How CDR can help Hank Paulson get his carbon tax

Over the weekend, the NYTimes ran an op-ed by Hank Paulson arguing for the US to tax carbon emissions. I applaud this effort by Mr. Paulson. One of the biggest reasons that we don't already have a tax on carbon (or any other strong national policy aimed at mitigating climate change) is Mr. Paulson's own Republican Party. With this op-ed, it is clear that Mr. Paulson is trying to lead his party away from their opposition to mitigating climate change:

"...just as we shouldn't leave our children or grandchildren with mountain of national debt and unsustainable entitlement programs, we shouldn't leave them with the economic and environmental costs of climate change. Republicans must not shrink from this issue. Risk management is a conservative principle, as is preserving our natural environment for future generations."

Leadership from Mr. Paulson and other prominent Republicans is important for changing the Party's stance on climate change. But for this leadership to be effective, it has to convince the Republicans that denying climate change is more expensive than fixing it. Accepting climate change means a future of increased energy costs that directly hit the bottom line, as well as large devaluations of fossil energy reserves in the ground. Such costs will be expensive to society, but not as expensive as the costs of climate change. However, the costs and benefits of mitigating climate change are not evenly distributed. Heavy-emitting industries will bear more of the costs while receiving fewer of the benefits.

CDR, if developed inexpensively and at large-scale, could help mitigate the disproportionate costs that heavy-emitting companies would bear when transitioning away from fossil fuels. How? It is possible that heavy-emitting industries could choose to emit fossil fuels so long as they implement CDR at a scale that removes more CO2 from the air than is emitted through the fossil fuels they burn. CDR makes mitigating climate change and burning fossil fuels no longer mutually exclusive.

What's more, CDR buys society extra time to develop inexpensive alternatives to fossil fuels. This extra time is critical, as it would enable developing countries to continue to burn fossil fuels without negating the efforts of the developed world to mitigate climate change. As Tyler Cowen notes in his response to Mr. Paulson:

"A climate change solution, if done the wrong way, will look to China like a major attempt to unfairly deindustrialize them and, if it is backed by trade sanctions, it will look like an act of war."

The caveats to using CDR to convince Republicans to accept it is time to mitigate climate change are many, including: large scale CDR is unlikely to be more cost-effective than large-scale clean energy and energy efficiency in the long run, and we don't have scaleable, inexpensive CDR solutions ready to deploy today. But as Paul Krugman notes in his response to Mr. Paulson's op-ed, it is better to have a "second-best" but feasible option for mitigating climate change than an infeasible first-best option:

"a carbon tax might be the best thing we could do, but we won't actually do it."

Bottom line: CDR can help leaders like Mr. Paulson convince his Republican Party that fixing climate change doesn't necessarily mean that heavy-emitting interests won't incur huge costs or devaluations, and that mitigating climate change is the only way to prevent, as Mr. Paulson says, "a crisis we can't afford to ignore."

Hat tip: jdub