Carbon Pricing

Energy Intelligence’s New Energy newsletter had an article in its February 27, 2014 issue entitled “Carbon Markets Seen Rising, but with Volatility Constrained,” based on its survey of carbon market specialists around the world. They wrote about China’s newly developed pilot projects, and cited yours truly:

Most of the experts expected China’s emissions prices to be below Europe’s in the near term, but to be on par with or higher than them by the 2020s. US academic Roger Raufer says significant energy savings could be captured in China with a relatively low carbon price, but structural changes in the power sector would require a higher one. He sees the government allowing the former, but not letting markets dictate the latter.

Last year’s World Bank report on the status of carbon pricing found that roughly 7% of the world’s emissions were covered by various carbon market & tax regimes – with the opportunity for significant expansion if developing economies exploring such options (such as China, Brazil and Chile) implemented them nationwide. I’ve obviously been watching this closely…. and would highly recommend two books exploring the topic.

Yale University professor William Nordhaus is probably the world’s preeminent environmental economist addressing climate change issues, and his most recent book The Climate Casino is a truly remarkable – and dispassionate – review of both the science and economics of climate change. It’s targeted at a general audience, and does a really fine job of laying out the case for the types of market- based approaches (whether carbon tax or carbon trading) that need to be applied. Gernot Wagner’s But Will the Planet Notice? addresses the same issue, highlighting why individual actions alone are simply not enough. Wagner works for the Environmental Defense Fund, an environmental NGO which has played a key role in fostering economic approaches in environmental management – including significant work over the years in China.

Professor Nordhaus notes:

The truth is that unless we implement an effective policy of carbon pricing, we will get virtually nowhere in slowing climate change…. Therefore, explaining the importance of the use of market-based approaches such as carbon pricing is just as important a part of the education process as explaining the science of climate change.

I wholeheartedly agree. And for those of you still struggling with the science, I’d also definitely recommend Elizabeth Kolbert’s new book The Sixth Extinction: An Unnatural History, a follow up to her wonderfully–written (but sobering) Field Notes from a Catastrophe: Man, Nature, and Climate Change.