Some of my economist friends complain that President Obama is being Leeroy Jenkins. (If you don’t know the reference, take 2 minutes and 53 seconds and click here).
The basic environmental problem is that we pollute too much; we put out too many greenhouse gases. The US has been negotiating for about 20 years to make these cutbacks…but so far, we’re like that circle of World of Warcraft players, yakking in a circle and accomplishing nothing. Is it so hard to put a policy in place?
It’s not that hard. Simply put there are four ways to go.
1) Make polluters pay a tax equal to the damage that pollution does. When it gets expensive to pollute, people quickly find ways and technologies to be clean. This has been the standard economic prescription since the 1920s.
2) Cap the allowable amount of pollution, distribute or sell the right to emit this limited pollution, then let people buy or sell these rights so that the producers who would make the most valuable use of them will outbid everyone else. This is called “Cap & Trade”, and was designed by several economists in the 1970s. It has worked well for controlling S02 pollution and is the main way that Europe is approaching the climate problem. It’s also central to the Waxman-Markey bill that passed the US House in June and the Boxer-Kerry bill that was just introduced in the Senate.
3) ”Command & Control” where government makes rules that everyone is required to follow. This would include banning incandescent light bulbs, increasing miles-per-gallon rules on cars, or requiring specific technologies or fuels for energy production. This is also how the EPA would likely approach regulating power plants if Congress doesn’t pass a bill first. Economists generally view Command & Control as being a more expensive way of achieving what could be done through pollution taxes or Cap & Trade.
4) Kick the can down the road. Until we know exactly what the best thing to do is…we just do nothing and hope that some cool solution will come to us in the future.
Hmm…which one of the four options are we most likely going to follow?
Like most economists, my preference would be to go with (1) Pollution Taxes, but I’d be fine with (2) Cap & Trade, even if the pollution permits are largely given out to polluters (not that I’d be happy about it…but stick with me here a minute).
But here’s where things start to go LEEROY JENKINS! So far the Obama administration’s environmental initiatives have largely been (3) Command & Control. Why? It’s largely because those are the tools at the disposal of the Executive Branch, and the Command & Control approach will only get bigger if Congress doesn’t pass a climate bill, which will leave climate policy to the EPA. So, while I don’t love (3), it’s better than doing nothing, and the perfect should not be the enemy of the good.
As I watch the various healthcare reform bills grind through the many required Senate committees, and follow the often uninformed debates and crazy town hall meetings, I get depressed thinking about how the climate bill will have to follow exactly that same path, and how unlikely it would be to pass anything serious before the Copenhagen climate conference in December. And if the US hasn’t passed a bill that sets up serious cuts in our emissions, it’s going to be hard to get any sort of worthwhile international agreement anytime soon.
It’s enough to make me wish for Leeroy Jenkins….