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Our paper on the effectiveness of carbon pricing on technological change has received quite some attention, both praise and likes but also disagreement. A thread on what we say + reactions to reactions. @tony_patt @IASS_Potsdam http://onlinelibrary.wiley.com/doi/full/10.1002/wcc.681
2/We show that existing carbon pricing schemes have had no effect on technological change. No study found noticeable effects on zero-carbon investment, and some studies found that carbon pricing has had no effect.
3/The authors of the reviewed papers generally attribute the observed lack of effects to a too low price or, if the price was high (Sweden, Norway) to too many exceptions. In short: they say there were weak or no effects, because the instrument was badly implemented.
4/Most carbon prices were low (so we included all schemes >25USD/t in 2019). But a policy may be both inadequate and the best possible simultaneously. Evidently, no country has managed to implement an impactful carbon price. After 30 years of carbon pricing, this is important.
5/But also in countries with high carbon prices, like Sweden (>100 Euro/t), the effects were small. However: all studies explicitly investigating effects of carbon pricing on investment in the Nordic are old. New empirical research is urgently needed!
6/The evidence for effects on immediate emission reductions is mixed: some studies conclude that there were no effects, but others found substantial effects (e.g. Sweden, BC). A main effect, when one was identified, was a shift from gasoline to less carbon-intensive diesel cars.
7/Such effects, while nice, are irrelevant for the aim of full decarbonisation. Driving diesel cars or driving less doesn’t matter, because we still emit CO2. Investment in carbon-free tech is necessary: without it, full decarbonisation is impossible.
8/So a more interesting question than “how do we implement higher carbon prices” is “how do we create a policy mix that is sufficient for full decarbonisation of energy” (leaving all other sectors aside for now)
9/It would be very surprising if the climate problem could be solved by a single instrument. Silver bullets are rare. So then the question is what role carbon pricing can play, and which not? Which specific problems can carbon pricing solve, which can it not solve?
10/ For which specific problem is carbon pricing the best option, and for which problem are other instruments better – more effective, more efficient? Calling for a policy mix is popular and intuitive – and now it’s time to be specific: what could “mix” mean, precisely?
11/Several colleagues have engaged with our paper, and some disagree. I believe this is rooted not only in our different theoretical homes, but in three differences in perspective. @jan_c_steckel @seb_levi @MCC_Berlin @ProfJeroenBergh @pleh_mann @dan_rosenbloom @JochenMarkard
12/First, epistemological differences. We base our conclusion on observation of effects in actual carbon pricing schemes. The counter-argument is primarily an expectation of what would happen if carbon prices were higher.
13/ @jan_c_steckel @seb_levi and others write that ours is a “premature” conclusion. Carbon pricing would have worked, if prices were higher. If so: when is the right time to judge whether this instrument is effective, if after 30 (Nordic) or 15 (EU ETS) years is too soon?
14/Second, the question of the political feasibility of high carbon prices remains open. For the last 30 years, carbon prices remained too low or with many exceptions. Is it a feature not a bug? Maybe there are instrument-inherent reasons for “bad implementation”. @greenprofgreen
15/Third, how do we measure “progress”? @jan_c_steckel views emissions as the key metric for decarbonisation. If emissions decrease, it’s good; if not, then bad. We argue that the momentary emissions are not a relevant metric for the aim of full decarbonisation.
16/For this, zero-carbon technologies must be deployed (investment) and improved (innovation); systems, infrastructures, institutions be adapted to the needs of zero-carbon tech. Same argument as https://doi.org/10.1073/pnas.2004093117 @dan_rosenbloom @vogt_schilb
17/Third, in our work, policies are evaluated based first on effectiveness and, if they are effective, only then WRT efficiency. If an instrument triggers no zero-carbon investment, then it cannot be efficient.
18/We find that effects on tech change have been small or non-existent. Not to be confused with other papers, like @greenprofgreen who finds that carbon pricing has hardly reduced emissions. https://iopscience.iop.org/article/10.1088/1748-9326/abdae9/meta. Papers+findings related, but we stand for our paper, she for her
