Greg Mankiw Asks: What Did Democratic Economists Think of Kyoto at the Time

Greg Mankiw writes:

Greg Mankiw's Blog: Kyoto, Carbon, and Al Gore: Most economists I know would endorse

1. Rejecting the Kyoto treaty,
2. Imposing a modest carbon tax.

I include myself in this consensus (although I do not hold myself up as an expert on the issue).

My understanding is that the economists in the Clinton administration fought vigorously against the Kyoto treaty but lost the internal policy battle to the Vice President's office. I don't recall the full story of that battle ever being told. If any reader knows of a reference, please let me know.

Maybe former Clinton appointee Brad DeLong can enlighten us. Brad has lately been calling for greater candor by former administration officials. This is a good opportunity to lead by example.

Gladly--although I wasn't there, and hence am not a reliable source. I know only what I was told and what has been hinted at.

As I understand it, the economists--Janet Yellen's CEA, plus others including the National Economic Council and the Treasury Department--said that something like Kyoto looked like a good deal if developing countries like India and China were brought into the process, and if the U.S. could satisfy its carbon-reduction commitments by buying up some of China's and India's carbon-emission rights. Otherwise, they said, it looked like a bad economic idea: potentially expensive for the U.S. economy (although not as expensive as more recent policy missteps like the Bush budget disasters, or the Medicare Drug Benefit), and not useful in fighting global warming as long as newly-industrializing China and India did not have incentives to curb their own carbon emissions.

Clinton's response was that it was important to start the ball rolling, that Kyoto might not be a great idea it was seen as the final treaty, but that it wouldn't be the final treaty. China, India, and company would be brought into the process, and would be brought into the process relatively soon. But that if the first step--Kyoto--was not taken now on his watch, Clinton thought, the dithering might last for generations.

I think Clinton was wrong, but if he was wrong it was one of his very few policy mistakes.

And, as I said, I wasn't there. I'm not a reliable witness.

What I was there for was an earlier episode of environmental-economic policymaking: the 1993 attempt to establish a modest carbon tax as part of the Clinton 1993 budget. It was the right thing to do. Clinton got very little backup as he tried to push it through Congress--certainly few if any Republicans singing the praises of carbon taxes now did so then. In the end the "modest carbon tax" of 1993 was sabotaged by the oil lobby, by a few relatively conservative Democratic senators--Boren, Breaux, Kerrey, and a couple others--who preferred to earn oil-lobby brownie points than do what was right for environmental policy, and, of course, by the Republican congressional leadership. Clinton was eager to deal with any sensible, environmentalist Republican senators and representatives, and would have paid a high price for their votes. Perhaps he could have succeeded if there had been Republican opinion leaders singing the praises of carbon taxes into the ears of legislators back in 1993.