It’s Not Easy Bein’ Green

World leaders who signed on to the Paris Climate accord in 2015 will gather in Glasgow for the 26th UN Climate Change Conference, the formal session beginning on November 1. Britain, in partnership with Italy, will play host. The nations represented committed themselves to ratcheting up of their original commitments every five years, but were forced to postpone the scheduled 2020 meeting because of the Covid pandemic. Unless the emergence of the Delta variant forces the group to choose between another postponement and a less satisfactory virtual meeting, each nation will come to Glasgow to unmask its updated, presumably more robust plans to reduce greenhouse gas (GHG) emissions.

A more-than-usual sense of urgency will pervade this gathering. Representatives of their countries and the usual gaggle of advisers and advocacy groups will be meeting in the wake of floods, fires and other calamities in Greece, Germany, Belgium, America, Australia and other nations, events widely believed to be the result of what is called climate change or global warming, in turn caused by emissions of greenhouse gasses, resulting largely from the use of fossil fuels to move goods and people, heat homes and operate both industrial and developing economies. Added to that are fears of financial crises resulting from the economic losses and instability caused by warming – property destroyed; once valuable, suddenly worthless stranded assets (think oil and gas reserves); refugees flooding countries unable to absorb them; asset-destroying government regulations.

There are dissenting voices, many of them from sources somewhat better qualified even than Swedish teenager Greta Thunberg, but they cannot carry the day against the disasters that are putting pressure on the Glasgow attendees to take action. Now.

Two problems face the conferees. First, more of the same, a sort of Paris+, will not do. Arguably, the environmental damage done since the Paris conferees agreed to do no such thing requires that the range of policies brought to the battle must be expanded. These must include a system of international pollution charges such as recommended by the European Union and incorporated in America’s new infrastructure plan, mitigation efforts to cope with rising sea levels and other problems already apparent, and accelerated research and development programs into such matters as geoengineering.

Second, the publics clamoring for change are somewhere between reluctant and unwilling to change the lifestyles that rely so heavily on fossil fuels, or to pay for the measures deemed necessary to roll back emissions and halt, and then reverse global warming. This latter problem is best understood with refence to the dilemma facing the meetings’ chairman. Boris Johnson sought to set an example for his guests by promising to reduce UK greenhouse gas emissions by 78% from 1990 level. But he found it politically impossible even to impose restrictions on the use of fossil fuels for house-heating because voters gagged at the cost.

Worse: Johnson had promised the country’s northern region that he would bring new jobs to its depressed constituencies, and now has an opportunity to do so – by allowing construction of a new coal mine in one of the northern constituencies to which he has promised lots of new jobs. He is considering a request from developers for permission to invest £160 million to create 500 well-paying jobs, salaries ranging up to $60,000 per year, by opening a new deep metallurgical coal mine near Westhaven, West Cumbria. The developers quite reasonably argue this will have no effect on global emissions since if the coal is not mined in Cumbria to make the steel for, say, wind turbines, it would be mined elsewhere. The Prime Minister has proven over his career that he can escape when trapped between a rock and a hard place, and will have to do so again.

 Advice from Einstein, Bismarck and Smith 

The leaders gathering in Glasgow should be guided by three bits of advice, one from a scientist, another from a politician, or statesman if you prefer, and a third from a philosopher. The first comes to us from Albert Einstein, “Insanity is doing the same thing over and over again and expecting different results.” In the six years since some 200 nations announced in Paris their voluntary plans to attack climate change, things have gone from bad to worse.

The latest report of the International Panel on Climate Change (IPCC) records that the world has grown warmer since the Paris meeting, and predicts that absent strong action it will become hotter still, with consequences that are already becoming visible in the shape of what are called “weather events.” The IPCC deems it “extremely unlikely” that these [heat events] would have occurred “without human influence on the climate system”.

And the National Oceanic and Atmospheric Administration reports there were eight extreme events in the first half of 2021 with losses exceeding $1 billion while, adjusting for inflation, there were only three in 1980. “Developments since 2015 have only strengthened the sense that the Paris Agreement is unlikely to even slow the growth of human influences on the climate, let alone reduce them … the world is very unlikely to zero out net emissions by 2075, let alone by 2050” writes the well-credentialed Steven Koonin in his new book, Unsettled. Game, set and match to the emitting team. Paris has fallen.

