As we discuss "cap-and-steal" (aka "cap-and-trade"), "cap-and-sell" (aka "cap-and-auction"), and carbon taxes -- three ways of putting prices on carbon -- it is worth remembering that putting a price on greenhouse-gas emissions is not enough to bring them under control. Gristmill is full of posts showing ways to save carbon at a profit. David posted an interview on Recycled Energy today that points to something that has been known, but mostly ignored, for over thirty years.
I can, and have in the past, posted extensive theoretical musings on this. But the bottom line is that if we are ignoring available savings at current prices, it seems likely that we would continue to ignore savings at artificially higher prices.
This sometimes makes people jump to the opposite extreme; if (as I insist) we can cut emissions by 90 percent or more, at prices comparable to fossil fuel, why do we need to put a price on carbon alone?
The answer is while we can cut emissions at a total cost comparable to what we currently pay for fossil fuels, that does not mean that every component is individually cheaper. The existence of market imperfections does not mean that markets don't have a role to play in solving the problem.
Let's take green buildings as a concrete example. There are a fair number of green commercial buildings that consume 30 percent of the energy of the typical U.S. building, and pay back the costs of those savings in four years or less.