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Friday, July 02, 2010

Rogoff: Can Good Emerge From the BP Oil Spill?

Kenneth Rogoff says anger among twenty somethings might "be the ticket to rekindling interest in a carbon tax":

Can Good Emerge From the BP Oil Spill?, by Kenneth Rogoff, Commentary, Project Syndicate: Perhaps it is a pipe dream, but it is just possible that the ongoing BP oil-spill catastrophe in the Gulf of Mexico will finally catalyze support for an American environmental policy with teeth. ...
The fact is, the BP oil spill is on the cusp of becoming a political game-changer of historic proportions. If summer hurricanes push huge quantities of oil onto Florida’s beaches and up the Eastern seaboard, the resulting political explosion will make the reaction to the financial crisis seem muted.
Anger is especially rife among young people. Already stressed by extraordinarily high rates of unemployment, twenty-somethings are now awakening to the fact that their country’s growth model – the one they are dreaming to be a part of – is, in fact, completely unsustainable, whatever their political leaders tell them. ...
Might a reawakening of voter anger be the ticket to rekindling interest in a carbon tax? ... Why might a carbon tax be viable now, when it never has been before? The point is that, when people can visualize a problem, they are far less able to discount or ignore it. Gradual global warming is hard enough to notice, much less get worked up about. But, as high-definition images of oil spewing from the bottom of the ocean are matched up with those of blackened coastline and devastated wildlife, a very different story could emerge.
Some say that young people in the rich countries are just too well off to mobilize politically, at least en masse. But they might be radicalized by the prospect of inheriting a badly damaged ecosystem. Indeed, there is volatility just beneath the surface. Modern-day record unemployment and extreme inequality may seem far less tolerable as young people realize that some of the most cherished “free” things in life – palatable weather, clean air, and nice beaches, for example – cannot be taken for granted.
Of course, I may be far too optimistic in thinking that the tragedy in the Gulf will spur a more sensible energy policy... A great deal of the US political reaction has centered on demonizing BP and its leaders, rather than thinking of better ways to balance regulation and innovation.
Politicians understandably want to deflect attention from their own misguided policies. But it would be far better if they made an effort to fix them. A prolonged moratorium on offshore and other out-of-bounds energy exploration makes sense, but the real tragedy of the BP oil spill will be if the changes stop there. How many wake-up calls do we need?

The response to the financial crisis from Congress has been disappointing, and it's hard not to let that color thoughts about climate change legislation. I'm not optimistic. But if there is action, I doubt it will be through a carbon tax. People may be angry, but the anger is at specific targets, e.g. BP. There are attempts to say "you, the American public caused this by your insatiable demand for energy," but I think that will backfire. especially if it can be linked to PR from BP. People don't think it's individually their fault that the oil spill happened, and while they are more than willing to make other people pay for it -- those who are responsible -- I'm not so sure they are ready to place the burden on themselves. The same goes for climate change policies more generally. I just don't see a carbon tax in the cards.

Update: Richard Green:

Ken Rogoff thinks the BP spill might produce a groundswell for a carbon tax...: ...but Mark Thoma is not so sure [Rogoff's take is here].

I am actually more inclined to agree with Rogoff on this one. When environmental problems are easily visible, they seem to generate political consensus for action. The air quality in Los Angeles, which was obviously awful 30 years ago, if much better currently--the vast majority of days are quite clear now(although we still have the problem of invisible small particulates). The 1952 smog disaster led to major policy changes in the UK. The BP disaster could similarly mobilize policy.

Mark could still be right about this--I just hope he is not.

    Posted by on Friday, July 2, 2010 at 12:06 PM in Economics, Environment, Market Failure, Oil, Taxes | Permalink  Comments (18)


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