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Climate Policy: Is Bjorn Lomborg Ďassuming a can openerí?

By Geoff Carmody - posted Tuesday, 5 April 2011


On climate policy, I always find Bjorn Lomborg (author of The Sceptical Environmentalist) worth reading. He challenges me to think more broadly.

But I wonder about the thinking behind one of his central climate policy prescriptions. If I understand him correctly, he concludes:

  1. A carbon price on greenhouse gas emissions is fine in principle, but apply it at a modest level in practice, and don’t hold your breath waiting for emerging economies to follow developed countries’ example. In short, making fossil fuels more expensive relative to alternatives is not the way to go.

  2. Reducing man-made greenhouse gas emissions requires investment in research and development (R&D) to uncover new no (or low) emissions energy. Here lies the path to a global climate policy.

  3. R&D must make no (or low) emissions energy cheaper than current fossil fuel technologies. This ensures all countries will adopt such technologies through self-interest, rather than being driven by (non-enforceable) penalties, or international ‘moral suasion’. Well, of course they will, if it’s feasible.

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I agree there’s a good case for a carbon price. On simplicity, transparency and price stability grounds, a carbon tax is a better instrument than an emissions trading scheme (ETS).

As argued below, I think a carbon price could play a larger role than envisaged by Bjorn Lomborg. Unless the price is based on national consumption of emissions, rather than production (and perhaps even then) I agree we can forget about major developing country emitters acting soon.

Doing more R&D hopefully would improve chances of finding lower emissions energy technology. Imposing a carbon price makes rewards from successful R&D more attractive.

How this might be financed is an important question. It can’t be finessed by assertions that x% of GDP should be hypothecated to the climate policy cause. Real-world political Budget pressures faced by elected governments don’t work this way.

It is Bjorn Lomborg’s third point that worries me the most.

It suggests there are no (or low) emissions energy technologies ‘out there’, just waiting to be discovered, that are even cheaper than current fossil fuel technologies. Are there?

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Don’t get me wrong. I would love no (or low) emissions technologies to be cheaper than, say, coal-fired energy. We emerged from the Stone Age despite not running out of stones because there were more cost-effective alternatives. Can we do it again?

Escaping the fossil fuel age without running out of fossil fuels would be terrific. Indeed, that’s the object of the global climate policy exercise, isn’t it?

A global climate policy deal is the Holy Grail of current negotiations (despite the failures of the past two decades). A practical no (or low) emissions technology that is cheaper than current fossil fuels like coal would be seized by all countries in a heartbeat – if it could be found.

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About the Author

Geoff Carmody is Director, Geoff Carmody & Associates, a former co-founder of Access Economics, and before that was a senior officer in the Commonwealth Treasury. He favours a national consumption-based climate policy, preferably using a carbon tax to put a price on carbon. He has prepared papers entitled Effective climate change policy: the seven Cs. Paper #1: Some design principles for evaluating greenhouse gas abatement policies. Paper #2: Implementing design principles for effective climate change policy. Paper #3: ETS or carbon tax?

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