I got a lot of responses to my Friday newsletter on restricting the supply of fossil fuels, one of which said “oof no” in the subject line. It was from an economist named Benjamin Ho, who wrote that he usually likes my newsletter, “But, oh boy, was today’s off track.”
I wrote that while a ban on production of fossil fuels would bring the economy to a halt if enforced right away, “a ban or severe restriction isn’t entirely crazy, either, if it’s phased in as part of a long-term plan to reduce emissions of greenhouse gases to zero.”
I’ll get to the readers who loved the idea as well as those who hated it, but I’m starting with Ho because his challenge was strong. He is an economics professor at Vassar College and was the lead energy economist for the White House Council of Economic Advisers in the George W. Bush administration.
The United States is such a big producer of fossil fuels that if it abruptly banned or restricted production, the reduction in supply would drive up the world price of oil, curbing demand. That’s the good part. The bad part, Ho wrote, is that “banning fossil fuels in the U.S. just increases profits to OPEC countries that don’t abide by the ban and encourages them to drill for more oil.”
A better fix, he argued, would be a tax on the carbon content of fuels, regardless of where they’re produced. That, he wrote, “would allow efficient low-cost producers in the U.S. to continue to compete and operate, and would lead to huge amounts of tax revenues that could be used to compensate low-income families” who couldn’t afford the costlier fuel.
He agreed that there’s little to no appetite in the United States for a carbon tax or, similarly, a system of tradable emission permits. But “I don’t think a ban is any more popular,” he wrote. The implication being that since neither solution is popular, you might as well go for the one that is economically superior.