The second bit of wisdom that might usefully guide the Glasgow proceedings comes to us from Germany’s first chancellor, Otto von Bismarck, “Politics is the art of the possible, the attainable – the art of the next best.” In democratic countries, the people rule, more or less. And drastic changes in lifestyles are not easily induced, especially not quickly, and especially if they are expensive.

It is simply unrealistic to expect the world’s politicians to rally support for net-zero emissions by 2050 by telling their voters there will be no more oil and gas furnaces for sale by 2025; half of air travel will have to cease if new emissions-free fuels are not developed; car trips must be replaced with walking and cycling; no permits will be issued to develop new oil and gas fields; no coal plants will be constructed unless fitted with currently unavailable emission-catching equipment.

Difficult demands are also made by the European Commission’s €1 trillion “European Green Deal,” aimed at reducing net GHG emissions by at least 55% by 2030, compared with 1990 levels. Known colloquially as its “Fit For 55” plan, it calls for massive renovation of existing buildings, building a power sector based largely on renewable resources, and requiring all new cars to be emissions-free by 2035, fifteen years ahead of the U.S. schedule, which itself is considered unrealistic by auto industry experts even if successive administrations are prepared to continue subsidies and tax credits for electric vehicles in the face of mounting fiscal pressures.

Sesame Street’s Kermit the Frog is not the only one finding “It’s not easy being green.” Or, if you believe economists express things more clearly than a frog, the discounted value of benefits to be received at some far future date is often below the current cost of the measures that must be taken to achieve those benefits.

The third piece of advice, from a great philosopher also claimed by economists, should be in Johnson’s mind at the Glasgow conference. The University of Glasgow was the academic home of Adam Smith for almost four decades, during which he spent considerable energy defining the role of government in economic life, which role, he concluded, was far from a minor one. But he warned of interventions that “impede the progress of opulence”, or as Jesse Norman puts it in his recent biography, “the centrality of markets to the process of wealth-creation and economic and social development.”

Reality Bites, China Emits

       Reality has driven a stake through the heart of existing policies aimed at arresting the pace of global warming, policies that rely primarily on promises made and kept by each individual nation. China, the world’s largest emitter, has reiterated its refusal to reduce the increase in its CO2 emissions just yet, or the actual increase eventually. China has financed hundreds of coal plants around the world: according to the Global Energy Monitor, China commissioned 76% of the world’s new coal plants in 2020, more than offsetting the emissions reductions from worldwide coal-plant retirements. About half of the $160 billion in coal-fired plants that China announced as part of Belt and Road were later canceled. Shuang Liu of the Washington think tank World Resources Institute, reckons that coal is no longer competitive with renewables in Belt-and-Road countries, which accounts for China’s decision this year to stop financing such new plants, announced . The regime has recently concentrated on building coal plants at home, in 2020 building more than three times as many new coal-fired plants as the rest of the world combined, roughly one new coal plant a week notes The Economist.

Japan, which has had its problems with nuclear power, intends to continue investing heavily in fossil fuels, and Australia has told the International Energy Agency it has no intention of taking the steps deemed necessary to reach the goal of net-zero carbon emissions by 2050, although wildfires and a change in the political climate might be softening that country’s position on global climate. Add them to Russia unwilling to cooperate, Saudi Arabia’s “green commitment” called into doubt by the independent Climate Action Tracker rating its climate commitments “critically insufficient”, and India, desperate for jobs and growth.  

       The most important reality that must be changed if progress is to be made is the position of China, the world’s largest emitter of CO2, only one of the greenhouse gasses, but the most significant for our purposes. The regime has made it clear that it has no intention of subordinating its economic-growth policies to programs to reduce emissions, and has subordinated its environment agencies to those responsible for maintaining China’s relatively rapid economic growth. China has been blunt. Xi Jinping will not reduce China’s emissions, although he might be willing to promise to stabilize them, not in total but per unit of GDP. But not just yet. In the first five months of this year China’s coal-powered electric generation rose substantially according to its National Development and Reform Commission (NDRC), the regime’s main planning agency, and China’s Five Year Plan for 2021-2025 suggests “coal power generation will continue to grow through 2025.”

