Interesting quibble over terminology, or linguistic obfuscation designed to soothe child-like sensibilities? Why not both?
Nordhaus: We have set the bar for our aspirations so high. Aiming for net-zero carbon emissions by the middle of the century is a very ambitious target.
In my own mind there is a twin set of policies. One is carbon pricing and one is strong support for low-carbon technologies. Both are necessary if we’re going to reach our goals. Carbon pricing by itself is not sufficient. By itself, it won’t bring forth the necessary technologies. Carbon pricing needs the helping hand of government support of new low-carbon technologies.
The analogue here is the covid vaccines. The private sector has incentives of the patent system to make vaccines profitable for pharmaceutical companies. But we went beyond that with the pre-purchase agreements to make sure a strong market was there and guaranteed in advance; this backstop would help these companies make back their investment. It is an unusual way to structure incentives, but it worked amazingly well.
So good so far, to acknowledge ambition alongside calculation, expediency, and urgency risks encouraging cynicism about solutions, aka bedtime stories in a land right here, right now. But great point about vaccines, and of course one of the tools is framing, whether we like having to tell ourselves certain fictions or not. See also, vaccines.
We can use this to think about climate change policies. We can use similar tools to improve our low-carbon technologies.
Mufson: And one of those tools is the carbon tax?
Nordhaus: I think we should use the word “price” rather than “tax.”
Mufson: That sounds better.
Nordhaus: This is not just a matter of rhetoric. It is fundamental. What we really want to do is raise the price of carbon emissions. If you can get it up to $100 a ton, you’re doing a good job. It doesn’t matter whether you do that through a tax or a cap-and-trade system. Canada has a carbon tax. Europe uses cap-and-trade. Others have mixed regimes. Different ones will work better in different environments.
I think it’s true that the U.S. is sort of stuck somewhere in the 18th century, maybe 19th century, on taxes. The rest of the world is moving ahead and we’re sitting here on an island of fiscal denial. One of these days people will wake up and say, “A carbon tax is a good way to reach our goal effectively.”
It is one of the most effective tools. It raises revenues, lowers carbon emissions and reduces mortality from air pollution. Hundreds of thousands of people a year die from the burning of fossil fuels. We’re just so blindered on this that we can’t see what is good for both public health and fiscal health.
In the land of truthfully dispiriting summations, the one-eyed optimist takes a peek. Saddled with the most resources and the least wisdom in using them, the price of dawdling IS the widely-feared tax. See also, vaccines.
Image: … forest… trees.