The unintended consequences of the celebrity global warming movement.
12:00 AM, Apr 17, 2007 • By IRWIN M. STELZER
The result is a problem for central banks. In the past, spikes in food prices have been seen as temporary, usually weather-related, and requiring no reaction from the inflation-watchers. But this jump is different, perhaps a plateau rather than a spike: chickens and cattle are more expensive to feed, driving meat and chicken production down and the prices of eggs, beef, and dairy products up; soft drink prices are under pressure from rising sugar costs. This food inflation (world prices up 10 percent last year) is felt most keenly in poorer countries, where food costs make up a larger part of the average budget than they do in the developed world. But even in the richest countries, central bankers are wondering whether they will have to raise interest rates to cool growth sufficiently to offset the effects of rising food prices.
NONE OF THIS means policymakers should avoid confronting the possibility that the earth is warming and the further possibility that the cause is human consumption of fossil fuels. We can't be certain, despite Al Gore's movie and the heated press releases that often accompany more balanced scientific reports. But there is enough evidence to warrant sensible steps to reduce carbon emissions.
But think before you legislate. The European Union introduced an emissions trading scheme that California intends to copy--and watched greenhouse gas emissions rise by 30 million tons, or about 1.5 percent, because too many permits were issued. Europe's four biggest power producers pocketed €8 billion (about $10 billion) from the sale of their excess permits, and U.K. generators an estimated £1 billion (about $2 billion). That doesn't mean such trading schemes are inherently flawed, but it does suggest that haste makes more than a little waste.
Cap-and-trade, properly done, and carbon taxes, properly levied, should be explored as ways of getting the costs of pollution reflected in the prices consumers pay. That would provide an incentive to entrepreneurs to come up with efficient alternatives to fossil fuel consumption and relieve governments of attempting to pick winners. There are efficient ways to cut emissions, but politicians grabbing for headlines are not going to be the ones to discover them.
Irwin M. Stelzer is director of economic policy studies at the Hudson Institute, a columnist for the Sunday Times (London), a contributing editor to The Weekly Standard, and a contributing writer to The Daily Standard.