Unfortunately, carbon pricing does not seem to be on the agenda of either the Biden administration or progressive advocates of an aggressive policy response to climate change. In part this neglect reflects ideological bias against market-based approaches to regulation and in favor of methods that are more direct in their effects. But it also reflects hard-headed political considerations. Carbon pricing is unpopular because it makes energy more expensive, and because it threatens fossil fuel jobs directly, but creates clean energy jobs only indirectly, in ways that are difficult to attribute to the policy itself. As a result, carbon pricing is hard to get enacted, when it is enacted it is often subverted and ineffective (because the carbon price
Topics:
Eric Kramer considers the following as important: climate change
This could be interesting, too:
Joel Eissenberg writes Is China eating our EV lunch?
Angry Bear writes Republican U.S. States Sue EPA over Strict Power Plant Emission Rules
Angry Bear writes An Erroneous Supply Chain Argument
Joel Eissenberg writes Economics of long-distance travel
Unfortunately, carbon pricing does not seem to be on the agenda of either the Biden administration or progressive advocates of an aggressive policy response to climate change. In part this neglect reflects ideological bias against market-based approaches to regulation and in favor of methods that are more direct in their effects. But it also reflects hard-headed political considerations. Carbon pricing is unpopular because it makes energy more expensive, and because it threatens fossil fuel jobs directly, but creates clean energy jobs only indirectly, in ways that are difficult to attribute to the policy itself. As a result, carbon pricing is hard to get enacted, when it is enacted it is often subverted and ineffective (because the carbon price falls to zero), and if the price did not fall to zero any carbon pricing scheme would be constantly vulnerable to attack and repeal.
These concerns about carbon pricing are indeed justified. Carbon pricing is difficult to enact and difficult to sustain. But essentially the same can be said of the policies currently being proposed to curb greenhouse gas emissions. Renewable portfolio standards and green building standards are difficult to pass, they will generate opposition if they do pass, and they may not be very effective at reducing greenhouse gas emissions. Using subsidies and government procurement to kick-start demand for electric vehicles and green building retrofits is a very good idea – an idea for which the Green New Dealers deserve considerable credit – but there are real limits to what can be achieved through government procurement and subsidies.
My point is not that we should focus exclusively on carbon pricing. Instead, we should acknowledge that every policy is imperfect and may fail for economic or political reasons – including reasons we cannot currently foresee. The fight against climate change is an uphill struggle and there is a real possibility, if not a likelihood, that we will fail to keep warming under 2 degrees. Recognizing this is discouraging, but it can also be helpful. It would lead us to favor a failsafe approach based on multiple policy approaches, including carbon pricing as well as procurement, subsidies, and direct regulation. That way if (say) a regulatory approach to electric sector decarbonization got bogged down in court challenges, a carbon price could act as a backstop, and if a carbon price was subverted and failed to stimulate demand for electric vehicles, a procurement program would still give automakers an incentive to re-tool production facilities to make EVs.