Friday, October 19, 2012

Book note: Carbon Crunch

Review copy requested: The Carbon Crunch: How We're Getting Climate Change Wrong--and How to Fix It, by Dieter Helm (Yale University Press). This book will, and should, cause a stir. Here's an excerpt from a review in the latest Economist:
Green activists, politicians and NGOs will hate this book. But Mr Helm has done a service to everyone else by describing what a global climate-change mitigation regime would look like if one took economics seriously. You would start, he says, with the cheapest way of reducing carbon emissions (not the dearest), meaning gas, especially abundant shale gas. Gas produces less than half as much carbon per unit of energy as coal and about 50% less than oil. But the French government wants to ban shale-gas production. 
Second, you would introduce a carbon tax, rather than (as now) a carbon price. These sound similar, being different ways of embodying in the price of a good the real cost of the carbon it takes to make. Actually, a tax is better. To see the difference, consider an extremely toxic substance such as mercury. Even a small amount in a river can do immense damage, so this is a case for strict permits, which should be tradable to encourage efficiency. You want fixed amounts and a variable price. Carbon is different. A small amount extra makes little odds. But miscalculating the cost of reducing emissions, as the world is doing, is expensive. In this case it would be better to fix a price (ie, a tax) and let the quantities vary. Third, Mr Helm argues, some of the money that goes on renewables would be better spent on future clean technologies such as carbon capture, energy storage and electric vehicles. 
This prescription is unrealistic. Europeans are too committed to their regulatory approach to change now. But Americans, Chinese and Indians would learn a lot from Mr Helm about cutting carbon emissions rationally. And all readers will get a cogent account of how self-defeating current global climate-change policies are turning out to be.

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