Monday, May 18, 2009

From "Obscure Journal" Article to Mainstream Policy

. Monday, May 18, 2009

Cap and trade has become the "hot" environmental policy of choice as of late. Both those on the right and those on the left increasingly see it as the most efficient and practical way to tackle the issue of global warming using a market-based approach. 


The hard-core environmentalists and champions of global warming on the left would much prefer a strict carbon tax that would levy a tax on emissions of carbon dioxide as a way to cut down on pollutants. The global warming skeptics on the right do not want increases in regulations on businesses and oppose taxing companies on their emissions. They still oppose cap and trade as unnecessary regulation seeking to tackle a mythical problem, but see it as preferable to a strict carbon tax. In other words, if something is going to be implemented, they'd rather see a market based cap and trade, similar to that of the acid rain cap and trade in the early 1990's, rather than higher taxes and regulations. 

A cap and trade program, with its relatively broad appeal, is easier to sell politically and cheaper to administer:
It is almost perfectly designed for the buying and selling of political support through the granting of valuable emissions permits to favor specific industries and even specific Congressional districts. That is precisely what is taking place now in the House Energy and Commerce Committee, which has used such concessions to patch together a Democratic majority to pass a far-reaching bill to regulate carbon emissions through a cap-and-trade plan.
The bill is poised to win committee approval this week, although with virtually no support from Republicans. If there was a single moment when cap and trade crossed the threshold from relatively untested economic concept to prevailing government policy, it came in May 1989 in the West Wing office of C. Boyden Gray, counsel to President George H. W. Bush.
Cap and trade evolved from an academic debate that began in the early 1960s when Ronald H. Coase, then a professor at the University of Chicago Law School, wrote an influential paper, "The Problem of Social Cost,” that examined when government should intervene in cases where a private entity causes public harm.

In 1971, W. David Montgomery, a Harvard graduate student in economics, fleshed out the idea of emissions trading in his doctoral thesis and has spent much of the last three decades trying to figure out how the marketplace can deal with environmental problems that are caused by relatively few actors but have consequences felt globally.
So a cap-and-trade system is poised to make its way through Congress and into legislation. An idea that was hashed out, critiqued and critiqued again in "obscure journals" across a wide variety of disciplines including economics, political science, public health and environmental science, among others, has finally made the long journey from mere idea to "policy" and it only took about 50 years. 

I find it really interesting when policies and proposals have their foundations in academic journal articles written by economists and political scientists (mostly because it gives me hope that I will one day be relevant and may come up with some crazy idea that may actually impact the real world), specifically when proposals and positions are exactly lifted from the literature. The interesting question is: When are policies most likely to get lifted from academic journals? I'm guessing it is during times of crisis, which is when there is an impetus to try new things and actually push through changes in regulatory structures. (Kindred brought this up in a recent paper and discussion.)

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From "Obscure Journal" Article to Mainstream Policy
 
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