[Editor Note: Robert Murphy’s 2009 views on the Andrew Weitzman “fat tails” argument for pricing carbon dioxide were presented yesterday. Today’s post shares Murphy’s review in 2016 of the same issue, part of his coauthored Policy Analysis (No. 801), “The Case Against a U.S. Carbon Tax,” with Patrick Michaels and Paul Knappenberger. ]
“Who would buy such an insurance policy?”
“Fat Tails” and Carbon Taxes as Insurance?
We note that the leaders in the pro-carbon tax camp are abandoning traditional cost-benefit analysis, claiming its use is inappropriate in the context of climate change. One reason given for this is concern over “fat tails”—concern that climate change could result in damages far greater than what is currently considered likely. Worries about fat tails lead some carbon tax proponents, like Harvard economist Martin Weitzman, to argue that, instead of treating a carbon tax as a policy response to a given (and known) negative externality, it should be considered a form of insurance pertaining to a catastrophe that might happen but with unknown likelihood.…
“Do you operate the ‘Institute of Energy Research’ out of your living room? What exactly entitles you to the evidently self-applied label of ‘energy expert’? … You appear to be a deputy adjunt miller, lacking both discernible qualifications in the real world and the ability to tell a good argument from a bad one.” (Holdren to Bradley, September 17, 2003)
Some 16 years ago, I put my book writing on hold to critically review the long written record of John P. Holdren, then (and now) a Professor of Environmental Policy at Harvard University. (He was President Obama’s science adviser between Harvard appointments, from 2009 until 2017.)
The result, “The Heated Energy Debate: Assessing John Holdren’s Attack on Bjorn Lomborg’s The Skeptical Environmentalist,” was published by the Competitive Enterprise Institute in mid-2003.…
“Thus, as of today, the United States will cease all implementation of the non-binding Paris Accord and the draconian financial and economic burdens the agreement imposes on our country. This includes ending the implementation of the nationally determined contribution and, very importantly, the Green Climate Fund which is costing the United States a vast fortune.”
“The United States, under the Trump administration, will continue to be the cleanest and most environmentally friendly country on Earth…. We will be environmentally friendly, but we’re not going to put our businesses out of work and we’re not going to lose our jobs.”
On June 1, 2017, President Trump provided what is arguably the greatest political victory for anti-Malthusian, pro-market environmentalism with his decision to withdraw the U.S. from the Paris climate accord.
Saturday marks the second anniversary of this historic decision.…