There is little hope that China is prepared to negotiate its emissions output with America. “The U.S. has neither the moral standing nor the real power to issue orders to China over climate issues,” said the state-controlled (there are no other kind) Chinese newspaper, the Global Times, on the eve of a visit to Shanghai by Biden climate czar, the vainglorious John Kerry. The prospect of serious negotiations faded even further with the rise of overt geopolitical competition between China and the US. Wang Yi, China’s foreign minister, warns that “cooperation on climate change cannot be divorced from the overall situation of China-US relations”.

Although Kerry continues to insist “climate is not ideological … not a geostrategic weapon”, the world’s two largest emitters – China’s pre-pandemic 30% of the world total was twice America’s – cannot become negotiating partners so long as America persists, as China sees it, in interfering in the PRC’s internal affairs, in which it includes Taiwan. Although America’s reputation for steadfastness in honoring commitments to its allies has been tarnished of late, it is more rather than less likely that America will not trade its promises to Taiwan for the mess of pottage that would be any Xi commitment on emissions reduction.

Besides, even if Xi promises to cut back, the reliance to be placed on that oath must be considered in light of the pledges he made to adhere the rules of the WTO, not to militarize the islands it constructed in the South China Sea, and to maintain the independence of Hong Kong.

The Impossible Dream For U.S. Greens: A Treaty

America, too, cannot be relied on to follow through on any commitments made in Glasgow, even though its negotiators are more honorable, if less clear-eyed than Xi. To give those commitments legal force would require a treaty rather than the mere stroke of the Presidential pen, as Trump demonstrated when he withdrew America from the Paris accord, and Biden demonstrated when he re-joined. In one year, out the next, back in the next. Not the sort of thing on which to base long-term investments. The Constitution gives the senate the sole power to elevate Presidential ephemera to the status of a treaty, with ratification requiring a two-thirds vote of the senate. Biden is having difficulty marshalling a simple majority behind his climate proposals; a super-majority is beyond his grasp. The time for such steps might come, but it is not now.

Reality Bites, Boris’ Candor Required

If candor be his guide, Johnson will take every opportunity to point out that a mere ratcheting up of existing policies would not be effective even if Xi Jinping turned green. And that richer countries have not honoured their promise to deliver $100 billion annually to help poorer countries adapt to climate change, which the poorer countries regard as promises to pay “reparations” for the damage done to them by GHG emissions in the course of the now-rich countries’ industrialization. Worse: the UN Environmental Programme estimates that the annual cost of adaptation by these countries could reach $300 billion by 2030 and $500 billion by 2050.

Odile Renaud-Basso, president of the London-based European Bank for Reconstruction and Development, which operates in eastern Europe, north Africa and central Asia, reports “resistance from lower-income countries to the Bank’s plan for low-carbon, “green belt and road” alternative to China’s coal-intensive Belt and Road Initiative.  

Johnson will tell them, too, that although renewables are making inroads into the generating markets, with lesser reliance on subsidies than in the past, they are far from a reliable source of base-load power. And will not become such a source in the absence of major improvements in the capacity of batteries to store power from renewables when the sun doesn’t shine and the wind doesn’t blow.  And producing batteries are a dirty business, relying on emissions-producing mining and manufacturing processes. Environmental groups also claim that the manufacturing process pollutes ground water.

Of course, renewables could be backed up by coal or natural gas plants, but those are the very producers of GHGs that climate experts agree we need to eliminate. That leaves nuclear power as a base-load possibility. But nuclear is more or less off the table in the US because of its bankruptcy-producing high cost, and seems likely to remain so unless the small module reactor (SMR) nuclear plants mentioned later eventually prove to be financially and politically acceptable. With a few exceptions, the UK being one, the world will get its future nuclear power from China, Russia and the United Arab Emirates – no noisy intervenors with whom to contend – which account for most of the 50 nuclear plants under construction.

