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The best way to help the climate is to increase the price of CO2 emissions

(The Guardian, 20 Jan 2020) Political measures and technology have a part to play, but a carbon tax or similar would be most effective.

Although many supporters of Donald Trump seemingly believe that global warming is a hoax, almost everyone else agrees that the climate emergency should be at the top of the list of important policy issues. Identifying the problem, however, is not much use unless we also identify the appropriate tools to address it.

In my own field of specialisation, central bankers have caught climate-change fever. Under the leadership of Christine Lagarde, for example, both the International Monetary Fund and now the European Central Bank have declared the planet’s climate health to be “mission critical.”

To be sure, financial institutions must fundamentally rethink some things in the light of the climate crisis. For example, a bank or insurance company calculating risks to real-estate loans would make a serious mistake if it followed the standard methodology and plugged into its formulas the probability of a flood based on data from the past 100 years. Instead, it should take a forward-looking approach, which means using estimates of the increasingly elevated probability of such disasters.

But central banks and international financial institutions simply lack the necessary tools to have first-, second-, or maybe even third-order effects on greenhouse-gas (GHG) emissions.

So, what policy tools would have first-order effects?

In the US, the “green new deal” signals commitment to the climate cause. But I fear that the legislative proposal that its congressional supporters have introduced will do more harm than good. It includes extraneous measures such as a federal jobs guarantee. This proposal creates a factual basis for a lie that US climate-change deniers have long been telling: that global warming is a hoax promoted as an excuse to expand the size of government. That is a sure-fire way to generate votes for Trump in November.

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The Guardian, 20 Jan 2020: The best way to help the climate is to increase the price of CO2 emissions