Gar,

It seems you're arguing that since a price on carbon won't encourage every actor to conserve the maximum amount possible, that carbon prices can't do the job alone.

While I might agree with the general sentiment, I think your example and argument are pretty bunk.  A carbon price works precisely because actors have different marginal cost structures.  The thing is, we don't need every actor to reduce emissions to the max.  Instead we need to set an emissions reduction goal and try to reach it at the lowest possible costs - hence the carbon price.  I know you know this, but I'm trying to figure out where your departure comes from.

Your info on green buildings is far too general.  Unfortunately, not all green buildings operate on the same cost structures you envision, and not all upgrades pay for themselves in just a few years.  Specifics, not generalizations, are much more useful in this case, and also show why carbon pricing, rather than standards are a more versatile tool.

Finally, there's no inherent shortcoming in a pricing system.  A cap on carbon emissions can be set as low as we want.  The problem is not with the mechanism, it's the political will to use it.  That's holds just as much for traditional regulations.

It's really a question of do we care where emissions reductions come from?  If not, then a carbon price alone works.

If we, for some reason, decide that we want emissions reductions to come from the construction industry, then we will have to impose standards, but will also have to understand that our opportunity costs may be cheaper reductions elsewhere.

What would also help is to increase/have a Carbon tax and then decrease the Property tax so that the builings owner will have the money to pay for the increased insulation, efficient motors and lights.  

In heavy concentrated areas like cities, still need the property tax because of the need to have high property value usage, but in less dense areas the need for Property taxes is less.  

What has been done in my state and others, are building code improvements, amount of insulation, etc..   surely that has helped.   But to really get more efficient, carbon tax is the way to go.

True about the marginal rate.

This essay seems odd to me.  I keep looking at it again to find something that is not there.

It seems obvious to me that if GHGs were taxed (or capped and traded) at effective levels, that would be sufficient to reduce emissions to any arbitrary target level.

There must be, somewhere in that essay, an appeal outside that simple system.

But then, if you are saying something like "politically we well not get effective levels of taxation" or "politicians will not set an appropriate target level" ... well, those are true under any regime.

And for that reason I would not fault a mechanism (tax) for a more general problem (society's commitment to GHG reductions).

Agree with previous commenters... the post is not convincing.

It is, however, worth considering the idea that people are irrational, which may support the use of "well designed" command-and-control regulations.

Take an example: it at least seems irrational that CFL's haven't totally taken over the residential lighting market-- they give off the same light and are cheaper over their lifetime. People have a clear economic incentive to use these bulbs. Nonetheless, they are "different" and, in fact, don't give out exactly the same spectrum of light, and they cost more up-front. So some people will not get them, even though it seems only rational to do so. Some have proposed mandating the switch to CFL's, and it's not a crazy idea.

Now it is always tricky territory to "prescribe rationality" by assuming you know what people really want even when they don't do it and mandating them to do it. So we should tread carefully. But, even though the economics behind market-based approaches assuming rational actors is impeccable, there may be psychological quirks that argue in favor of the "command-and-control nudge" in selected cases.

>It's really a question of do we care where emissions reductions come from?  If not, then a carbon price alone works.

No. This is handwaving - the assumption that there are unlimited opportunities for carbon reductions available and if we don't get them one place, we will get them another. This was behind the failure of the famous RECLAIM program in Los Angeles which is only now being recovered from. All the participants assumed someone else would reduce emissions, and they could simply buy credits. So the project ended up failing, and they had to extend the cap deadline and put in direct command & control regulations to get that cap met.

In the U.S. it is generally assume that we need to reduce emissions by somewhere between 80% and 95% per capita, to meet our reasonable share of emission reductions. To some extent we can meet this at the supply end, renewable electricity and such. But if it is not to be extremely expensive we need, as Roberts say to meld renewables and efficiency. And that means we really can't afford to skip any efficiency measures that can be put in place at a lower price than continuing to burn fossil fuels.

Are you really arguing against taxes or caps that do not apply to all GHG emissions?

Obviously an incomplete system would be ineffective, but is that the fault of the system or its incompleteness? ;-)

(I think everyone agrees that the perfect theoretical tax or cap and trade system would be global and uniform.  And sadly it might be arguable how far any one player should go in "unilateral" taxation or caps.  Certainly, a system that aggressively taxed US natural fossil fuels but still allowed import of finished goods from (say) China would be by its nature incomplete.)

Nope, I'm saying even a full fledged cap n' auction or carbon tax system won't lead to a full    reduction, at least not without driving up carbon prices way beyond the actual cost of reductions.

Look at the RECLAIM example

1)A cap n' trade system - no loopholes, phased in over time.

