Carbon Pricing Isn’t Working

Well, in the last few days we’ve talked about The Conservative Case for Carbon Dividends, now lets see on few reason why carbon pricing might not or isn’t working. And according to Jeffrey Ball, carbon pricing is a good idea in theory but failing in practice.

Carbon pricing is a market based scheme which incentivize companies to invest further in clean energy. One version of this policy is cap-and-trade, whereby governments allocate or sell pollution permits to companies or industry sector. Companies can then buy or sell these permits on the market, depending on whether they exceed or stay below their original permit’s pollution limit. Another approach is imposing a fossil fuel tax, which governments sometimes redistribute to consumers in the form of tax rebates.

Today, 42 countries and 25 sub-national jurisdictions, which together produce about a quarter of global carbon emissions, either operate under or plan to impose a carbon pricing program. Unfortunately, the policy has not shown significant results in reducing global carbon emissions.

The reason are

  1. Carbon prices are too low as an economic incentive;
  2. In fossil fuel intensive sector, carbon pricing might have a chance; but
  3. It shown to be less effective in the building and transportation sectors (which make up 20% of global carbon emission)

We’ve mentioned this for quite a few time before, the fact that time is running out for the world to avert catastrophic climate change. And a single policy won’t solve the most complex environmental problem humanity has ever faced.

Therefore, governments must adopt additional measures to cut greenhouse gas emissions. Start with phasing out coal, one of the largest and most carbon-intensive energy sources, which is an important starting point. While developing nations like China and India will continue to use their large coal resources in the coming decades, governments can support the development of “carbon capture and storage” technologies to mitigate their emissions.

On top of that, safe nuclear power must remain part of the energy mix. Policymakers must also find ways to make renewable energies, such as wind and solar power, cheaper and more accessible. Raising fuel taxes and cutting fuel subsidies can help cut emissions in the transportation sector although it might be slightly difficult to achieve these without unintended increase in living cost for the people. Therefore, it must be done well, balanced, and public awareness on the issue is very crucial.


(1) Why Carbon Pricing Isn’t Working


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