Mar. 9, 2010: A tanker truck drives by a Chevron refinery in California. The state is set to begin the most extensive U.S. carbon trading market in Jan. 2012, which will provide a financial incentive to cut GHG emissions.
Op-Ed, Technology Review
Author: Robert N. Stavins, Albert Pratt Professor of Business and Government; Member of the Board; Director, Harvard Project on Climate Agreements
Belfer Center Programs or Projects: Harvard Project on Climate Agreements
Throughout the U.S. economy, millions of decentralized decisions are made every day that contribute to the problem of climate change. A national carbon-pricing system—in the form of either carbon taxes or cap-and-trade—is the only policy that can significantly tilt them all in a climate-friendly direction. Given the ubiquity and diversity of energy use in a modern economy, conventional regulatory approaches simply cannot do the job.
Furthermore, carbon pricing is the least costly approach. In the short term, the cost of reducing emissions will vary wildly across sources as different as coal-fired power plants and cars and trucks. Only carbon pricing provides strong incentives that can push all sources to control at the same marginal cost, achieving the lowest possible expense overall. In the long term, it will create incentives to develop carbon-minimizing technologies (see "Praying for an Energy Miracle") that reduce costs over time....
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