Reader Response: Climate Change & Scamming

After reading a recent blog post of mine, a reader asked how I can claim that the climate change industry is a scam:

"How does climate change politics qualify as one of your scams? I hope you're not denying that capitalist industry has greatly affected our planet, and that political steps to combat it are making polluters culpable for their actions."

I've explained the faulty thinking at length before with a whole series of blogs - but the best way to define it as a scam is to elicit a popular term coined by Bruce Yandle called Bootleggers and Baptists, which is about regulations that provide self-interested benefits for both the regulators and for those thought to be victims of the regulations. It is based on the notion that Baptists support Sunday closing hours, but so do Bootleggers, because if local bars and off-licenses are closed, Bootleggers gain too.

Sunday closing hours benefit both Bootleggers and Baptists, while at the same time purporting to serve the public interests - and the green regulations are of a similar nature, as well as being very short-sighted and hugely damaging. Climate change alarmists naturally support heavy green regulations - because it furthers their own agenda, and enables them to cream off crony capitalist subsidies - but so do some of the biggest polluters too because some of the regulations help shut out competition.

As well as the inherent crony capitalist misallocation of resources, the other part of the scam - believed quite ubiquitously, I'm sorry to say - is that this is all very necessary as a regulatory means of reducing emissions down to a state-mandated nominal level. But frankly, this perceived is a rather confused one. As I've said before:

"A carbon tax is not a means of reducing emissions down to a nominal figure; it is supposed to be a tool for maximising utility. That is, carbon taxes help us incorporate negative externalities into the price system of a free market whereby polluters carry the costs of their negative externalities, but also whereby the price reaches equilibrium as the costs of pollution are measured accurately against the benefits.

That way, those negative externalities are compensated for by the fact that they increase utility to a level greater than their costs. For example, a timber factory and a roadside diner on the outskirts of a city add some pollution to the environment, but they make up for those negative externalities by providing goods and services that people want.

Where they are a benefit is when carbon taxes intervene in the price system to ensure that future costs of transactions are thought to be worth paying for present benefits. The rate of carbon tax is roughly commensurate with the future cost of pollution, incorporated into the price system to justify the benefits now – it is a tax that attempts to ascertain the benefits of pollution. Carbon taxes are far from simply being about lowering emissions, although as I argue here, they will likely change future behaviour as businesses innovate to be greener with improved technology."