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Why a price on carbon cannot fix everything

Some market fundamentalists make that a simple price on carbon (ie an ETS) can fix everything. This is simply wrong, has been proven wrong by many studies and it will remain wrong no matter how often this myth is repeated.

The price of carbon can change some things but not all…. So called market failures, e.g. “irrational”  behavior, split incentives, technological and other barriers make life and economics much more complicated than some economists, ETS enthusiasts and market fundamentalists  would like us to believe.

A simple example: why don’t you go out and buy a new fridge that is much more efficient than your old one and will pay for itself in 3 years? Well, maybe you are planning to move, or don’t have the money, or don’t have the time, or don’t know or simply cannot be bothered because there are more important things than thinking about fridges.

This is why we need many different polices that can address these different “market failures” (and to convince you why buing a super energy efficient fridge is worthwhile).

Here some recent research on why a policy bouquet is necessary to effectively reduce emissions:  

And why do some economists still hang on to this myth of a price that can fix everything? Oh because life would be so much nicer and simpler if it followed the basic theoretic principles of economics. But life is messy and so is climate politics and climate protection. Policy solutions that work in the abstract may turn out to be useless in the real world. This is why there will never be a silver bullet but there are many beautiful solution bouquets!

Latest Publications

  • Letter to Deputy Ambassadors on a Governance framework compatible with the Paris Agreement

    This letter was sent ahead of the COREPER meeting on 24 November 2017 Dear Deputy Ambassador, This Friday, 24 November, you will be discussing the proposed Regulation on the Governance of the Energy Union. With that in mind we are writing on behalf of our EU-wide network to highlight those aspects of the draft legislation that we consider critical to effective implementation by the EU of the Paris Agreement.
  • European and African NGO recommendations for an EU-Africa Summit that puts climate action at the forefront

    Ahead of the EU-Africa summit taking place in Abidjan, Côte d’Ivoire on November 28-29, European and African NGOs working on climate change, energy and sustainable development jointly identify some important areas of cooperation to enhance European and African climate action.
  • Report: Juncker Plan backs billions in fossil fuels and carbon-heavy infrastructure

    The European Union is set to continue a funding tool that in last two years has lent billions of euros for fossil fuels projects, finds a new study from CEE Bankwatch Network, CAN Europe, Counter Balance and WWF European Policy Office.
  • Joint NGO statement on the ETS revision

    Being serious about the Paris Agreement:Stop the ETS funding coal, Start a meaningful carbon price This Agreement [...] aims to [...] making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development. Paris Agreement, Article 2(1)c We, the undersigned, urgently appeal to Representatives of European Parliament, Council and the European Commission to ensure that European power and industry are put on the right track to rapidly and cost-effectively reduce their carbon emissions. The European Union was instrumental in designing the Paris Agreement. Now it must implement it. On 8th November, the aforementioned decision-makers will discuss final changes to the EU Emissions Trading System (ETS) for the post-2020 period. It is vital that these changes enable the ETS to help deliver the Paris commitments. The recently published UNEP report underlines the urgency to act now in order to ensure that the 1.5°C target remains attainable [1]. One important discussion topic will be the design of the ETS funds. It is crucial that ETS funds stop subsidizing coal plants. We are glad to see that the European Parliament as well as seven Member States [2] have called for ending this misuse of funds. To reach the “well below two degrees” goal agreed at Paris, the International Energy Agency’s (IEA) modelling shows that unabated coal in Europe must fall to zero by 2030: This means that the ETS must no longer fund this obsolete and polluting technology and needs to accelerate a socially just transition instead. The second crucial topic is how to ensure a meaningful carbon price that drives decarbonisation throughout the 2020s and beyond. This can only happen if the cap on the ETS emissions continues to tighten in line with the Paris climate goals, and is adjusted downwards to account for progress. Without this change, the EU carbon market will remain on an inadequate decarbonisation trajectory and risks another decade of irrelevance, leaving the EU lagging behind on green growth and innovation. Fundamentally, the EU ETS must ensure a meaningful carbon price in line with the Paris climate goals, while at the same time stop subsidizing high-carbon intensity technologies such as coal. We count on your support. Kind regards, Carbon Market WatchCEE Bankwatch NetworkCenter for Transport and EnergyChange PartnershipClimate Action Network (CAN) EuropeEfdeN RomaniaInternational Young NaturefriendsSandbagWWF EPOYoung European Federalists11.11.11 Notes: [1] Under current trends, it is expected that in 2030 global efforts to remain on a 1.5°C pathway are 16 to 19 GtCO2 off track. UNEP (2017). The Emissions Gap Report 2017. Available here. [2] Non-paper by Denmark, France, Germany, Luxembourg, the Netherlands, Sweden and the UK Joint NGO statement on the ETS revision
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