[I]sn’t it obvious that the targeted countries might consider other reactions [to carbon tariffs] beyond either just joining the carbon-pricing regime or choosing to pay the tariff? What if they reacted with counter-tariffs, or set up an outside-the-tariff trading bloc with various resource-rich African and Asian countries, or reduced purchases of U.S Treasuries, or any of a thousand other ideas? Krugman has this to say:Manzi's statements are part 2 of his review of Krugman's NYT Magazine tome on climate change; that "2 percent" figure comes from part 1, which I highly recommend. On the actual effectiveness of carbon tariffs, I mentioned last night that it's far from certain that carbon tariffs would eliminate "carbon leakage" (what little there would be) by inducing developing countries to join the climate change regulation gang. So maybe that's why Krugman substitutes conclusory statements like those above for real, honest analysis on carbon tariffs' efficacy.
To the objection that such a policy would be protectionist, a violation of the principles of free trade, one reply is, So? Keeping world markets open is important, but avoiding planetary catastrophe is a lot more important.But if for the next century “planetary catastrophe” = an expected cost of 2 percent of economic output 100 years from now (and if avoiding this will likely cost more than this amount, even if such a program works), then maybe running the risk of inciting a global trade war isn’t such a great bet.
He goes on to describe the legality, but not the effectiveness, of such tariffs. Why do we think they will work, and not be met by aggressive counter-action? Here is the argument in its entirety:
Needless to say, the actual business of getting cooperative, worldwide action on climate change would be much more complicated and tendentious than this discussion suggests. Yet the problem is not as intractable as you often hear. If the United States and Europe decide to move on climate policy, they almost certainly would be able to cajole and chivvy the rest of the world into joining the effort. We can do this.Maybe a direct, aggressive confrontation with countries representing several billion people and a good chunk of world economic output would work, and maybe it wouldn’t; but this is exhortation and wishful thinking in the place of analysis.
At this point, I think its safe to say that Manzi's economic and logical criticisms, combined with my legal and academic ones, leave Krugman with nary a leg to stand on. Of course, something tells me that none of this will stop him from remorselessly continuing his current climate change obfuscation campaign.