In Which I Cash My Predictability Chips
Now, I’ll admit that as cosmotarian technophile post-Randian foreign policy doves with a soft spot for mutualism go, I’m pretty predictable. But this made me sit up and take notice. Maybe it’ll do the same for you.
It’s about Thomas Crocker, an economist who followed in Ronald Coase’s footsteps to become the inventor of cap and trade pollution credit systems:
Crocker, who is retired but continues to do economics research, says cap-and-trade is not the best way to reduce greenhouse gas emissions. It would make more sense to impose a flat tax on carbon dioxide, he argues. In a phone interview with TWI from his home in Wyoming, Crocker said, “Apart from the question of whether or not it’s appropriate to control greenhouse gases in the first place, and given that you’re going to take some form of control, I believe that emissions taxes for greenhouse gases are more economically efficient than is cap-and-trade.”
Cap-and-trade, which Crocker said is not “inappropriate by any means” to reduce greenhouse gas emissions, works better for traditional pollutants like sulfur dioxide, because “incremental emissions of SO2 do a great deal of damage.”
“Whereas with respect to greenhouse gases,” he continued, “the marginal damages of an additional bit of greenhouse gas is not going to do much harm.”
Because each additional increment of SO2 that is emitted into the atmosphere is so detrimental to the environment, a proper policy must give certainty with respect to quantity, Crocker said. Cap-and-trade puts a hard cap on emissions and therefore controls emissions quantity. A carbon tax, on the other hand, provides certainty with respect to pricing — it imposes a certain cost on carbon — but does not set a limit on how much carbon can be emitted across the economy.
Greenhouse gases, Crocker argued, are not as incrementally dangerous as SO2 and other pollutants. Therefore, price certainty, delivered through a carbon tax, is more important.
So while I’m not inclined to take Friedrich Hayek seriously as an anti-cap-and-trader (because he advocated pollution controls before cap-and-trade even existed as an idea), I am inclined to take Thomas Crocker seriously, because he’s the actual inventor of cap-and-trade.
As to the appropriate size of the intervention, that’s another question entirely, but there’s nothing in principle about very large sized commons problems that says we should ignore them forever. The opposite seems rather obviously true, no?
One proposal I recently found appealing was to swap it for the corporate income tax. If it could be done, why not do it? Even if we were to grant that carbon taxes achieved no environmental good whatsoever, they could still wind up being a lot better than the special interest boondoggles arising from the corporate income tax and its many exceptions. If you’ve gotta tax something, why not carbon?
 I’m also inclined to grumble at the Washington Independent, for misspelling Coase’s name, and not in a flattering way.
 A premise I by no means grant.
 In the interests of fairness, here’s a dissenting view.