CARBON PRICING

‘Economists have long argued that the most efficient way to curb global warming is to put a price on the greenhouse-gas emissions that cause it. A total of 41 OECD and G20 governments have announced either a carbon tax or a cap-and-trade scheme, or both. Add state and local schemes, and they cover 15% of the world’s emissions, up from 4% in 2010. Voters concerned about climate change are egging them on. So, too, are corporate bosses. More firms are imposing such pricing on themselves, even in places where policymakers are dragging their feet,’ (‘Low-carb diet’, The Economist 13th January 2018, p55). 

‘The hard fact is that both markets and governments fail to reflect climate-change risks, which explain the failure in slowing global warming. Without a global agreement for an effective, market-based framework for the taxing of carbon at an appropriately high level, no serious and sustainable dent can be made in greenhouse-gas emissions. This alone has doomed the Paris agreement to be a toothless deal. No wonder that coal’s share in the global energy mix keeps growing. Only forceful policies can alter the behaviour of the energy markets, which do not reflect that fossil-fuel firms are overvalued and may become stranded assets. These firms do not even sense the long-term risk of sitting on vast volumes of unburnable carbon reserves, which is a carbon bubble. These companies continue to develop reserves that would never be used with effective climate policies in place. They are rewarded by the markets for finding and developing new reserves. There is no noticeable exit from heavy emission-producing activities in anticipation of the possible introduction of a biting carbon tax. Unless this energy-market behaviour is dealt with, the vision of a carbon-free future will remain just that, a vision,’ says Istvan Dobozi, Former lead energy economist at the World Bank, in a letter publised in The Economist, March 2nd 2019 edition, p14)