This post first appeared on February 5, 2007
We have to admit to being a little slow on the uptake from time to time. We reported on the FT’s February 2 editorial, which commented on the publication of the first of four reports by the Intergovernmental Panel on Climate Change. (Media watch item: still no editorial yet on this topic in the New York Times. And a Barbaro-related story again took pride of place, this time on the first page of the Sunday “Week In Review,” section, with a big photo, while the global warming got a teeny story on the second page. 1:22 A.M. correction: we do have an NYT comment, a satirical op-ed discussing the efforts of a Park Avenue co-op to reduce its carbon footprint. If this is all the Times has to offer, we’ll take Barbaro any day).
The FT editorial, “We need a clear and predictable price for carbon,” gives a high level discussion of the global warming problem and the key elements of an effective response.
Do read the editorial (see our post ). We call attention to two items. First, the article recommends acting on the recommendations of the UK’s Stern Report, which suggests that the costs of combating global warming may only be 1% of world GDP if steps are taken now. What is noteworthy is that the Stern report has gotten very little press in the US (if you type “Stern report” and “global warming” in Google News, nearly all the entries are in Commonwealth newspapers. And the few references in America are buried in comparatively long stories).
Why is this of concern? It increases the possibility that those who have something to lose will exaggerate the costs of taking action.
The second matter is the recommendation in the headline, “a clear and predictable price for carbon.” That may sound simple and uncontroversial, but it is anything but that. The regime that business finds most palatable for dealing with global warming is carbon trading. Indeed, as we discussed earlier, Wall Street firm are keenly interested in this area, not just as investors, but as market makers.
Unless I am missing something, the idea of having a market is antithetical to having a stable, let alone predictable, price. But from a public policy standpoint, you need some level of price predictability in order for companies and entrepreneurs to fund projects Volatility favors speculators, not investors. But it seems that the speculators are leading the development of this market.