How regulations can backfire on climate change

Oxford Professor Dieter Helm has a great recent NYT op-ed that illustrates the law of unintended consequences for regulations designed to reduce global warming.  Helm points out that although Europe has invested heavily in green technologies, it has made less progress in reducing carbon emissions than the US. 

The reason?  In the US we have cut down on coal and substituted natural gas.  Both are carbon-based but natural gas is much cleaner.  Europe has cut back on coal usage in its manufacturing processes, but because it is now importing more goods from China there is no net global reduction in coal usage.  Coal that would have been burned in Europe is now being burned in China.  Also some areas in Europe are cutting back on nuclear-generated electricity and are burning more coal.  Helm, like most economists, advocates a carbon tax that would apply regardless of the source. 

Republican supports new tax

There's a man-bites-dog headline for you. Today's Tom Friedman NYT column features an interview with SC GOP Sen. Lindsey Graham who apparently supports a carbon tax. This tax would create incentives for energy conservation and pollution abatement, as well as making us less dependent on foreign oil. Helps with global warming too, if you still believe that. More jobs, cleaner air, and a thumb in the eye to petroleum-supported autocracies (Russia, Venezuela, Iran) who have not been playing nice in world affairs -- what's not to like? One also could use the proceeds of such a tax to reduce the federal budget deficit, or make it budget-neutral by making off-setting tax cuts. In economic terms this would be far superior to the cap-and-trade bill passed by the House last year. Stay tuned, this could get interesting.