Global warming: a market proposal even libertarians would love

Libertarians may debate the merits of global warming, but not the worthiness of an emissions market.

Smoke billows from chimneys at a chemical factory in Hefei in China's Anhui Province. Libertarians may deny that global warming exists, but wouldn't they support a market for emissions?

Sandwiched between "gays in the military" and "gold standard and fiat money", I find the entry for "global warming" in Jeffrey Miron's new book Libertarianism from A to Z . (Full disclosure --- Basic Books published this book and they will publish my book this fall).

I will paraphrase his entry and then discuss;

1. Debate will continue about the underlying science of global warming.

2. There are benefits caused by global warming.

3. There are pre-existing government distortions that encourage the use of fossil fuels so we should consider getting rid of these "unlevel playing field policies" before we introduce new policies (i.e carbon tax). examples include; ethanol subsidies, not allowing peak time pricing and critical peak pricing on roads and electric utility pricing (both would reduce demand).

4. the cost of anti-carbon policies would be very high

5. public money would be better spent on LDC malaria fighting or improving education in LDCs.

There is a lot of truth to what he says here but I'm surprised by one big point. Where is the Coasian logic concerning property rights? At my University of Chicago, we were taught that if there are well defined property rights and everyone agrees on who owns what then through trading and bargaining that we can reach an efficient allocation of resources.

In the case of the atmosphere and carbon, who owns the right to pollute and what markets exist to trade in these rights?

I would have thought that a free market libertarian might say: "Right now there are no world wide carbon markets for buying and selling the right to pollute. I favor opening up such a market and letting people buy and sell and pursue their own individual freedom".

My question for a libertarian is; "in a free society, how do people who fear climate change and want to take action express their concern?" Yes, we will move to higher ground and yes we will purchase products to protect us from climate change's blows --- but could creating a new market be a bad thing?

If your answer is yes, then you are implicitly endorsing that the polluters have the right to pollute but you are not allowing them the opportunity to sell this right in a free market. You are thus not allowing and encouraging endogenous innovation and squeezing out the waste in our status quo system.

I do not believe that being a libertarian = demanding "low prices".

To quote Gary Becker from 2007,

"Using a social-discount rate of 3 percent does not sweep away the greenhouse-gas problem. The latest report by the Intergovernmental Panel on Climate Change strongly suggests that the problem will be quite serious in perhaps 50 or fewer years from now. However, the 3 percent rate does imply that low weight be given to effects on the utility of generations 150 years from now, and even more so 400 years from now. Common sense also dictates that one recognize that technologies will be much improved in the future, including technologies that can improve health, income, and the environment. A positive and non-negligible discount rate is the formal way to recognize the importance of these and related considerations."

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