The article in the url below examines the economics of decarbonization. In particular, it makes two arguments that are enlightening. The first is that any barriers to decarbonization do not include the amounts of money involved:
"If the world economy fails to decarbonise, it will not be because of the cost. The gross investment needed to achieve net-zero emissions by 2050 can seem enormous: a cumulative $275trn, according to the McKinsey Global Institute, a think-tank attached to the consultancy. But over a period of decades the world would have had to replace its cars, gas boilers and power plants anyway. So the additional spending needed to go green is in fact much smaller: $25trn. Spread that over many years and compare it to global GDP, and it looks significant but manageable, peaking at 1.4% between 2026 and 2035. And that is without counting the returns on the investment. British officials reckon that three-quarters of the total cost of the transition to net zero will be offset by benefits such as more efficient transport, and that the state may need to spend only 0.4% of GDP a year over three decades."
The second argument is that a carbon tax can only be effective if reasonable alternatives are already on offer. If they are not on offer or they are too expensive, then taxes do not have the same effect on behavior:
"Carbon prices do not alter people's choices much when there are too few substitutes for dirty goods, or when those substitutes are too expensive. High fuel taxes, for example, tend to provoke political backlash against environmentalism … but do not much alter transport emissions. Britain has had one of the highest levels of fuel duty in the rich world in recent decades, … but drivers' take-up of electric vehicles has been unremarkable."
The reasons economists favor a carbon tax, the article suggests, is because they have wrongly focused on externalities ("the damage done to society when carbon is emitted") when they should have also considered the elasticity of demand ("the extent to which prices change behavior"). As a result, rather than a carbon tax, the solution offered by the book that is being reviewed in the article to bring about decarbonization is "extreme positive incentives for change," or EPICS:
"[The book's authors] laud Norway for exempting electric vehicles from road tax, cutting their parking charges in half and giving them access to bus lanes. (More than 90% of cars sold in the country are now electric.) They propose big mortgage discounts for homeowners who retrofit their properties. And they want the state to generously subsidise lending to green projects while exempting them from a range of taxes."
Take care
David
David Chandler
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An EPIC challenge
By Free exchange
March 26, 2022
The Eonomist
Late Edition – Final
73
