Review of Cullenward and Victor’s book Making Climate Policy Work

Is putting a price on carbon hard? Oh yes. And I speak from experience: I was the founder and co-chair of the I-732 revenue-neutral carbon tax proposal that made the 2016 ballot in Washington State. We ended up getting 41% of the vote, which I like to say was not bad given that we were opposed by just about everybody, including the Sierra Club, Governor Jay Inslee, and others on the “environmental left” who wanted a Green New Deal instead. (Two years later they put just such a measure, I-1631, on the ballot; it lost, too, getting 43% of the vote. Hence my big-picture view: everything is hard.)

Those of us who continue to bang our heads against the wall of carbon pricing—a term that covers carbon taxes as well as cap-and-trade systems—do so because of what you might call the belief: the belief that eventually, when voters and interest groups and legislators take climate change seriously enough, there will be a successful push for a strong economy-wide price signal, implemented nationally if not internationally, that will create a powerful financial incentive for everyone to reduce carbon emissions in an efficient and effective way.

But what if this belief is wrong? What if putting a price on carbon is more trouble than it’s worth, what if it’s not just hard but too hard, what if “policymakers and policy advocates have relied and are relying too heavily on market forces”? That’s the central argument in Making Climate Policy Work, by Danny Cullenward and David Victor. It’s a thoughtful and thought-provoking book, but I hope it’s only the first of two volumes because there’s much more they need to say to make their case.

The authors’ analysis of existing carbon pricing policies is well-reasoned and I have few quibbles with it. Anybody who thinks that the carbon pricing agenda is proceeding merrily along, from victory to victory—i.e., that the available evidence to date supports the belief—should read this book and reconsider. Instead of sending strong price signals, existing carbon pricing programs are mostly weak “Potemkin markets”; instead of being economy-wide, they are mostly narrowly focused; instead of being linked nationally and internationally, they are mostly stand-alone. And offsets are a recipe for disaster.

But the authors go beyond pointing out the problems with existing carbon pricing programs. They argue that the belief is flat-out wrong, that carbon pricing is too hard, that market instruments can never be more than a small part of the solution: “With careful reforms, they can be made to do more. Even then, the dominant—if not overwhelming—majority of emissions reductions are likely to come from smart industrial policy strategies.” They tout in particular an iterative process called experimental governance (XG).

Unfortunately, the authors only spend about 10% of the book making the case for industrial policy and XG. That’s not enough, which is why I hope they will write a follow-up book. One request is for more about the “big hammers” and “penalty defaults” that XG apparently relies on in order to get businesses on board. What would the policies and politics here actually look like in steel or cement or air travel, or even in “easier” sectors like motor vehicles or electricity?

I’d also like to learn more about how they aim to get “effective public administration” of “massive state intervention in the economy.” The authors are admirably upfront in saying that this is a “blind spot” for folks who don’t like markets but want climate action, and in their interview with David Roberts they say that “nobody knows how to run these programs.” Roberts seems to be happy having this blind spot and even tries to lighten things up by posting a cute picture of his dog—he clearly has a talent for the PR side of journalism—so it’s left for me to second the authors by emphasizing that this is a huge problem, roughly the size of the Soviet Union, Cuba, and Venezuela, combined. I admire the authors for their honesty about all this: my beef is with Roberts and others who seek to downplay this problem. But I should also say that the authors’ claim that “a more market-oriented approach would be no less demanding” is one of the few lines of the book that seem to me to be totally off-base.

The authors also need to hold XG up to the same exacting standards they apply to carbon pricing. It doesn’t seem reasonable to laud XG for being a flexible and adaptive process while criticizing “ongoing political negotiations” in carbon pricing policies. And it doesn’t seem right to point out the flaws in existing carbon pricing policies without doing the same with XG. One example they give of XG is California’s effort in the 1990s to mandate electric vehicles, but that effort seems to have failed. Another example they cite is the Irish dairy industry’s efforts to improve water quality, but the latest Irish EPA report says that “water quality is getting worse… both cattle numbers and fertilizer use have increased.” (And that’s despite “peculiarities” that helped bring the stars into alignment, with international consumers supposedly keen on buying Kerrygold® butter but only if they can dream of grass-fed Irish cows grazing sustainably near the Lake Isle of Innisfree.) To ask the obvious question: is the grass really greener on the other side? 

I could go on, but look: I’m not trying to dismiss industrial policy or XG. I’m just saying that I’m not (yet) convinced, and that the way to convince me is to advocate for industrial policy and XG, not against carbon pricing. Otherwise this all just devolves into a kind of “we can only make serious progress on climate change if” parlor game that is as destructive as it is beloved. (See for example the Naomi Klein-type progressives who claim that we can only make serious progress on climate change if we dismantle the white supremacist cisgender capitalist hetero-patriarchy, a belief they are betting the planet on, so far without much success.) In my view, all of these arguments fall short for the simple reason that nobody can say with mathematical certainty how to make progress on climate change. Everything is hard, and everybody working on climate change should repeat daily the famous quote from the screenwriter William Goldman about how to make a Hollywood blockbuster: “NOBODY KNOWS ANYTHING. Not one person in the entire [field] knows for a certainty what’s going to work. Every time out it’s a guess—and, if you’re lucky, an educated one.”

