Wanted: A stable, predictable price for carbon! (Must not be too low!)
Today’s London Financial Times has an editorial calling for political action to secure a successor agreement to the Kyoto Protocol, in the hope of avoiding a climate change catastrophe. Among good, strong words we read:
“Politicians will have to learn how to sell any deal, too. Many countries are responding to climate change by rewarding favoured lobby groups rather than spreading the costs fairly. Analysis published today by economists at Oxford University shows that the European Emissions Trading scheme provided a massive windfall for polluting industries; they enjoyed an unnecessarily generous handout of valuable permits, ultimately at the taxpayer’s expense.
We should be able to do better than that. A stable, predictable price for carbon - whether through an auction of emissions permits or a carbon tax - would promote the best ways of reducing emissions while providing substantial government revenues. Those revenues can be used to buy domestic political support by cutting other taxes and to provide the money necessary to ensure that developing countries are happy to sign up to a Kyoto successor.”
But, we have a pretty stable, predictable price for carbon now! The price also needs to be sufficiently high to incent emitters to reduce their emissions.