Even if the storage problem could be solved by improvements in battery technology, it is not certain that the supply of renewable energy could be expanded sufficiently to replace fossil fuels, which is why Germany is opening new mines to extract the dirtiest of all coals, lignite, and American consumption of coal is expected to increase by 15% as the economy reopens in response to the wider use of vaccines, and natural gas prices soar. Given a choice of insufficient electricity or burning fossil fuels, politicians will inevitably select the latter.

Policymakers relying on sun and wind run into two objections from, yes, environmental groups (the fact that 80% of America’s solar panels are made in China creates another problem, but security issues are a topic for another day). The first is that solar farms require huge acreage, and wind turbines are, well, ugly. And both of these methods of generating electricity are not kind to birds, solar panels frying those that the blades of the wind turbines do not chop up.

Second, both renewables operate in locations far from the centres at which the electricity they generate is consumed. That requires a massive increase in the miles of high-voltage transmission lines needed to bring the power from where the solar farms and wind turbines are, to the population centres where it is needed. These high- voltage lines and towers scar the landscape, and often have to be located in or over communities that see no direct benefit from the new power source, adding opposition from the NIMBY crowd to that of environmentalists. Then there is the cost: Bloomberg NES reckons that greening the global grid would add $14 trillion to the $15 trillion cost of generation over the next thirty years.

All of this means that in democratic countries with legal processes that confer rights on all sorts of environmental groups, many skillful at prolonging costly legal proceedings, permitting transmission lines is a nightmare. President Biden has proposed to establish  a Grid Development Authority to facilitate permitting by over-riding objections of affected communities that have no desire to have their landscape marred in order to allow power to pass overhead, usually remote corners of some other states about which they know little and care considerably less. Law suits to follow.

Finally, there is no agreement among environmental groups that construction of large-scale solar farms, increasingly large wind turbines and miles of high-voltage transmission lines with attendant towers is consistent with the President’s call to Build Back Better. They believe that power sources should be decentralized around roof-top panels and improved batteries because such a system would be more resilient and could be put in place more quickly. For them, what Energy Secretary Jennifer Granholm calls “a big national plan”, a green, centralized system, leaves control in the hands of major utilities, and is a step back rather than a move forward. These greens point to a 2019 report of Ms. Granholm’s department (before her reign) that argues that greater use of rooftop solar can reduce the need for transmission lines and costly central power stations. And point out that, during a recent period of shortage, solar panels installed in homes in California were able to provide the state’s consumers with 6% of the electrical energy they consumed.

Electric Vehicles Are Nice, But…

Electric vehicles (EVs) are another favorite of the gang to gather in Glasgow, including President Biden, although his enthusiasm is confined to vehicles made in America and by trade-union labor (6.3% of the private-sector work force), the latter preference barring America’s largest, and non-union, manufacturer of EVs, Tesla’s Elon Musk, from government panels and meetings. These vehicles are more expensive than traditional cars and trucks, and the system of subsidies available, at least in America, favours affluent buyers who can avail themselves of tax credits. Indeed, trade unions worry that the government is subsidizing the rich to enable them to buy cars that will cost union workers their jobs: EVs require one-third less labor to build than conventional vehicles.

Opposition can also be expected from governments dependent on high gasoline taxes. They have yet to figure out how to replace the revenue once generated at filling-station pumps. In any event, the 1.4 billion gasoline-fueled vehicles on the world’s roads, 300 million of them in the U.S., will not disappear soon, especially in America, where longer average trips make the absence of charging stations an important deterrent. That is one reason the market share of new battery-powered and hybrid vehicles is considerably higher in Europe, 17%, compared with less than 4% in the U.S. That, reckon owners of America’s gasoline stations, is too small a market to make it economic to incur the $100,000+ cost of adding chargers to their existing stations, especially since many EV owners charge vehicles at home. The burden of adding charging stations will have to fall on vehicle manufacturers, electric utilities and perhaps on service stations that sell fuel along with coffee and snacks. Or on the government (aka taxpayers) if chargers are to be placed on roadside rest stops, a move convenience stores and fuel retailers are attempting to prevent.

