This week I posted a 3-part interview w/ @dcullenward & David Victor, authors of the new book Making Climate Policy Work. It's about CO2 pricing -- mainly cap&trade systems, which comprise most real-world CO2 pricing -- & why it doesn't live up to its aspirations. A thread.
Part 1 is about the allure of the theory behind economy-wide CO2 pricing (it really would be nice if it worked!) & why, in the real world, the "economy-wide" part never actually happens.
Part 2 is about carbon offsets, which are also alluring in theory & also fall short in practice. In reality, there's enormous incentive to hold prices down & very little incentive to ensure quality CO2 reductions.
Part 3 is about "Potemkin carbon markets" like CA's. On the surface, their low prices suggest carbon is being reduced cheaply. But look behind the scenes & you find old-fashioned sectoral regulations doing the real work.
The conclusion of the book/interviews is not that CO2 pricing is actively bad or can never work. It's just never going to be the One Single Tool that lowers emissions across the country/world. Too many political forces work against that kind of economy-spanning tool.
The best way to use carbon pricing is as a kind of sector-specific regulation itself, meant to encourage static optimization (choosing among existing options) in markets where low-CO2 techs are already developed. See, for example, power-sector-focused RGGI in the US.
Ultimately, carbon pricing is not some shortcut or super-policy that will bypass all the difficult, sector-by-sector work of decarbonization. It's just one tool in the toolbox; all tools are needed. Anyway, read the interview ... and subscribe to Volts!
Oh! One other note: this perspective on carbon pricing makes it very clear that the proposed scheme whereby sectoral regulations would be reversed or "traded" in exchange for a carbon tax ... is insane. Nobody serious about climate should touch that w/ a 10-foot pole.
I made this, I might as well add it to this thread.
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