Climate 411

Nat Keohane and I have been participating in the “Carbon Tax vs. Cap-and-Trade” debate over on Bulletin of the Atomic Scientists. From Round 3, which addresses the international aspects:

A cap-and-trade system allows for the creation of a global carbon market. Such a market would provide the mechanisms and flexibility necessary to achieve the environmental goals at the lowest cost and the incentives for other countries to join. A tax does neither, while requiring much more harmonization across countries.

This post is by Gernot Wagner, Ph.D., an economist in the Climate and Air program at Environmental Defense Fund.

A call for change — no, not by Barack Obama, by Al Gore.

Gore co-authored a call for Sustainable Capitalism in today’s Wall Street Journal:

At this moment, we are faced with the convergence of three interrelated crises: economic recession, energy insecurity and the overarching climate crisis. Solving any one of these challenges requires addressing all three.

The op-ed concludes that:

Today, the sustainability challenges the planet faces are extraordinary and completely unprecedented. Business and the capital markets are best positioned to address these issues.

…as long as the incentives are correct:

We…need to internalize externalities — starting with a price on carbon. The longer we delay the internalization of this obviously material cost, the greater risk the economy faces from investing in high carbon content, “sub-prime” assets. Such investments ignore the reality of the climate crisis and its consequences for business.

This post is by Gernot Wagner, Ph.D., an economist in the Climate and Air program at Environmental Defense Fund, and originally appeared on the Environmental Economics blog.