“I don’t get economic policy from my bishops or my cardinal or my pope,” Jeb Bush said Tuesday.
Pope Francis released a wide-ranging, 192-page encyclical on climate change Thursday, making several points that are extremely important — and, although many environmentalists aren’t mentioning them, others that are profoundly counterproductive. The document should serve as a call to action, not as a comprehensive guidance for world policymakers.
First, the good stuff. The Vatican insists that people must take scientists’ warnings seriously, noting the large volume of scientific work on the risks of heat-trapping gases concentrating in the atmosphere. Francis also emphasized that the world’s poor are likely to feel the brunt of climate change’s effects, a fact that typically doesn’t feature in an American debate more often focused on the potential consequences to farmers in California, ranchers in Texas or waterside property owners in New York.
Yet Francis’s deep suspicion of the free market leads him to precisely the wrong conclusions about how to address global warming. “The strategy of buying and selling ‘carbon credits’ can lead to a new form of speculation which would not help reduce the emission of polluting gases worldwide,” he writes. “It may simply become a ploy which permits maintaining the excessive consumption of some countries and sectors.”
The “carbon credits” strategy Francis refers to, more commonly called “cap and trade,” would put a price on emitting carbon dioxide, essentially building the social costs of pollution into the sticker price of goods and services. Many environmentalists like the idea because at their core, cap-and-trade programs would have a legal requirement that emissions can’t breach a prescribed upper limit. Economists like this approach because it would wring carbon out of the economy at minimal cost. Businesses and consumers making millions of individual choices would over time invest in energy efficiency, move away from emissions-heavy modes of production and reorder the economy in ways central planners wouldn’t anticipate or appreciate.
A benefit of carbon pricing — a term encompassing both cap and trade and carbon tax policy, which relies on much the same logic — is that it would be modest, channeling human behavior to advance toward a common goal rather than dictating to society how it will get there. Francis sees this as a drawback. “Is it realistic,” he asks, “to hope that those who are obsessed with maximizing profits will stop to reflect on the environmental damage which they will leave behind for future generations?” The pope’s implied answer is “no.” The correct answer is “yes, if their profits depend on it.”
The United States government successfully and cheaply slashed power plant emissions of acid rain-causing gases with a cap-and-trade program. Perhaps Francis was informed by the recent performance of the European Union’s creaky carbon trading system. But the EU’s cap-and-trade program was incompetently designed. The answer isn’t to roll back the continent’s premier anti-carbon strategy, or for other nations to scorn the policy. The answer is to properly calibrate it.
Later in the encyclical, Francis almost seems to make the case for carbon pricing, drawing on the work of his predecessor, Benedict XVI. “As long as the clearing of a forest increases production, no one calculates the losses entailed in the desertification of the land, the harm done to biodiversity or the increased pollution,” Francis writes. “In a word, businesses profit by calculating and paying only a fraction of the costs involved. Yet only when ‘the economic and social costs of using up shared environmental resources are recognized with transparency and fully borne by those who incur them, not by other peoples or future generations,’ can those actions be considered ethical.” Carbon pricing would do exactly what Francis professes to want — require prices to reflect full social and environmental costs.
Francis isn’t quite clear about his alternative. He backs several good ideas, such as increasing energy efficiency, constructing better buildings and developing cleaner energy technologies. But that’s hardly all: The pope seems to want a fundamental restructuring of the world economy based on spontaneous moral action supplemented by massive spending in the developed world and sledgehammer government mandates from the global level on down, starting with the establishment of a powerful “world political authority.” In the process, he calls for consumer self-denial that defies human nature and minimizes the connections between market-driven economic growth and generalized increases in living standards.
“The economy accepts every advance in technology with a view to profit,” Francis says, “without concern for its potentially negative impact on human beings.” The answer is to force the market to account for pollution and other externalities, unleashing its terrible power to solve the problem rather than contribute to it. This would be far less disruptive than many alternatives. Then again, that’s probably why Francis — whose skepticism of modern life leads him onto tangents about things such as “the increasing use and power of air conditioning” — doesn’t like it.