Thursday, January 8, 2009

Questionning market logic for quelling carbon emissions

Interesting data on the cost estimates relating to various means of cutting carbon emissions. However, at the very moment when markets are proven not to be as effective as previously proclaimed, do we still want to rely solely on market mechanisms to quell carbon emissions? I mean, the current financial and credit crisis, which is relentlessly extending as a full-blown recession of the "real" economy, amply shows that markets are not that good at pricing assets and risk. So, why is it that we still seem to think that market mechanisms should be more or less exclusively involved in quelling carbon emissions?

The Cost of Cutting Carbon

Will putting a price on carbon increase the use of renewables?

If the goal is to increase the use of renewable energy, says Sergey Paltsev, principal research scientist at the MIT joint program, governments may have to mandate its use. Unfortunately, that would increase energy costs much more than market-based approaches to carbon regulation would.

1Based on average 2007 prices 2For electrical utilities 3All blends
Source: Energy Information Administration/Gilbert Metcalf (prices); MIT Joint Program on the Science and Policy of Global Change (power sources)
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