Suppose you believe, as I do, in basic conservative principles (free enterprise and a market economy, limited government, and minimal change in established institutions that work well), but also acknowledge that anthropogenic climate change presents a sufficient danger that something needs to be done about it. The risk is that even as little as 2° Celsius (about 3.6° Fahrenheit) of warming might push one of a number of different earth systems past a tipping point that is both catastrophic and irreversible. In other words, the problem is one of risk management, in which prudence calls for taking action before it is too late to make a mid-course correction. What would be a conservative response to this threat?
It is unfortunate that the climate issue has been co-opted by liberals, because conservative policy prescriptions would not be the same as those that have been put forward by the Democrats and their allies among the environmental groups. The Waxman-Markey cap-and-trade bill that passed the House in 2010 (then died in the Senate) was a 1400-page monstrosity; it catered to special interests, placed undue burdens on people with low incomes, and had no connection to a coherent US international negotiating strategy on climate. Just as misguided is the EPA’s intention to regulate CO2 as a pollutant by executive fiat – a scheme that also is inefficient, non-transparent, and regressive. Virtually all economists would agree that either approach is inferior to a well-designed carbon tax or auctioned emissions permits, with revenues returned to citizens on a per capita basis or used to cut other taxes.
Neither domestic cap-and-trade nor the command-and-control regulatory approach of the Democrats recognizes the 800-pound gorilla in the room: Whatever the United States does will be ineffective unless there is global action. The cornerstone of a conservative climate policy has to be to foster emissions reductions everywhere. The United States should exercise leadership because we have the world’s largest economy, but we cannot solve this problem alone. What is needed is less social tinkering within the US, and more old-fashioned realpolitik, an approach that ought to be the hallmark of conservatism in foreign affairs. We need to recognize the interaction of the interests of other nations large and small, and fashion policies that will alter the international political and economic landscape to our benefit.
The necessity for international action is purely a matter of arithmetic. The “non Annex I” countries as defined by the Kyoto Protocol (with a few exceptions the developing countries that are not in the OECD or the former East Bloc) now account for more than half of total global CO2 emissions, and by 2050 under business as usual the non-Annex I countries will emit three times the CO2 of the OECD, according to International Energy Agency projections. China is already the largest single emitter of CO2.
The key question for the US is, what would induce other countries to make the large-scale emissions reductions required to avoid the risk of reaching one of the tipping points that most concern climate scientists? Won’t free-riding and the development imperative driving China, India, and the other rapidly-growing countries doom any attempt at coordinated global action?
Perhaps not. The fact is that any one of the big countries or groups of countries – the US, China, India, the EU, or Japan – can by itself drive the climate into the danger zone. This reality transforms the international negotiations from something that looks like the Prisoner’s Dilemma (in which the temptation for free-riding is overwhelming) into a coordination problem. In a coordination problem, one of the stable outcomes is that all major countries reduce their emissions because it is not in their individual interest to continue polluting and thereby risk climate catastrophe. A Prisoner’s Dilemma-type equilibrium, in which all countries continue to pollute, is also possible, so a negotiated agreement to reduce emissions is needed to reach the optimal outcome in which all countries abate. The good news is that such an agreement, once achieved, would be “self-enforcing” because it would be in no country’s interest to defect from it.
A solution to this type of problem has a real-world precedent, though on a smaller scale. The Montreal Protocol on Substances that Deplete the Ozone Layer has universal participation, and the side payments agreed to in the early 1990s to induce developing countries to sign on were relatively small (on the order of only about $3 billion over two decades). Just as with CO2, the emission of ozone-depleting substances anywhere affects the entire world, and the consequences of destruction of the ozone layer would be so disastrous that it is in every country’s interest to accede to Montreal and observe it. Montreal was negotiated and signed under President Reagan, and was ratified with no dissenting votes by the Senate.
Reducing greenhouse gas emissions by transitioning to non-fossil-fuel energy sources would be much more costly and difficult than eliminating the ozone-depleting substances, of course, but forecasts of gloom and doom if fossil fuels are phased out should be regarded with a great deal of skepticism. Economic projections of distant future costs are notoriously unreliable, because those costs depend on the slopes of learning curves, the magnitudes of economies of scale for alternative energy production methods, and technologies that may not even have been invented yet. Experience shows that ex ante estimates of environmental regulatory costs tend to be much higher than what those costs actually turn out to be – as was the case for the SO2 reductions under the Clean Air Act Amendments of 1990 and the phaseout of ozone-depleting substances under the Montreal Protocol.
