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It’s Steven Mnuchin who should listen to economists on climate change

There’s overwhelming consensus among scientists for more aggressive action.

US Treasury Secretary Steven Mnuchin
US Treasury Secretary Steven Mnuchin.
Fabrice Coffrini/AFP via Getty Images

Treasury Secretary Steven Mnuchin took time out of his day at the World Economic Forum in Davos, Switzerland, on Thursday to suggest that Greta Thunberg should stop speaking out on climate change policy, adding, “After she goes and studies economics in college, she can come back and explain that to us.”

Thunberg herself is an international climate activist who’s garnered attention touring the globe and encouraging governments and companies to take drastic action to try to meet targets established by the Intergovernmental Panel on Climate Change (IPCC).

Thunberg countered Mnuchin’s comments with an argument more grounded in the physical sciences: We are facing extremely disruptive warming consequences absent a dramatic change in policy trajectory, and one really doesn’t need to know much about economics to understand that.

But a good question for Mnuchin and other Republican Party policymakers probably is: Why don’t you listen to what economists have to say about climate change, if you think Thunberg’s ideas are too economically destructive?

Mnuchin has a bachelor’s degree in economics from Yale University, where William Nordhaus teaches. Nordhaus, who recently won a Nobel Prize for his work on climate economics, created an integrated assessment model based on the interplay between economies, social impact, and the environment. (Such models are used to calculate the “social cost of carbon,” or the economic consequences of the release of more carbon dioxide into the atmosphere.) Nordhaus champions a view that the social cost of carbon is about $36 per ton in present-dollar terms.

That’s a lot lower than many other analysts think, and in some ways, Nordhaus’s work is a tool that could be used to argue that a) Thunberg is too alarmist about climate change, and b) the 1.5°C warming target she’s talking about is too aggressive. But $36 per ton is well above the $1 to $7 per ton that the Trump administration has argued is the real cost.

The gap underscores the fact that while reasonably well-qualified people hold a range of opinions on climate policy, the Trump administration — backed by the vast majority of the Republican Party — is standing entirely outside that range.

Economist Paul Romer shared the Nobel with Nordhaus, winning for his work on the role of technology and ideas in economic growth. At the press conference announcing his win, Romer spoke about climate and argued for investments in innovation.

“It is entirely possible for humans to produce less carbon,” Romer said. “Once we start to try to reduce emissions, we’ll be surprised that it wasn’t as hard as we anticipated.”

Though Romer and Nordhaus are recent Nobel Prize winners, they’re not outliers in the profession by any means.

Economists think we should do something about climate change

For economists, the gold standard of climate policy continues to be the idea of taxing carbon dioxide emissions. That was the point of a January 2019 letter signed by thousands of PhD-wielding economists, including more than two dozen Nobel laureates, all four living former Federal Reserve chairs, and Treasury secretaries and Council of Economic Advisers chairs from both parties.

That letter called for a four-fold program:

  • A carbon tax of $40 per ton, rising at 5 percentage points more than the rate of economy-wide inflation per year
  • Cash rebates financed by the tax revenues
  • Relief from certain emissions-related regulatory mandates
  • A “border adjustment” so that carbon-intensive imports would also be taxed

This is not necessarily the end-all, be-all of good climate policy.

There are reasonable arguments that standard economic models understate the degree of economic harm. There are also reasonable arguments that the exercise of economic modeling itself understates the harm created by things like species extinction, wrecking the viability of indigenous people’s traditional lifestyles, and rendering small island nations uninhabitable. It seems to me that pricing-centric strategies also underrate the role of innovation and downplay the strength of the case for R&D subsidies and early deployment in driving down the costs of new clean technology.

But if you are going to run around the world lecturing people about the need to take economics classes, you should familiarize yourself with the baseline consensus in the economics profession.

And the least common denominator here — the stuff Alan Greenspan and Glenn Hubbard and Edward Lazear and Martin Feldstein and Michael Boskin and Ben Bernanke and Greg Mankiw and other veterans of Republican presidential administrations were willing to sign on for — is the suggestion that America should institute a rapidly rising carbon tax.

Imagine an honest climate debate

If Mnuchin listened to economists and championed their policy preferences, he’d almost certainly be left with plenty of arguments to have with Thunberg and other environmental activists.

They’d say he’s underplaying the risks entailed by 2°C or 3°C of climate change relative to the safety of trying to hold things to 1.5°C. He’d say they’re underrating the value of economic growth. They’d say he’s too ensnared by neoliberal dogma in counting on price mechanisms to drive necessary change, and he’d say they’re indulging in central planning fallacies that will end in boondoggles and tears. I go back and forth on some of these topics myself, finding plenty of disagreements in the climate space between smart, well-informed people.

What you don’t find are smart, well-informed people who think it’s a good idea to enact a 70 percent cut to green energy funding while doing nothing on carbon pricing and rolling back regulatory efforts to reduce emissions. That opinion is way outside the consensus views of economists and even further outside the consensus views of natural scientists who study the issue. That also happens to be the Trump administration’s policy position.

It would genuinely be an incredibly constructive step for Mnuchin and other GOP leaders to do what they’re suggesting Thunberg to do — listen to economists and espouse moderately aggressive, market-oriented solutions to the climate problem. They could then have a reality-based argument with people who have various reasons to favor more aggressive steps. But instead, the current government is doing less than nothing to reduce emissions, even as it smugly lectures others about the need to listen to experts.