I never get tired of this stuff!
Putting a price on carbon is the only effective way to curb emissions to combat climate change, according to a Nobel prize-winning economist.
“People continue to buy polluting cars and live polluting lives and this will continue until their pockets are hit,” said Jean Tirole, who works at the University of Toulouse and won the 2014 Nobel Prize in economic sciences. “The problem is on such a scale that we have to hit pockets.”
Tirole was speaking in Paris as negotiators from almost 200 nations are aiming for a deal at the end of the year to reduce heat-trapping greenhouse gases. Last month, business leaders met in Paris to call for a price on carbon as an incentive for industry to move toward cleaner transport and energy production.
Economists are divided over whether the best method for pricing carbon is through a tax or a market mechanism such as a cap-and-trade program, said Tirole, who favors the latter. The debate is “relatively minor” compared with the risks for the climate.
Countries’ carbon emissions can be monitored using satellite imagery so each nation can then be charged with putting in place rules to curb them, he said.
Tirole won the Nobel last year for his work on how governments can better regulate industries. He was the first Frenchman since 1988 to win the award and the first to be specifically recognized for work on regulation since 1982.
On the chances of getting a deal at the end of the year, Tirole said he is “worried.”
“Simply making promises isn’t enough,” he said. “They will have to be carried out.”
Two important points that can't be said enough (especially #2 because not many people say it):
- Pricing carbon is the best way to mitigate climate change efficiently.
- Cap-and-trade vs carbon tax is a debate for the journals, not for public policy. If a politician proposes a carbon tax (or cap-and-trade), all economists should back it up with point #1. If an economist thinks that the other policy lever is best s/he should say something like Tirole does above. And this goes for pairing revenue from a carbon tax or cap-and-trade auction with income tax reductions / energy efficiency investments / free college tuition / etc.
Don't let perfect be the enemy of good.