In a cap n' trade system, you have two ways to meet a cap - reducing your emissions or buying emissions from someone else.

In the first phase there was enough low hanging fruit from a few sources to provide cheap credits for everyone else.

To meet the second phase required capital investments.

Not enough capital investments were made, because polluters anticipated credits continuing to be made available. Remember in not making the capital investments, polluters were not violating any cap; during the first phase credits really were available.

When the second phase came along, suddenly it went from everybody complying with the cap to nobody being able to comply with it without

shutting down. Since a lot of the plants out of compliance were electricity generators - in California where there is no excess capacity-you couldn't just shut the plants down and black out much of Los Angeles for two years until needed equipment was installed.

7) So the solution left was to add two years to the deadline to meet phase two, and put into place command and control regulations so that major polluters would install needed equipment and not count on someone else to do it.

What could have been done differently? Instead of relying on Cap & Trade as a complete replacement for quantity based regulations, they could have used them as a way to simply them, to reduce specificity, and record keeping, and red-tape, while still having some sort of basic requirements in place, and not completely replying on markets to produce reductions unassisted.

There are have been no complete, universal, carbon taxes (or systems of cap and trade) in the history of our world.

When you describe a very limited and asymmetrical and badly designed system as "complete" that distorts the discussion.

What you are saying is "bad programs don't work, film at 11"

Even if you accept Gar's version of what happened with RECLAIM (to which I've provided a different take in my link above), it's still an issue of the size of the market and the design of the pricing mechanism - not a blanket proof that pricing mechanisms fall short of their goals.  

you're saying that I'm receiving funding from oil companies because I think that price mechanisms are the most effective, environmentally and economically?  You're also implying that I somehow don't care for the Earth and should change my name?

good one.  

Call market mechanisms "corporate" all you want, but until you can provide substance instead of name calling, realize this -- you represent the reactionary environmental movement that is on its way out.  Progressive environmentalism embodies the reality that we don't have to pit the environment vs. economics, and we can in fact use economic thinking and mechanisms to improve environmental policy.  

You showed me a funding list that includes a variety of privately funded and government funded grants.  The government grants are used to fund specific projects while most of the private grants do not go to specific projects.  So, what exactly is your point?  Or better yet, where do you expect funding to come from if not government and industry?

Maybe I'll change my name to sockpuppet.

Please quit with the personal attacks.

grist.org

I generally agree with naturescene's post that faulting bad systems is irrelevant.  The most significant lesson to take away from the NOx and SOx tradeable permit markets is that they delivered reductions in those pollutants at vastly lower prices than anyone projected beforehand.  Markets work.

But there are two specific points that the article and subsequent debate seem to miss:

The purpose of taxes, cap and trade or any other mechanism that puts a value on what was previously an externality subject to the tragedy of the commons is to price in the externality.  To ask any mechanism to identify the optimum level of reduction - or even to agree on what that optimum level is - is absurd.  So any price signal is a step in the right direction.  From that point, the debate is simply - as others have pointed out - a question of whether the price signal is sufficiently high to shift behavior.  But this is a matter of design, not of the mechanism per se.

The fact that people don't do things which are in their economic self-interest as stipulated by others is far too common in economics circles, and ultimately irrelevant, since it presumes that I know what is in your interests.  Not all decisions are based on simple payback, contrary to what economic models tell us.  Businesses have higher return requirements for non-core investments - and therefore don't do lots of high-return projects for good reasons.  Businesses and individuals also have thresholds for total savings below which they won't act (e.g., you might spend a $1000 on a 3 year payback faster than you'd spend $100 on a 2 year payback, for the simple reason that you'd rather save $333 than $50.)  Many of the small dollar energy efficiency investments like CFLs suffer from this problem, since people tend not to  devote too much effort to understand things that only save them a few bucks a year - even if that is a big chunk of the capital outlay.

Both of these help explain the building example (although in that one you also need to throw in that the party who puts up the capital to build the building is not always the same as the guy who pays the energy bill, so there may truly be no economic incentive at all for the builder to invest in efficiency).  

We are talking mechanisms without a mandate.

I think it matters more to get 70% or whatever to answer a poll that they are ready to make significant changes to their lifestyle.  The rest will then follow, and at that point it matters little what mechanism is used.  They will be tried until one is found that works.

On the other hand, trading favorite methods in absence of that majority is only a game for would-be wonks, for eco-geeks.  No point in getting carried away ...

Don't call me a sock puppet though, because I'm really telling you to get out there and get that majority, in order to make things happen.

(Some few of you might thing the right policy will "sneak" lifestyle changes past the voter ... I say don't count on it.)