Two other obstacles must be overcome to get combustion engines off the roads. The IPCC report emphasizes the need to begin reducing GHGs immediately. But in the first two years of existence newly built EVs create more emissions than new gasoline-powered vehicles. Then, too, China produces more than 90% of the world’s manganese, relied on by the world’s largest builders of EVs. China’s producers have formed what is in essence a cartel and prices have soared. Developing alternative supplies is not a short-term effort. All these factors reduce the immediate contribution electric vehicles might make to emissions reduction.

If indeed EV’s are a solution. Farhad Manjoo, writing in The New York Times, argues, “The problem isn’t just gas-fueled cars, but car-fueled lives.” What is needed is not a shift to EVs, helpful though that might be, but a removal of the automobile from the center of American lives.

What Is To Be Done?

So, as Lenin asked, in a different connection of course, what is to be done? First, because politics is indeed the art of the possible, don’t expect the Glasgow gaggle to troop to a confessional to confess the failure of their efforts. After all, had the Paris meeting never occurred, and the national plans never been formulated, things might have gotten even worse in the past six years. Besides, better to tilt at windmills and if you fail, you fail, as Stephen Sondheim wrote, because failure can be a learning process, and the lessons put to use in Glasgow. And some of the proposals to reduce the pace of warming do provide ancillary benefits. Two examples: electric vehicles reduce noise pollution and reliance on volatile oil markets, and reduced reliance on coal has significant health benefits. Even if they don’t do much to drop temperatures, if the cost is modest these things are worth doing.

R&D, Mitigation and Adaptation  

There are, said the much-missed late Irving Kristol, problems and there are conditions. The former can and should be solved, the latter adapted to and learned to live with. The problem of warming can be addressed in several ways, many of them well known, all prominent on concerned politicians’ agenda. The condition of climate change, the irreversible past increases in temperatures, requires adaptation, defined by the IPCC as “the actions taken to manage impacts of climate change reducing vulnerability and exposure to its harmful effects and exploiting any potential benefits.”

These solutions, mitigations and adaptations are not mutually exclusive. There are probably feedback loops, through which solutions suggest new means of adapting, and adaptations reveal new solutions. So going down that twin-lane path is probably a good idea.

 Solutions start with whatever comes out of Glasgow, the updated version of the 2015 Paris accord. That has several advantages. Paris provides a framework familiar to politicians, for whom never-been-done-before often is a step too far. As Glasgow proves, Paris establishes that such fora facilitate international cooperation in a world in which geopolitical rivalry between its two largest economies dominates international discussions. Allowing countries to set their own goals, has its weaknesses – China’s low bar and Russia’s even lower bar – probably is more effective than attempting to impose policies on governments over which international bodies have little power.

Mitigation starts with honest self-examination. Richard Allen, a lead author of the IPCC report and a professor at the UK’s University of Reading, might be correct that “the severity of some recent unprecedented extremes is only possible due to human-caused warming of climate”, although his position is contested, most notably by Bjorn Lomborg, a visiting fellow at the Hoover Institution. In any event, the IPCC finding should not be used as an excuse for unfortunate river management policies in Germany, or poor regulation of utilities and inept forest management in California. Correction of such policies, made difficult in some cases by environmentalists’ opposition to aspects of forest management or flood control that might threaten obscure but endangered species, can play a role in mitigating the effects of climate change. So, too, will methods of earning offsets to net against emissions production, paying foresters not to cut down trees being one of the most popular among companies.

Research properly funded – by government subsidies to private-sector players who are willing to put skin in the game so that they, and not politicians, get to pick probable winners – is surely sensible. In his How To Avoid A Climate Disaster, Bill Gates proposes a quintupling of the $22 billion he estimates the government now spends on “clean energy R&D.” One example is small modular reactors, or SMRs, a technology into which TerraPower, founded by Bill Gates, will pour $1 billion and more; Gates  hopes that the SMRs will produce power at a cost competitive with new combined-cycle gas plants. Others include work being done by private cement companies that account for about 6% of global emissions, to develop concrete that can store carbon dioxide (adds 15% to costs), and European and American companies to make steel without using fossil fuels (adds over 60% to capital spending). About 80% of the burden will fall on those two industries.

