Carbon pricing does not necessarily cause high energy prices
E&E Daily reports ($ub. req’d) today on efforts in the House to try and determine how to minimize the economic pain of CO2 pricing.
Government studies conclude that for a new U.S. climate law to work, it must stem the demand for carbon-based energy by increasing prices — not exactly the most politically popular thing to do during an economic crisis that is being compared to the Great Depression.
All the logical failing of our CO2 policy discussion is nested in this paragraph.
For climate law to work, it must put a price on CO2 emissions. But there is no logical reason why that must imply an increase in energy costs, for the simple reason that energy is not CO2.
A price on CO2 emissions, done right, will facilitate a wealth transfer away from CO2-intensive forms of energy, but to assume that this must lead to higher energy costs is to assume that low costs and high carbon go hand in hand. And no matter how many hearings we hold and policies we develop that implicitly or explicitly make this linkage, it ain’t there. Coal is freakin’ expensive. Efficiency is cheap. Even solar PV is cheap if you ignore the capital costs (just like coal!).
The idea that charging for CO2 will increase energy costs makes as much sense as assuming that charging for mercury will increase tuna costs.
This persistent idea is both inane and dangerous. Inane because it’s wrong. Dangerous because it leads to one of two places:
- Do nothing. For the last decade, we’ve spent so much time talking about the bogeyman under our bed that we’ve actually come to believe it. And so we stay in bed, per legislative mandate.
- Do something economically dangerous. As I’ve noted before, this framing biases us towards economically disastrous CO2 policies, effectively giving us what we fear.
In other words, we have the power to make that economic bogeyman real. It is entirely within our power to pass economically disastrous CO2 policies that will drive up the cost of energy. But that is a policy failure, and in no way innate to good climate policy.
We need to send a clear message to D.C.: Grow up. Get over your bogeyman fears. We can’t afford to wait for you any longer.