Advanced Search
MyIDEAS: Login

Carbon Markets and Beyond: The Limited Role of Prices and Taxes in Climate and Development Policy

Contents:

Author Info

  • Frank Ackerman

Abstract

The climate policy debate has advanced from science to economics, with a growing focus on creating carbon markets and getting the prices right. This is necessary but far from sufficient for an effective and equitable response to the climate challenge. While market-oriented forces such as the IMF and the World Bank have focused almost exclusively on carbon markets, others, such as the Human Development Report and the Stern Review, have emphasized the need for complementary, non-market climate initiatives to promote energy conservation and above all, to create and adopt new low-carbon technologies. The equity implications of market-based policies depend on the price elasticity of demand. When demand is elastic (i.e. the elasticity is large in absolute value), as in the case of industrial energy use, price incentives are quite effective and distributional impacts are minimized. On the other hand, when demand is inelastic (i.e. the price elasticity is close to zero), as in the case of transportation fuel use, price incentives are less effective, worsening income inequality but doing little to change in energy use and carbon emissions. Thus non-market policy instruments are particularly important in sectors with inelastic demand for energy, such as transportation. Price incentives alone cannot be relied on to spark the creation of new low-carbon technologies. Many technologies display “learning curve” effects, starting out with high unit costs and becoming cheaper as they are used more widely. Wind power, which is now commercially viable, only became affordable as a result of decades of government subsidies and research support. The same will be true of other low-carbon energy technologies, which will be needed for a sustainable solution to the climate problem. Policy debate has focused on the need for a globally harmonized price for carbon. This is not required by economic theory; in an unequal world, the logic of market economics implies that richer countries should, in effect, have a higher price for carbon. It appears likely, nonetheless, that a consistent global price will eventually be adopted. This will make the benefit of reducing carbon emissions loom larger in lower-income countries. As a result, a wider range of carbon-reducing technologies will be profitable in developing countries, creating opportunities for “leapfrogging” beyond the technologies in use in high-income countries – thereby helping to launch a new, green path to development.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.unctad.org/en/Docs/gdsmdpg2420084_en.pdf
Download Restriction: no

Bibliographic Info

Paper provided by United Nations Conference on Trade and Development in its series G-24 Discussion Papers with number 53.

as in new window
Length:
Date of creation: 2008
Date of revision:
Handle: RePEc:unc:g24pap:53

Contact details of provider:
Postal: Palais des Nations, CH - 1211 Geneva 10
Phone: +41 22 907 12 34
Fax: +41 22 907 00 43
Email:
Web page: http://www.unctad.org/Templates/Page.asp?intItemID=2101&lang=1
More information through EDIRC

Related research

Keywords:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Silverstein, David N., 2011. "Using a harmonized carbon price framework to finance the Green Climate Fund," MPRA Paper 35280, University Library of Munich, Germany.
  2. Silverstein, David N., 2010. "A method to finance a global climate fund with a harmonized carbon tax," MPRA Paper 27121, University Library of Munich, Germany.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:unc:g24pap:53. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rachid Bouhia).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.