ECONOMISTS have long championed a price on carbon as the ideal way to limit the greenhouse-gas emissions that cause global warming. So has this newspaper: it first embraced the idea in 1989. Yet the bitter truth is that the world is nowhere near the sort of carbon-pricing regime that would keep greenhouse gases at tolerable levels. The negotiations under way in Paris this week will not yield one. Economists are used to being ignored, yet the contrast between academics’ enthusiasm for a carbon price and the rest of the world’s disinterest is striking.
Carbon prices tackle the problem of emissions head on. When people engage in a carbon-intensive activity, such as driving a car, they impose a cost on others, often without even realising it: the emissions produced when petrol is burned contribute to global warming. Because that cost is not built into the price of petrol, people buy more of it than they otherwise would, atmospheric carbon goes up, and the world bakes. A carbon price that added the missing cost to the price of petrol (and coal and every other carbon-generating activity) would give people an incentive to emit less. To impose a price, a...Continue reading
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