The broader point is that, to be successful, R&D must draw on the financial and intellectual resources of private-sector players to the greatest extent possible, players sensitive to the possibility of purchasing offsets to net against their emissions if that is more efficient than new manufacturing processes, rather than committed to increasing the reach of government.

But R&D results take a while – Gates says that TerraPower’s design “exists only in our supercomputers” and that “we’re still years away from breaking ground on a new plant.” Losses will be incurred by investors exploring many approaches, and the patience of a democratic polity tested. During the period of research and development, which should include deepening markets for carbon offsets which provide the “net” in “net-zero carbon emissions”, adaptation might take pride of place. After all, over generations people have adapted to changes in climate because that is what they had to do to be comfortable and in some cases to survive. Gates writes, “Innovation doesn’t happen overnight…. In the meantime, people all over the world, at every income level … just about everyone who’s alive now, will have to adapt to a warmer world,” with many Glaswegians among the winners from a change that will have winners as well as losers.

The process of mitigation has a virtue: it can be costly. As voters see with their own eyes, and feel in their own wallets the cost of mitigation and adaptation, carbon taxes might come to be seen as the least costly, most efficient and fairest way to cope with warming, at least in developed economies. It is not cheap to elevate a house or move it back from an eroding coast line, or adopt the Corps of Engineers plan to construct in Florida a $6 billion 20-foot high seawall across beautiful Biscayne Bay and through several neighborhoods, or to change methods of agriculture, or to replace natural gas for cooking and heating homes, or to implement rather than merely draw up a plan to deal with flooding in New York City.

Putin and Xi Tremble Before CBAM

Putin and Xi will likely find nothing in the IPCC report sufficiently frightening to persuade them to change course, although XI is experimenting with some limited form of carbon credits and has thrown a bone or two to greens at the recent UN meeting. But the IPCC bureaucracy was not the only one at work since Paris. The European Commission has unloaded a fully developed (291 pages) “Proposal for a Regulation of the European Parliament and of the Council establishing a carbon border adjustment mechanism”. The essence of the proposal is a border tax on the carbon content of imports. This comes most perfectly upon the hour in America, where the President needs quite a lot of revenue, “pay fors” as they are called by legislators, to fund his infrastructure program and his expansion of the welfare state. A carbon border tax – Democrats prefer “a polluter import fee” –  would provide at least some of that cash, about $500 billion over the next decade according to Maryland senator Chris Van Hollen.

Putin’s Russia reluctantly and belatedly joined the Paris accord in 2019, but with no intention of reducing emissions. An adjustment mechanism (CBAM) would hit his country’s troubled economy and its industries hard. Russia’ economists estimate that border-tax surcharges  on Russia’s high-carbon-content exports would come to  $3 billion annually; KPMG says the figure is twice that, and would total $60 billion between 2022 and 2030. But Russia will fight back. Rusal, Russia’s giant aluminum producer, is spinning off its dirtiest plants into a subsidiary that will sell only in domestic markets, and will use its cleanest plants to serve export markets. Such “circumventions” are anticipated by the EC and addressed in Article 27 of its proposed regulations.

China also would be hard hit. Its manufacturers rely heavily on coal-fired electricity: about 58% of China’s energy use is coal-based (the roughly comparable U.S. figure is 23%), and since 2011 China has consumed more coal than the rest of the world combined. Its CO2 emissions per ton of steel produced are about three times those in the US and the EU. Little wonder that China’s vice environment minister, Zhao Yingmin, says a border tax is a form of protectionism that will hurt global growth, a charge echoed by Russian foreign ministry official Artyom Bulatov, who adds that the aim of the tax is to finance the EU budget, which is, of course, one of its objectives.

Call it what they will, the Chinese authorities know that the EU is facing them with a choice, although one that so far is scheduled not to cut in until 2026 and take a decade to roll out: reduce the emissions embedded in your exports, raising manufacturing costs, or face border taxes that will raise export prices and reduce their competitiveness in EU and U.S. markets that in combination absorb about 40% of China’s exports.

