Blogs

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

  • Briefing: EFSI support to fossil fuel projects

      In September 2016 the European Commission published its proposal for the prolongation of the European Fund for Strategic Investments (EFSI) until 2020, to be achieved by amending the existing regulation. In this briefing by CAN Europe, WWF, CEE Bankwatch and CounterBalance, current support to fossil fuel projects by the EFSI are summarized and recommendations to the legislative review of the EFSI are given. 
  • Letter to Commission on reducing emissions in aviation and maritime sectors

    In this letter CAN Europe, Transport & Environment, Seas at Risk, Carbon Market Watch and the Aviation Environment Federation urge the European Commission to ensure the aviation and maritime sectors reduce emissions in line with the temperature goals of the Paris Agreement.
  • Letter to the World Bank regarding loan to the Trans-Anatolian Gas Pipeline

    This letter, signed by 39 organisations, was sent to the World Bank in relation to the board discussion on a loan to the Turkish company Botas for the construction of the Trans-Anatolian Gas Pipeline (TANAP). In the letter, several social, environemntal and human rights issues with the TANAP are raised, and the organisations urge the board to at the very least postpone this discussion until the martial law inTurkey is cancelled; the NGO legislation in Azerbaijan is modified as requested by the EITI; and democratic participation in both countries is restored. Clearly, given the violations of World Bank Safeguard requirements during project appraisal, this project should not qualify for a Board vote.
  • Briefing: Reviewing the European Investment Bank’s carbon footprint methodology

    The European Investment Bank developed its methodology for calculating greenhouse gas emissions in 2012, and is now considering its further review. In this briefing CAN Europe together with CEE Bankwatch, WWF, Friends of the Earth Europe and Counterbalance review the existing carbon footprint methodology and provide recommendations for its further review. 
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