It’s time* for environmentalists (and everyone else) to give up on a myriad of second-best regulatory policies and push for a simple emissions price (i.e. a carbon tax). The latest reason: green subsidies are unraveling under adverse energy market conditions. There are many others:
- It’s hard to design an emissions market that works well on a large scale, resisting volatility, in pursuit of elusive environmental certainty.
- Performance standards don’t permit enough tradeoffs.
- Portfolio standards can have perverse and volatile outcomes and tend to develop strange internal convolutions.
- Subsidies and credits send the wrong price signal for conservation, have poor equity effects, and because they cost money, tend to self-extinguish when they simply get too successful.
- R&D subsidies won’t get the job done on their own.
- Rebates get discounted or wasted.
- Green labeling presents a weak and confusing signal.
All of the above have some role to play, but without prices as a keystone economic signal, they’re fighting the tide. Moreover, together they have a large cost in administrative complexity, which gives opponents a legitimate reason to whine about bureaucracy and promotes regulatory capture.
If all the effort that’s now expended in fragmented venues to create these policies were focused on one measure, would it be enough to pass a significant emissions price with fair revenue recycling and a border adjustment? I don’t know for sure, but I’d like to see us try.
* Actually, I think it was time for a carbon tax at least 20 years ago.