Australian Environment Minister Greg Hunt and his prime minister, Tony Abbott, probably didn't expect Paul Krugman to be an ally for their 'direct action' climate plan, but Krugman gives them something to hang their hats on in his review of economist William Nordhaus' latest book on climate policy.
Krugman adds a note of mild scepticism to the widely held preference among economists, Nordhaus included, for carbon pricing (either through a tax or through carbon trading) to reduce emissions. He's still in favour of carbon pricing, but seems to think the difference between that and 'direct action' might not be worth fighting over. Keep in mind he is writing in the US context:
...there is a slightly odd dissonance in this book’s emphasis on carbon pricing. As I’ve just suggested, the standard economic argument for emissions pricing comes from the observation that there are many margins on which we should operate. Yet as Nordhaus himself points out, studies attempting to analyze how we might most efficiently reduce carbon emissions strongly suggest that just one of these margins should account for the bulk of any improvement—namely, we have to sharply reduce emissions from coal-fired electricity generation. Certainly it would be good to operate on other margins, especially because these studies might be wrong—maybe, for example, it would be easier than we think for consumers to shift to a radically lower-energy lifestyle, or there might be radical new ideas for scrubbing carbon from the atmosphere. Nonetheless, the message I took from this book was that direct action to regulate emissions from electricity generation would be a surprisingly good substitute for carbon pricing—not as good, but not bad.
Photo by Flickr user Guy Gorek.