Ah, blogging. My post below was intended as, well, as a “thumbnail sketch” — “a brief outline or cursory description” — offered for critique by my commenters. It was the product of perhaps ten minutes of deliberation, laying out in stark terms the countours of a few lines of thought I have found appealing at first blush. And thanks to all the commenters for your critiques, which I value, and many of which I agree with.
That said, sigh. I am very grateful for Tyler's link, for his broad agreement, and even for his terrifying apocalyptic imagination. But his naming the post “Will's Theorem” implied a settled view that I do not have and a logical structure I certainly did not take any care to set out. Then my admittedly half-baked thoughts showed up on the Wall Street Journal economics blog, and then on Felix Salmon's blog at Portfolio, where I am treated to a pretty good pummeling. Anyway, now I feel semi-famous for a view I hold at barely better than even odds! Bittersweet.
Anyway, here are a few of Felix's points, and some thoughts about them:
But he has no reason at all to believe that in the medium run environmental externalities are positive rather than negative. It's entirely possible that in the medium run fossil fuels will remain cheaper than alternative energy sources, and that externalities will remain negative. It's also entirely possible that by the time fossil fuels are so scarce that alternative energy sources are cheaper than their carbon-emitting counterparts, we will have pumped so much carbon dioxide into the atmosphere that it will be too late: environmental catastrophe will be upon us.
Will's argument, it seems to me, seems to rely on the peculiar idea that we'll run out of fossil fuels just in time to avert environmental catastrophe: that even if we don't change our ways unilaterally, the finite supply of oil and coal wil force us to do so before it's too late.
But scientifically speaking, there's no reason to believe this. Carbon levels in the atmosphere are already too high, and they're rising fast.
I completely agree that there is no reason to believe that coal and oil prices will happen to rise just enough, just in time to cause a seamless, universal shift to cleaner, relatively cheaper sources of energy. That is in fact silly.
I expect that what's going to happen (what is perhaps already starting to happen) is that already very wealthy nations will try to force a shift to cleaner energy sources by manipulating relative prices — that is, by taxing carbon and subsidizing alternatives like wind, solar, biofuels, etc. At a point in the not-distant future, there will be large-scale substitution to the alternatives in these rich countries. The effect of this will be to ease demand for extractive energy sources, dramatically bringing down the price of coal and oil on the world market, making them that much more attractive to developing economies, who will then burn them in the least clean way. In effect, the rich world will be subsidizing dirty energy for the poor world. This is, I think, quite generous of us, but it's not clear to me the result will be any net decrease in carbon emissions.
Because I am not naive about the probability of our arriving at a stable solution to the global collective action problem required to successfully impose a worldwide tax on carbon, when we arrive at the point where rich countries finally succeed in reducing the price of carbon for poor countries, it's probably then a race of innovation against the true climate model. If the true model is the current consensus model, then we may simply be stuck with the (Nordhaus-calculated) $23 trillion dollar externality in 2100. Innovation certainly may fail to push the price of alternative energy to free (more or less) before we begin to take a big economic hit from warming. But if I could, I would bet my life savings against the predictions of the current consensus climate model. And I would also bet (rather more conjecturally) that energy will be basically free by 2050. Which may help explain where I am coming from.
Now, I have to say, I have no idea what Felix is talking about when he says that “carbon levels in the atmosphere are too high.” Too high for what? I am not aware of a net negative externality from current levels of carbon. But whatever. My point about technology was not just that technology will, in the medium-run, produce clean energy sources that will underprice oil and coal, but will also produce Nordhaus' first-best “low cost backstop” — a technology like carbon sequestering trees that basically delivers the carbon level we want. I predict this will happen in the medium term, by which I guess I mean the next several decades. (Oh, to have a real prediction market!) If we do get it, it's going to come from the kind of science and innovation that, as I said, “causes and is caused by” economic growth. So that's what I mean when I say I think the medium-run environmental externality from growth is positive.