Media outlets trumped the headline conclusion of an International Monetary Fund (IMF) analysis in October: a global tax of $75 per ton of fossil-fuel carbon dioxide emissions may put the world on track to create additional temperature increases to 2 ° C above pre-industrial levels. Unfortunately, it's not that simple, experts say.
The IMF report stated that a charge dependent on the CO2 content should be charged for the production of oil, gas and coal. The tax should be levied automatically and by 2030 should be risen to $75 a ton. It predicted that the levy would lead to an average increase in gasoline prices of 15% and energy charges of 45%. The revenues generated could be rebated or used for other reasons, such as supporting low-income households or reducing budget deficits.
Economists of all types believe that putting a limit on CO2 emissions is the most effective way to prod the planet into the rapid decarbonization needed to avoid the worst effects of climate change. But even if a globally-observed and universal CO2 tax as possible, it would not be sufficient to ensure that the solutions required to supplant fossil fuels would be developed and implemented within the time frame necessary to prevent the worst effects of climate change.
"Economists ' opinion is that carbon pricing is important but not enough," says Robert Stavins, Energy and Economics Professor at the Belfer Center for Science and International Affairs at Harvard University. "Many market failures affect technological change. Even the right price signals will not produce what economists would consider being the efficient amount of R&D activity. "
Companies conducting early-stage R&D do not get all the advantages of the technologies they develop. Competitors are reaping some of the spillover benefits from these investments, says Stavins; he points out how others copied Apple's iPhone research.
Companies typically do not have incentives due to the spillover to perform the right amount of R&D. "Due to the huge amount of technology, invention, and innovation that will be needed, this is an important factor in the context of climate change," he says.
Any new measures that address technological change will need to go along with a carbon price, but "unfortunately, it's easier to say that than to know what those policies are going to be," says Stavins. "It could be government funding for research in the private sector or research funding in the Department of Energy laboratories."
Tags : Budgets, Energy,