Comments on: The End of Carbon Price Orthodoxy

By: Tom

Tom — Wed, 02 Apr 2008 17:38:59 +0000

The United States already has a policy for helping people who lose their job. There’s not need to redirect revenue from a carbon tax or cap-and-trade system to retraining. They are separate issues.

The biggest issue is establishing a clear, long-term and predictable policy on which corporate America can begin to plan the transition. Wall Street and Fortune 500 desperately want clarity. An enormous amount of money will pour into renewable energy once that policy is established.

But no one wants to bet on a technology if falls out of favor of DC. Since there is no inherent demand for a carbon offset or renewable energy credit without regulation, this entire market is driven by regulation.

If politicians begin to pick winners to encourage investment (think biofuels) it will likely create unanticipated consequences on a huge scale (think soaring food costs).

A carbon price and its revenue can go a long way to creating the environment in which the transition will take place — but the price probably has to be set pretty high (the Stern report mentioned a carbon price well above $100 CO2 tonne). Politicians should create a market without picking winners and then focus on preparing voters for the painful years ahead.

By: lmeisel

lmeisel — Tue, 01 Apr 2008 16:18:25 +0000

Phil,

If carbon pricing worked the way it was intended to work — and the way it did work in past efforts like regulating CFCs — then yes, perhaps it could pull its weight in the policy mix on climate change. But when we used cap and trade for the ozone problem, alternatives to ozone depleting chemicals were cheap and readily available. That is not the case with clean energy alternatives, and so before carbon pricing can play an important role, getting the technology up to speed needs to be our number one concern.

I may not have been clear in my posting, but I do not believe that only funds from carbon pricing can fund energy R&D–quit the contrary. R&D should be primarily funded by direct government investment of at least $30 billion a year. If some portion of this can come from carbon pricing, then great.

Social equity concerns should absolutely have a place at the table, just not from carbon revenue. The tax is there as a penalty on carbon-producing industries. It makes perfect sense to have that penalty fee go towards transitioning to non-polluting alternatives. Why create an incentive to keep the tax around for longer when the whole idea is for it to be eventually self-defeating?

By: R Margolis

R Margolis — Tue, 01 Apr 2008 12:52:47 +0000

Another point to mention on Denmark: they are connected to the German and Norweigen electric grids. This goes a long way towards allowing them to use more renewables (i.e., they are part of a larger conventional grid that provides the equivalent of energy storage and absorbs any fluctuations from their wind turbines).

By: branto

branto — Mon, 31 Mar 2008 17:19:25 +0000

Great post. Would love to see more coverage like this of opinion-leading thinkers. I, for one, would love to hear a counter-point to Prasad. Seems like the best idea I’ve heard yet.

By: Phil Mitchell

Phil Mitchell — Mon, 31 Mar 2008 16:18:09 +0000

I don’t see why this has to be framed in such an either/or way. Anyone who’s paying attention knows that we are ridiculously underinvesting right now in clean energy R&D — and many are calling for a “new Apollo project” for clean energy. But carbon pricing is every bit as essential, bc without it, we won’t phase out fossil fuels fast enough, even with new technology.

Why assume that all revenues from carbon pricing must fund energy R&D? Why assume that only funds from carbon pricing can fund energy R&D? Don’t social equity concerns have a place at the table? Don’t issues of economic efficiency have a place (eg., reducing payroll taxes would likely benefit the economy enough to offset the effect of carbon pricing)?

By: Angeline

Angeline — Mon, 31 Mar 2008 15:43:08 +0000

That’s an insightful post about what to do with a carbon tax. Using it to invest heavily in clean energy certainly seems to be the most sustainable strategy (ie. the most effective way to lower energy prices in the long-term). However, I would argue that many of the causes Roberts lists are not unrelated and should probably be considered as reasonable investments. Particularly, retraining workers in clean energy, improving energy efficiency, investing in education about energy reduction and retrofitting or redesigning infrastructure to reduce energy use are all investments that will help reduce energy costs in the long-term.