There’s certainly a great deal of logic to what Ezra says here — it would be nice if an upstream price on carbon would automatically rejigger the price of everything, right down to chips and candy bars. What could be a more gratifying solution than moving the behavior of every single consumer in a rational direction by applying pressure to a single policy lever?
I hope it’s that easy. I suspect carbon prices will not be like dye in water, diffusing equally everywhere. It’s going to be a lumpier process than that. Some costs will be shirked, hidden, or offshored; there will be special pleading from politically favored industries. There are all kind of nooks and crannies in the economy for carbon prices to get lost, diverted, or distorted before they reach Joe Consumer.
Even when carbon prices make it all the way down, the effect will often be small relative to other factors. A penny or two won’t make the difference between candy bars. A dime or two won’t make the difference between light bulbs. A few hundred dollars won’t make the difference between cars. It’s a price signal, but not as big at the consumer level as people seem to think. Unless of course you jack the price of carbon up to a few hundred bucks a ton on a political kamikaze run.
The thing is, carbon pricing is a necessary but not sufficient condition of good energy policy. It’s not a silver bullet. You still need sector-specific performance standards, serious, long-term public investment in clean infrastructure, and a sea change in public engagement.
It would be nice if we could cap it and forget it, even if it put me out of work. But driving down carbon as much as we need to as fast as we need to is a gigantic undertaking and we’re going to need ongoing focus and initiative.