Direct regulation is the government telling people and companies what (not) to do, and how (not) to do it. #climateeconomics
Direct regulation works fine if there are few, similar sources of emissions. It does not work for greenhouse gases. #climateeconomics
Direct regulation was successful, it made the career of current environmental leaders, and so it is still popular. #climateeconomics
Taxes, subsidies and tradable permits reward emission reduction, but the decision whether and how is private. #climateeconomics
A target is met at its lowest possible cost if taxes, subsidies or tradable permits are used. #climateeconomics
Taxes increase costs, subsidies reduce costs. Over time, subsidies thus lead to an expansion of the polluting sector. #climateeconomics
With permit trade, emissions are known but costs are not. With taxes, marginal costs are known but emissions are not. #climateeconomics
(Mistakes with) annual national emissions do not matter much for a global stock pollutant. Emission certainty is worth little. #climateeconomics
Cost certainty is worth a lot. Therefore, taxes are better suited for climate policy than tradable permits. #climateeconomics
There are various ways to allocate permits: auction, equal per capita, to the polluters, to the victims of pollution. #climateeconomics
The initial allocation of permits provides opportunities for politicians to hand out favours. #climateeconomics
If the willingness to pay to pollute equals the willingness to accept compensation for not polluting, and #climateeconomics
if he willingness to accept compensation for pollution equals the willingness to pay for reduced pollution, then #climateeconomics
then the market allocation of permits is therefore independent of the initial allocation. Efficiency and equity separate. #climateeconomics
The price of carbon should rise with the interest rate plus the rate of atmospheric decay if there is a constraint on the concentration of CO2. #climateeconomics
The price of carbon should rise with the interest rate plus the rate of atmospheric decay minus the rate of climate deterioration if net present welfare is maximized. #climateeconomics
Emission permits traded across borders require that importing countries recognize the permits of exporting countries. #climateeconomics
The EU ETS is the largest and only international emission permit market. It suffered from avoidable teething problems. #climateeconomics
Enforcement is the greatest challenge for the EU ETS, as it relies on judicial strength of individual Member States. #climateeconomics
The Clean Development Mechanism appears to have led to neither development not emission reduction. #climateeconomics
Technological progress in renewable energy, energy efficiency and agriculture drives the costs of climate policy. #climateeconomics
Diverting R&D towards energy and agriculture would be expensive as these are small sectors in the economy. #climateeconomics
R&D is best stimulated by patents, prizes, and taxes. Governments are bad at picking winners. #climateeconomics
Chapter 4 of #climateeconomics amazon.co.uk/Climate-Econom…
Slides, videos, quizzes and more on #climateeconomics sites.google.com/site/climateco…
