A recent episode of the Global Energy Exchange podcast, conservative economist Glenn Hubbard explains how “putting a price on carbon” might work.
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The shift to renewable energy is key to combating climate change and reducing our dependence on fossil fuels. But critics argue it won’t be possible without financial support from the government. How important are special tax breaks and other subsides, and do they really work?
Given the political infeasibility of a carbon tax to speed the transformation to a sustainable economy, we need to rapidly move on to another policy approach.
These ideas hold merit no matter where you fall on the political spectrum
Many economists and policy experts believe carbon pricing is the most effective way to deal with global warming. But others argue that carbon pricing is not a silver bullet for dealing with climate change. Here’s why.
Most economists and policy experts agree that the most effective and cheapest way to curb the carbon dioxide emissions that are warming the planet is to “put a price on carbon.” How effective are carbon taxes and cap and trade programs?
I would argue that given human behavior and organizational inertia it is better to subsidize something new than tax something old. A subsidy, like a sale, sometimes stimulates changed behavior. But a tax may or may not influence behavior.
In the United States, our political process sends us strong signals about what problems and proposals can achieve agenda status. Increased federal support for science and technology will not be easy, but unlike a carbon tax, it is capable of drawing bipartisan support.
The idea behind the carbon tax is that by raising the price of fossil fuels, one promotes energy efficiency and, as fossil fuels become more expensive, renewable energy technologies will become more competitive. I am certain this is true. But few elected officials are going to advocate higher fossil fuel prices.
Professor Sachs mentioned feed-in tariffs as an innovative way to decrease our dependency on fossil fuels and increase investments in renewables. They are a fairly simple and cost-effective way to jump-start production of renewable energy. Feed-in tariffs have been used to transition many European countries, particularly Germany, away from fossil fuels.