Governments can approach the potential harms of climate change caused by carbon dioxide emissions in three general ways. It can take no direct action but unshackle energy producers and private organizations to take whatever actions they deem appropriate; it can treat carbon emissions as a type of property right; or it can engage in Soviet-style micromanaging of the economy, complete with national and international subsidies and industrial planning.
The command-and-control approach is the worst possible one. So of course that’s the one governments currently are pursuing in Paris. To the extent the United States pursues the agreement, we can expect the federal government to subsidize hopelessly infeasible forms of energy; to confiscate wealth from U.S. citizens to subsidize corrupt foreign governments; and to throttle producers and consumers of fossil fuels through bureaucratically imposed regulations. The result is that government will slow economic growth relative to what it could and should be, and we will be poorer for it.
There’s a lot to be said for the “do nothing” approach—which really means that government should get out of the way and let innovators innovate. Simple economics dictates that people will stop burning fossil fuels when they can get cheaper electricity from other sources. Except in special circumstances (such as where a large river can be dammed), the only feasible way to get inexpensive, large-scale energy is via nuclear power, as far as I see. Arguably, but for government throttling the development of nuclear power, we’d already live in a mostly emissions-free world.
Of course, in a free society, private organizations also are free to fund research of their choosing; to engage in public education campaigns; to buy up mineral rights for conservation purposes; and so on.
Although I cannot at present offer anything other than a tentative sketch of the proposal, I’m also interested in the possibility of treating carbon emissions as a type of property right. (Please note that my views in this area are tentative and subject to change.)
Obviously we already deal with other types of pollution via property rights. For example, I can emit a certain amount of odors and toxins from my property (such as a certain amount of smoke from fires), but beyond a certain amount my emissions interfere with my neighbors’ use of their property. We handle many kinds of pollutants, ranging from toxins to noise to light, via property rights. I see no reason, in principle, why this could not be extended to carbon emissions.
Of course, it is an open question whether increased emissions actually will cause substantial harm, relative to the clear and immediate harm of throttling energy production. Matt Ridley argues that slightly warmer average temperatures might even be beneficial on net. In his book The Moral Case for Fossil Fuels, Alex Epstein argues that the effects of carbon emissions are “decelerating” and “logarithmic,” meaning that the more carbon dioxide we emit, the less additional impact each unit of emissions has.
But, for a moment, let’s assume that the mildly alarmist view of climate change is correct, and that if we more than roughly double our total cumulative carbon dioxide emissions, we’ll get ourselves into some serious trouble. As Ronald Bailey explains, the typical thinking along these lines is that “humanity has already used up 515 billion tons of its carbon budget, which means that there’s only 485 billion tons left.” (Bailey further explains that to “get carbon dioxide equivalents, multiply by 3.67.”)
If it could be objectively proven that total emissions of (let’s round) 500 billion tons of additional carbon is the most we could safely handle (and that’s a big “if”), then one obvious approach would be to recognize property rights in that amount of emissions, if the legalities of such could be worked out (another big “if”).
It’s unclear to me how governments should pursue a property rights regimen in this area, or if it can even be done. But one hypothetical possibility would be to simply give each living person one equal share of the emissions. The problems of enforcing such a thing globally are enormous, but the matter potentially could be handled through treaty. If such a thing were possible, obviously the result would be the immediate creation of a market by which energy producers bought up rights to emit. In practice, producers in the U.S. and in other wealthier regions would pay out individuals (not governments) in poorer regions, resulting in higher fuel costs at home.
Notice that one result of a property rights system in carbon emissions would be that some people would think seriously about how to “farm” emissions. For example, if I could remove a billion tons of carbon from the atmosphere, I could sell the right to emit that much to a producer of fossil fuels. I haven’t looked into the science of this, but my guess is that it would be a lot better to use solar energy to suck carbon dioxide out of the atmosphere so that we can burn more cheap coal.
Notice also how a property rights system would result in market innovation that government regulators otherwise would squash. For example, the current government strategy is simply to outlaw coal. But, in a property rights system, it might make sense to burn coal in a cleaner plant.
The broader point is, government planners cannot possibly know the best ways to generate energy and control carbon emissions, and they’re extremely likely to direct funds and regulatory controls to favor the politically powerful.
Here’s another wrinkle that could be built into a property rights plan, to handle the uncertainty of future problems. Let’s consider one possible scenario. We could say that we’re going to burn through another 200 billion tons of carbon without limits, then check to see what the results are. If the results are milder than expected, then we could ditch or revise the property rights rules as needed. On the other hand, if the first 200 billion additional tons of carbon strongly indicated that 500 billion total tons is indeed the responsible limit, then we could implement property rights for the additional 300 billion tons.
Again, what I’m offering here is merely a sketch. I don’t know if property rights in carbon emissions can be sustained in legal theory or as a practical matter of international politics. But what is clear is that the command-and-control approach will be disastrous. Certainly government should unshackle energy producers and other innovators. That alone may resolve the problem. Beyond that, a property rights approach is the only other potential strategy that governments should pursue—if it can be established that such can be practically established within the boundaries of justice.