01 December, 2008

Distributive Impacts of Climate Change

Matt Yglesias seems unhappy that ships can now carry cargo across the Arctic Ocean. But climate change is not unambiguously bad and this is one of its many benefits--a new waterway through which to transport goods.

On a related note, he wonders just why the "business community" wants to stall climate change legislation:

Firms whose operations are more carbon intensive than the average firm would be put at a competitive disadvantage, but by the same token firms whose operations are less carbon intensive than the average firm would be given a leg up. And there should be half of each.
But business isn't zero-sum like this. It's possible for something to be bad for all businesses. And charging for pollution would be. In fact, it's bad for pretty much everyone alive in the U.S. right now. The prime beneficiaries of reduced carbon emissions are people who live in developing countries and the people who will inhabit the Earth fifty or 100 years from now.

Despite this, I still think a carbon tax or cap-n-trade is the way to go (not a strategy focused on energy subsidies, like that advocated for in this Prospect piece.)


Cassady said...

I thought we settled carbon tax issue in posts months ago?

Didn't the world leaders read our blog?

Elliot said...

I mean, I think the net impacts of climate change are indeed unambiguously bad, despite the relatively small marginal improvements that may come about. And Yglesias' sarcasm is rightly mocking the silliness of trumpeting the gains of arctic shipping while huge swaths of the rest of the world feel the heat (ha ha). I don't imagine that arctic shipping will have that large of an impact on world efficiency, especially now that we've got Panama. But maybe I'm wrong.

But regarding his larger point, isn't it true that firms who use less than the average amount of carbon would see a net advantage vis a vis their competitors? Their costs would raise, say, 10% while costs in other sectors would raise 60%, and more capital would flow towards them than under the status quo ante capo et trado?

spencer said...

The impacts may be bad on net, even if there are some good impacts. I would imagine the short-run impacts are surely bad on net, but the long-run impacts are more ambiguous. For example, if large swaths of the world are opened to agriculture, this could be a good thing in 200 years (after a lot of short-run pain).

Speculation aside, I was just making the point that business is not really zero-sum like that. Carbon taxes mean that everyone will make less profits. If your costs go up, you make less money, period. The fact that other industries may lose even more money doesn't really matter to this calculation.