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An Ambitious Plan for Climate Change

Paul Krugman: “I just hope the president sticks to his guns – and the good news is that I’m starting to believe that he will.”

(Image: HAGEN; Norway / CartoonArts International / The New York Times Syndicate)

I recently had a discussion with someone who felt disappointed in President Obama; he had not, this person complained, lived up to the high hopes of his supporters. My response apparently came as a surprise: I’m liking Mr. Obama more and more as he slogs through his second term.

Of course you’re disappointed if you believed that soaring rhetoric could transform our political life, or if you believed that Mr. Obama could, by sheer force of will, turn crazy right-wingers into centrists. But I never bought into all of that. In fact, I was always exasperated by the inspiring speeches, which suggested to me that Mr. Obama didn’t understand what he was facing.

What mattered instead were concrete achievements, things that would shape America for the better over time. And in the end, Mr. Obama has delivered. Health reform is working, and the repeal crowd is slinking slowly away.

And now, the environment.

His recent proposal to cut carbon pollution from power plants isn’t enough, by itself, to save the planet, and like heath reform, it could be undone if enough justices on the Supreme Court decide that their partisan loyalty trumps the law and sound policy. But if the plan does go into effect, it could have huge implications. Climate diplomacy could resume; and if something like cap-and-trade is actually implemented, it will prove far cheaper than the doomsayers claim, undermining the arguments of anti-environmentalists in much the way that the success of the Affordable Care Act has undermined those of enemies of universal health coverage.

So this is really encouraging. I just hope the president sticks to his guns — and the good news is that I’m starting to believe that he will.

Coal Comfort

The U.S. Chamber of Commerce recently released its preemptive strike against the Obama administration’s regulations on power plants.

What the chamber wanted to do was show that the economic impact of the regulations would be devastating. And I was eager to see how they had fudged the numbers.

But a funny thing happened on the way to the diatribe. The chamber evidently made a decision that it wanted to preserve credibility, so it outsourced the analysis. And while it tried to spin the results, what it actually found was that dramatic action on greenhouse gases would have surprisingly small economic costs.

The chamber’s supposed scare headline is that regulations would cost the American economy $50.2 billion per year in constant dollars between now and 2030. That’s for a plan to reduce greenhouse gas emissions by 40 percent from their 2005 levels, so it’s for real action.

Is $50 billion a lot? According to the Congressional Budget Office’s long-term projections, average annual real gross domestic product over the 2014-2030 period will be $21.5 trillion. So the Chamber is telling us that we can achieve major reductions in greenhouse gases at a cost of 0.2 percent of G.D.P. That’s cheap!

True, the chamber also says that the regulations would cost 224,000 jobs in an average year.

That’s bad economics: Employment in the United States is determined by the interaction between macroeconomic policy and the underlying tradeoff between inflation and unemployment, and there’s no good reason to think that environmental protection would reduce the number of jobs (as opposed to real wages).

But even at face value that’s also a small number in a country with 140 million workers.

So, I was ready to come down hard on the Chamber’s bad economics; but what they’ve actually just shown is that even when they’re paying for the study, the economics of climate protection look quite easy.

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