The EC proposal, of course, must be approved by the European Parliament, 27 countries with widely varying interests – Poland relies on its coal industry for 74% of its electricity generation, France’s gilets jaunes are unenthusiastic about any green proposals to raise fuel prices.  Negotiating details with the industries affected, many quite powerful politically, others with politically powerful trade unions as allies in any fight to lighten the burden of final rules, will not be easy, and is expected to take two years.

But the fight to make markets work better by getting prices to reflect production and consumption costs more accurately is worth fighting. Pollution charges, rebated for lower earners, send signals not only to consumers considering how to spend their incomes, but to investors who decide where to employ their capital. Climate researchers have been telling governments and investors that investments in coal plants could be “stranded” if coal prices reflect emissions charges, and such Asian investors as the Mitsubishi UFJ Financial Group are joining U.S. banks in ending the flow of capital to coal projects.

Carbon taxes also raise the cost of the technologies with which innovations would be competing, driving up the anticipated rate of return on the capital they require, and the willingness of private-sector players to take the risks inherent in backing any inventions.

A Touch of Humility In Order

As they go about their business in Glasgow the leaders would do well to remind themselves of how difficult it is to manage their own economies, the problems they faced in devising and implementing programs to cope with Covid. They undoubtedly recognize that these difficulties are compounded when dealing with widely varying international standards, goals and value systems.

And keep that in mind when they survey the opportunities the fight against climate change to expand the reach of government at the expense of the private sector. Some such growth is necessary. But markets are more efficient than men in making most decisions directing resources. Energy consumers and producers make millions upon millions of decisions every moment. No government regulator or politicians can know the effect of a consumer throwing a light switch in Paris or buying a new EV in China or resetting a thermostat in New York, or of Xi building still another coal plant and California having another electricity shortage that forces the governor to waive rules restricting the use of gas-fired and diesel generators. Only a well-functioning price system can process such information efficiently.

If there is what is called “market failure”, imperfections that prevent markets from doing their jobs efficiently, politicians should first consider correcting that failure, in the case of pollutants, by forcing the internalization of costs being imposed on society. If carbon-emitting production and consumption is imposing costs on society, transfer those costs to the producers and consumers by carbon taxes before resorting to regulation and other government controls.

It would be real progress if the participants took away from Glasgow an understanding that repairing the world’s energy pricing system should be their first order of business. Embed the social cost of emissions in the prices consumers pay and innovators face, and most of the rest that needs to be done will be done by the millions of participants in the world’s energy markets, with regulations, subsidies and the rest playing important but subsidiary goals.

So, and to answer Lenin’s question, what is to be done is to engineer a steady ratcheting up of a border adjustment tax – extending its reach to more industries and more countries – thereby getting the price signals right, and requiring users to pay the full cost of the emissions they are imposing on the world. That would be the most efficient way to contain warming while research proceeds and adaptation measures take effect. That still leaves a role for regulations – markets are not perfect – as experience with the Clean Air Act demonstrates.

A bit of humility would not be misplaced. “The curious task of economics,” wrote economist and winner of the Nobel Prize in Economic Sciences Friedrich von Hayek, “is to demonstrate to men how little they really know about what they imagine they can design.” At least in the United States, governments that imagined they pick winners in the energy innovation rate have ended up squandering money that is, after all, not their own. The leaders gathered by Prime Minister Johnson, at least those of democratic countries that do not rely on coercion as a tool with which to manage their economies, must admit what they surely know: they cannot hope to solve all of the inter-related problems of optimum distribution systems for electricity, the environmental problems created by the ingredients needed for better batteries, the best use of research funds. But with a carbon border tax in place, all the players in this global drama will have the right incentives to make the most efficient decisions, with regulations playing a subsidiary role. Surely that is Bismarck’s “possible, attainable, next best.”

A more concise version of this paper appeared as an article in The Critic, a UK magazine.

Irwin Stelzer is a Senior Fellow at the Hudson Institute and U.S. economic and business columnist for The Sunday Times (London). He has been director of the Energy and Environmental Policy Center at Harvard University’s Kennedy School.