There’s another quote that I think is relevant here, this one (via a review) from The Knowledge Machine, Michael Strevens’s philosophy-of-science book: “The single greatest obstacle to successful science is the difficulty of persuading brilliant minds to give up the intellectual pleasures of continual speculation and debate, theorizing and arguing, and to turn instead to a life consisting almost entirely of the production of experimental data.”

It seems to me that this “speculation and debate” is also the greatest obstacle to successful climate action, and that the solution is to actually try stuff and see whether we can find some things that work. My view is that the best place to try stuff is in the “laboratories of democracy”—the 50 U.S. states—and in that vein I’m working on an effort to put climate-related measures on the ballot in at least 7 states in 2024. (“Climate 24/7”, get it?) So my challenge to Cullenward and Victor—and to Jessica Green, Matto Mildenberger, Leah Stokes, and indeed to everyone reading this—is to come up with proposals that are politically plausible for one or more of the states that allow ballot measures: red states like South Dakota, Nebraska, and Arkansas, blue states like Washington, Oregon, and Massachusetts, purple states like Arizona, Colorado, and Michigan. I’ve got some ideas for all those states, and Yes they’re about carbon pricing. What have you got?

 

 

3 responses to “Review of Cullenward and Victor’s book Making Climate Policy Work”

  1. Thanks, Yoram! I’ve enjoyed our conversations on how to move the ball forward over the years and appreciate your close read and thoughtful review. Keep your eyes out for David’s new book specifically on XG, coming out from Princeton University press this year, and agreed entirely on the need to be humble about what works in climate policy. We’ve laid out a case for why we think carbon pricing isn’t working and why those barriers are likely to remain high relative to other strategies, which deserve a similar treatment from us or others in the future as you suggest. We also hope that those who see higher barriers elsewhere, as you reasonably do, will nevertheless find our description of the politics of carbon pricing useful as a testable theory. Specifically, we hope our work can help inform efforts to make carbon pricing work better (which I pursue year after fruitless year in California) as well as to overcome barriers holding back other strategies. Again, I really appreciate the thoughtful discussion and look forward to more in the years ahead.

  2. Here’s an understatement: “[Carbon] offsets are a recipe for disaster.”

    Yep, that’s robustly supported by C&V’s forcefully-presented empirical evidence. [Check out their footnotes.] They show how offsets end up creating a race to the bottom. The cheapest, least effective and most poorly monitored projects to capture or avoid carbon emissions win. That’s bad, but what’s worse is that shaky or bogus offsets hold down carbon prices so there’s also no incentive for carbon polluters to cut back, defeating the primary purpose of carbon pricing.

    C&V’s book seems to lump carbon taxes in with gimmicky cap/trade/offset schemes that hide or don’t even register a real cost to climate polluters. That’s hardly fair. Carbon taxes have barely been tested. Yes, it’s hard to raise the price of a carbon tax, but as Yoram says, “everything [about enacting] climate policy is hard.” Starting a carbon tax low isn’t a crazy idea if there’s a mechanism to raise the price, preferably automatically so there’s a strong expectation of higher carbon prices in the future.

    At this point, on the federal level, explicit carbon taxes may enjoy an advantage over cap/trade/offset schemes where free allowances funnel revenue back to polluters: Because carbon taxes generate revenue available for appropriation, they could pass the Senate with a bare majority using “reconciliation” which applies only to budgetary measures.

    https://slate.com/business/2021/01/budget-reconciliation-senate-everything-you-need-to-know.html

  3. Everything is hard — I agree 100% with that. I watch these (city-level) policy meetings and people like to poke holes (an easy exercise), but it is much harder and more productive for people to show leadership, get people to rally around something, and try it. That’s the only way we get out of this mess.

    > What have you got?

    What about electricity pricing? I really like Severin Borenstein’s idea of removing fixed costs (e.g., transmission) from electric bills, effectively both lowering prices and making electricity pricing less regressive. It would make for faster and more equitable electrification.

    It seems like it’s easier to lower costs (electricity) than to raise them (carbon), even though in both cases we are really just moving them. Or maybe a little of each?

    Refs: https://energyathaas.wordpress.com/2020/11/16/reinventing-fixed-charges/
    And my rendition: https://www.paloaltoonline.com/blogs/p/2021/01/31/california-must-fix-its-expensive-and-unfair-electricity-pricing

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