In an essay for the Sunday New York Times he writes:
. . . there is widespread agreement among environmental economists that a market-based program to deal with the threat of climate change — one that limits carbon emissions by putting a price on them — can achieve large results at modest, though not trivial, cost. There is, however, much less agreement on how fast we should move, whether major conservation efforts should start almost immediately or be gradually increased over the course of many decades.Lest there be any confusion:
What you hear from conservative opponents of a climate-change policy, however, is that any attempt to limit emissions would be economically devastating. The Heritage Foundation, for one, responded to Budget Office estimates on Waxman-Markey with a broadside titled, “C.B.O. Grossly Underestimates Costs of Cap and Trade.” The real effects, the foundation said, would be ruinous for families and job creation.So technology is favored by those evil conservatives? Emissions are to be treated very much like a limited "resource," like land? The goal of pricing carbon would be to encourage "conservation"? Say what? No wonder climate policy is a complete mess.
This reaction — this extreme pessimism about the economy’s ability to live with cap and trade — is very much at odds with typical conservative rhetoric. After all, modern conservatives express a deep, almost mystical confidence in the effectiveness of market incentives — Ronald Reagan liked to talk about the “magic of the marketplace.” They believe that the capitalist system can deal with all kinds of limitations, that technology, say, can easily overcome any constraints on growth posed by limited reserves of oil or other natural resources. And yet now they submit that this same private sector is utterly incapable of coping with a limit on overall emissions, even though such a cap would, from the private sector’s point of view, operate very much like a limited supply of a resource, like land. Why don’t they believe that the dynamism of capitalism will spur it to find ways to make do in a world of reduced carbon emissions? Why do they think the marketplace loses its magic as soon as market incentives are invoked in favor of conservation?
Absent from Krugman's discussion is any discussion of energy technology (other than to disparage it) in favor of an almost mystical confidence in the magical effectiveness of the market to lead to conservation. Guess what? We cannot decarbonize the U.S. economy based on "conservation." To suggest otherwise is a pretty clear sign that one really doesn't understand the nature of the challenge.
Paul Krugman may have a Nobel Prize and be an excellent economist. However, his analysis of climate policy is utterly absurd. Someone needs to introduce him to the Kaya Identity;-)