

Ignoring Lomborg’s claim that global warming will cost less than 1 trillion dollars, and the implication that most economists think tackling climate change is not worth it (most say it is), Lomborg misleads us my claiming that the cost placed on carbon is a reduction of global gross domestic product. The fact is that a cost on carbon means that money changes hands, nothing more. In other words paying 100 dollars a ton is does not reduce GDP by 100 times the number of tons of GHG’s. The money collected is not lost, it is spent elsewhere, or given back to the tax payers if the carbon pricing policy is revenue neutral.

Yes this will have large impacts on some industries (that is the point), but it wall also benefit other industries (also the point), and this will likely have an effect on total GDP (almost certainly negative, especially in the short-term, but nothing major).

Lomborg’s estimate of costs is so far off the map, it is not even wrong.

But there is another interesting aspect of his article that deserves mention:

Devoting just 0.2 percent of global gross domestic product — roughly $100 billion (70 billion euros) a year — to green energy R&D would produce the kind of game-changing breakthroughs needed to fuel a carbon-free future. Not only would this be a much less expensive fix than trying to cut carbon emissions, it would also reduce global warming far more quickly.

When did Lomborg start advocating for socialism? I know that is harsh, and technically not even true (not all government investments equal socialism), but given how much that word has been thrown around of late, I think it fits.

Richard Littlemore writing at Desmogblog illustrates why this isn’t the best option:

This is probably a good idea, although anyone who is even slightly skeptical of government might worry about empowering politicians to try to pick winners when it comes to financing research and innovation.

Smart economists (clearly a group to which Lomborg has no affiliation) tend to agree that the best way to address climate change is to ask the market to do it. You put a price on carbon – a price that begins to reflect the unfunded damage that CO2 (and other fossil fuel pollutants) do to the atmosphere – and let entrepreneurs act on that price signal and seek the most efficient solutions.

But Lomborg is suddenly a socialist – suddenly an advocate for direct government control and investment.

It’s not that government investment on alternative energy sources is a bad thing (it isn’t), but that is generally better to let the market pick the winners and losers, rather than ask the government to do so. But in order for the market to pick an winner the externalities currently associated with carbon based energy sources need to be internalized. In other words we need a price on carbon!

Failing to properly price carbon so that its use is phased out, direct government investment in alternative energy technology is the next best thing.

Ideally we would have both. And once we consider how to pay for this government funded research into alternative energy it becomes clear that putting a price on carbon is a great way to collect money to fund such initiatives.

Or we could just take it from the most profitable industry in the world, who coincidently has also caused much of the problem:

Fair enough: an argument can certainly be made that government should be supporting alternative energy research. Where, though, should those governments get the money? Should they take it from the foreign aid programs that Lomborg sometimes claims to defend? I think not. Should they take it from the beleaguered taxpayer whom Lomborg presumes to champion in this latest piece? He says no.

What about this: why not get the money from the most profitable industry in the world and – not coincidentally – the people who are actually creating the problem? ABC tallied the revenues of the top five U.S. oil companies a couple of years ago and came to $1.5 trillion. When you consider that Exxon Mobil, the big cheese on this list, is actually the 17th on the list of the world’s largest oil companies (the top 16 are in government hands and don’t show on U.S. lists), there seems to be a little slush to go around.

So, sure, take Lomborg’s advice. Spend $100 billion on renewable energy research – and fund the investment with an extremely small carbon tax. It would hardly be noticed at the pump and, according to Lomborg (admittedly, not really a reliable source), it might actually start moving us in the right direction.

The bottom line is that there is little hope of cutting our dependence on fossil fuels without putting a price on carbon. Funding for alternative energy is all well and good, but without a price on carbon we wont kick the fossil habit.

2 Responses to Bjorn Lomborg, wrong with a dash of socialism

  1. Enjoyed your article. I don’t often see this pretty crucial point that you make above, being made: “The fact is that a cost on carbon means that money changes hands, nothing more. In other words paying 100 dollars a ton is does not reduce GDP by 100 times the number of tons of GHG’s. The money collected is not lost, it is spent elsewhere, or given back to the tax payers if the carbon pricing policy is revenue neutral.

    Yes this will have large impacts on some industries (that is the point), but it wall also benefit other industries (also the point),”

    This is key, but most national framing, and discussion on the issue make the presumption that everything that is a change is a cost (whereas everything spent that is the same, is an “investment” or benefit.) And miss the point that the goal is to equal the playing field a little bit, because right now

    By the way, I think part of the information problem on climate change is that we call it climate change, . A bit more thought on that, Atmospheric Problem Denialism, and a lot on macroeconomics that is related, at least in part, to your point above. http://theworldofairaboveus.blogspot.com/2014/07/why-poorly-named-climate-change-thing.html

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