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Fiddling while carbon burns: why climate policy needs pervasive emission pricing as well as technology promotion

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Author Info

  • John C.V. Pezzey

    ()
    (Centre for Resource and Environmental Studies, Australian National University)

  • Frank Jotzo

    ()
    (Research School of Pacific and Asian Studies, Australian National University)

  • John Quiggin

    ()
    (Department of Economics, University of Queensland)

Abstract

Effective climate policy requires global emissions of greenhouse gases to be cut drastically, which in energy sectors can be achieved by lower emissions supply technologies, greater energy use efficiency, and substitution in demand. For policy to be efficient requires fairly uniform, pervasive emission pricing from taxes, permit trading, or hybrid combinations of the two, as well as significant government support for low-emission technologies. We compare the kind of technology-focused climate policies currently adopted by Australia and the USA, the ‘Asia- Pacific Partnership on Clean Development and Climate’ (AP6), against this ideal policy yardstick. We find that they omit the need for emission pricing to achieve abatement effectively and efficiently; that they over-prescribe which abatement actions should be used most; that they make unrealistic assumptions about how much progress can be achieved by voluntarism and cooperation, in the absence of either adequate funding or mandatory policies; and that they unjustifiably contrast technology-focused policy and the Kyoto Protocol approach as the only two policies worth considering, and thus ignore other important options.

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Bibliographic Info

Paper provided by Risk and Sustainable Management Group, University of Queensland in its series Climate Change Working Papers with number WPC06_1.

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Date of creation: Dec 2006
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Handle: RePEc:rsm:climte:c06_1

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Keywords: greenhouse gas emissions; abatement; emission taxes; emissions trading; technology policy; innovation; Asia-Pacific Partnership; AP6;

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References

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  1. Lawrence H. Goulder & Ian W. H. Parry & Roberton C. Williams III & Dallas Burtraw, 1998. "The Cost-Effectiveness of Alternative Instruments for Environmental Protection in a Second-Best Setting," NBER Working Papers 6464, National Bureau of Economic Research, Inc.
  2. Jaffe, Adam B. & Newell, Richard G. & Stavins, Robert N., 2005. "A tale of two market failures: Technology and environmental policy," Ecological Economics, Elsevier, vol. 54(2-3), pages 164-174, August.
  3. Aldy, Joseph & Barrett, Scott & Stavins, Robert, 2003. "Thirteen Plus One: A Comparison of Global Climate Policy Architectures," Working Paper Series rwp03-012, Harvard University, John F. Kennedy School of Government.
  4. John Pezzey, 2003. "Emission Taxes and Tradeable Permits A Comparison of Views on Long-Run Efficiency," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 26(2), pages 329-342, October.
  5. Goulder, Lawrence & Bovenberg, A. Lans, 2000. "Neutralizing the Adverse Industry Impacts of CO2 Abatement Policies: What Does It Cost?," Discussion Papers dp-00-27, Resources For the Future.
  6. Popp, David, 2006. "Innovation in climate policy models: Implementing lessons from the economics of R&D," Energy Economics, Elsevier, vol. 28(5-6), pages 596-609, November.
  7. Pizer, William A., 2002. "Combining price and quantity controls to mitigate global climate change," Journal of Public Economics, Elsevier, vol. 85(3), pages 409-434, September.
  8. Sijm, J. & Neuhoff, K. & Chen, Y., 2006. "CO2 cost pass through and windfall profits in the power sector," Cambridge Working Papers in Economics 0639, Faculty of Economics, University of Cambridge.
  9. Jacoby, Henry D. & Ellerman, A. Denny, 2004. "The safety valve and climate policy," Energy Policy, Elsevier, vol. 32(4), pages 481-491, March.
  10. Jakeman, Guy & Hanslow, Kevin & Hinchy, Mike & Fisher, Brian S. & Woffenden, Kate, 2004. "Induced innovations and climate change policy," Energy Economics, Elsevier, vol. 26(6), pages 937-960, November.
  11. Warwick J. McKibbin & Peter J. Wilcoxen, 2002. "The Role of Economics in Climate Change Policy," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 107-129, Spring.
  12. Ford, Melanie & Matysek, Anna & Jakeman, Guy & Gurney, Andrew & Fisher, Brian S., 2006. "Perspectives on international climate policy," 2006 Conference (50th), February 8-10, 2006, Sydney, Australia 137963, Australian Agricultural and Resource Economics Society.
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Citations

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Cited by:
  1. Mathews, John, 2007. "Seven steps to curb global warming," Energy Policy, Elsevier, vol. 35(8), pages 4247-4259, August.
  2. Sylvia Karlsson-Vinkhuyzen & Harro Asselt, 2009. "Introduction: exploring and explaining the Asia-Pacific Partnership on Clean Development and Climate," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 9(3), pages 195-211, August.
  3. Helen King, 2008. "The challenges of finding efficient policy measures to reduce Australia'’s agricultural greenhouse gas emissions," Environmental Economics Research Hub Research Reports 0809, Environmental Economics Research Hub, Crawford School of Public Policy, The Australian National University.
  4. Sarah Hards, 2011. "Social Practice and the Evolution of Personal Environmental Values," Environmental Values, White Horse Press, vol. 20(1), pages 23-42, February.
  5. John C.V. Pezzey & Salim Mazouz & Frank Jotzo, 2009. "The logic of collective action and Australia’s Climate Policy," Environmental Economics Research Hub Research Reports 0924, Environmental Economics Research Hub, Crawford School of Public Policy, The Australian National University.
  6. Harro Asselt & Norichika Kanie & Masahiko Iguchi, 2009. "Japan’s position in international climate policy: navigating between Kyoto and the APP," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 9(3), pages 319-336, August.
  7. King, Helen, 2008. "The challenges of finding efficient policy measures to reduce Australia’s agricultural Greenhouse gas emissions," Research Reports 94809, Australian National University, Environmental Economics Research Hub.
  8. Pablo del Río, 2009. "Assessing the dynamic efficiency of internal mitigation projects. An evolutionary perspective," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 14(3), pages 203-213, March.
  9. Frank Jotzo, 2007. "Climate policy in Australia and globally: where to and how?," Economics and Environment Network Working Papers 0703, Australian National University, Economics and Environment Network.
  10. Warwick McKibbin, 2007. "The 2006 Sir Leslie Melville Lecture: From National To International Climate Change Policy," CAMA Working Papers 2007-05a, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  11. Warwick J. McKibbin, 2007. "From National to International Climate Change Policy," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 40(4), pages 410-420, December.
  12. Armbruster, Walter J., 2009. "Challenges and Issues in the Next Decade: A Proactive Role for Agricultural and Resource Economists," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 38(1), April.

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