I agree with this from today's Krugman:

...cutting greenhouse gas emissions is affordable as well as essential. Serious studies say that we can achieve sharp reductions in emissions with only a small impact on the economy’s growth.

However:

Action on climate, if it happens, will take the form of “cap and trade”: businesses won’t be told what to produce or how, but they will have to buy permits to cover their emissions of carbon dioxide and other greenhouse gases. So they’ll be able to increase their profits if they can burn less carbon — and there’s every reason to believe that they’ll be clever and creative about finding ways to do just that.

Heaven help me for questioning a Nobel Prize winner (and especially one with a blog and a sharp pen*), but I think it is more correct to say that profits won't fall by as much under an economic incentive-based policy like cap-and-trade (especially if permits are given away instead of auctioned) relative to command-and-control regulation (i.e., standards and other government input and output mandates).

And this makes me scratch my head:

Still, should we be starting a project like this when the economy is depressed? Yes, we should — in fact, this is an especially good time to act, because the prospect of climate-change legislation could spur more investment spending.

Regulation as stimulus? The idea is that regulation would require the retrofitting of buildings and other retrofits, leading to expenditures and jobs, etc. Is there any empirical macro evidence that this could work? I have no idea, just asking the question, but I'm skeptical.

*This post may be "deeply irresponsible."


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