Emission prices don’t reduce consumption sufficiently
Recently, I pointed out that emission prices do in fact get passed along to consumers. However, it’s important to add that making low carbon alternatives cheaper won’t by itself ensure that they are adopted.
My online book Cooling It! No Hair Shirt Solutions to Global Warming documents numerous profitable-but-overlooked energy-saving alternatives. Numerous other people have pointed out the same thing. The Rocky Mountain Institute produces megabytes of examples. Economists refer to the fact that profitable opportunities to save energy tend to be overlooked as “low demand elasticity.” You can find out more about why this tends to occur in an annotated bibliography I put together, currently posted as a Word doc at the Carbon Tax center website.
Just to correct some ambiguities, this is not to say that an emissions price won’t accomplish anything or is not needed – simply that it is not sufficient. That if we want the problem solved without absurdly high carbon prices, we need to use other policy tools, and not limit ourselves to putting a price on emission.