Three fundamentals of climate policy
There are three fundamentals of climate policy.
First, policies have to address the emissions from large industrial and power plants. Policy must convince these industries that it will cost too much in the long term to run a plant that emits CO2. This means either a cap-and-trade system or a carbon tax; I believe that cap and trade is more trustworthy in the eyes of business (taxes are more likely to be repealed or lowered for political reasons). The European system has received some criticism, but this is misguided. Its effectiveness cannot easily be measured over 3-4 years - the key is that expectations change long-term decision-making. This is already happening.
Second, policies must address decision-making about energy efficiency. Automobiles, buildings, and appliances can all be made more efficient without a loss of quality, and doing so would save consumers money. Yet these improvements do not happen as quickly as they could. Financial incentives can help, but some cases rules and standards should be used to complement incentives. For example, despite wasting energy and being much less cost-effective, traditional light bulbs continue to outsell their low-energy counterparts globally. Thus the European Union recently took the bold (yet sensible) decision to phase out the sale of incandescent bulbs entirely. Providing better information to consumers -- through labeling of products' energy and climate impacts -- is another useful approach here.
Finally, policies must help expensive technologies reach the market. This starts with public investment in research, but also includes efforts to 'push' technologies through public-private partnerships and 'pull' technologies through incentives for purchase. The EU has allocated some 'push' funding to carbon capture and storage, and this approach needs to be expanded. An important 'pull' policy has been subsidization of hybrid electric cars. These subsidies 'prime the pump' of demand and help manufacturers scale up their production and bring down costs.
The key is applying the right policy in the right area. For example, emissions standards for new power plants can create perverse results, as power plant operators simply prolong the life of older plants. Likewise, expecting expensive solar or battery technologies to come to market on the basis of a carbon tax is unrealistic. Smart policy does not need to be complicated, but it does need to be targeted.
Posted by: Ombudsman1 | November 15, 2009 1:25 PM
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Posted by: irvnx | November 15, 2009 11:39 AM
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