Because most CO2 reductions will have to take place in the non-OECD countries, the hard problem for any effective conservative climate policy is how to induce those reductions in a way that is consistent with the foreign policy interests of the United States. The solution is both easy to visualize and complicated to implement. First of all, we must recognize that the desire for economic growth in the non-Annex I countries is completely legitimate. However, this does not mean that we have any obligation or interest in providing “climate assistance” to China, Iran, or any other “developing” country that is a geopolitical rival of the US or that is hostile to us. China is already a major player on the global stage, so it cannot legitimately cry poverty or claim a need for any kind of development assistance. No side payments to China (or the other big countries) are needed; it is in the interest of those countries to reduce their own CO2 emissions as part of a mutually beneficial international agreement with the other Great Powers to do so.
The challenge is to convince the small developing countries to follow suit. A combination of positive and negative incentives will be needed. Overseas US climate assistance should be targeted to developing countries where our influence can be increased and our foreign policy objectives advanced. Assisting developing countries to purchase US climate-friendly technologies would have similar political and economic benefits as our current practice of encouraging or mandating that our allies adopt US military technologies. World-wide emissions-reduction investments have the same potential as investments in other high-tech sectors for export of US technologies, standards, training, and language. (It is a pure benefit to us that the international language of air traffic control is English, for example.) The usual issues of how to bypass the kleptocratic oligarchies of the countries that are poor because they are poorly governed will have to be overcome, but this is a perennial problem of our foreign policy and is not confined to any effort we might make on climate. In pushing for the spread of US carbon-free methods, we will be competing with China, the EU, Japan, and others, but that is just the reality of global economic and political competition.
Furthermore, we can offer favored access to the US market as a strong positive incentive for fast-growing countries to adopt a clean energy development path. This could be combined with restrictions on imports produced with or requiring intensive use of fossil fuels. The incentive for developing countries to take the green energy route would be even stronger if other major countries like Japan and members of the EU made the same offer. The incentives created by the Montreal Protocol’s trade sanctions, even if the sanctions did not have to be invoked, contributed to its unquestionable success.
The climate action strategy being proposed here need not have an adverse effect on overall US employment and economic growth. Total domestic employment in the long run is determined by numerous factors buried deep in the structure of the labor market (labor force participation rates, the availability and duration of unemployment subsidies, the degree of inter-regional mobility, etc.), so while carbon-free energy investments at home and abroad will require substantial allocations of capital, the effect on aggregate US employment is not likely to be large. The new technologies will open up a range of new domestic jobs even as some previous jobs are lost. Climate investments will not be costless, however. Resources used to transform the energy system will not be available for immediate consumption, or for other productive investments. Economists on both the Left and the Right have done a disservice in confusing jobs and consumption. The Right has exacerbated fears that the transition away from carbon will cost jobs, while downplaying the jobs created by the transition; the Left has touted “green jobs” as a panacea that will make action on climate painless, ignoring the opportunity cost of the green investments. The truth is that the necessary investments have a real cost and will shift jobs.
Finally, there is an additional strategic benefit to a climate policy aimed at the eventual phaseout of fossil fuels. It makes no political or military sense for the US, the EU, and Japan to spend hundreds of billions of dollars annually to purchase oil and gas from non-democratic, unstable, or hostile countries. The magnitude of this wealth transfer is of the same order as the investment effort that would be required to convert the global energy system to non-fossil primary sources. How could such a re-direction of funds be bad for US interests?
A conservative climate policy along the lines outlined here would change the terms of the debate. No policy of this magnitude has any chance of being enacted (and sustained!) without strong and enduring support from both major political parties. Yet the necessary common ground does exist: avoiding the risks of climate catastrophe is in our national interest, and an investment-based strategy that synchronizes domestic and international emissions reductions would serve US foreign policy goals. Taking responsibility for our national security and for the well-being of future generations is a moral imperative that transcends partisan divisions. And ultimately, it is a guiding principle of true conservatism to take the steps that are necessary to safeguard the Republic, even if doing so requires sacrifices from all of us.