The alternative investment provides positive returns if the economy is growing, not if it is shrinking as it likely would be if the global temperature rise exceeds 3C by 2100.

That conclusion is not in line with the literature on the topic. Almost all models show the global economy continuing to grow for the foreseeable future despite climate change. Climate change will slow the growth considerably — it could easily take ~10% of GDP from baseline away by 2100 by most conventional estimates — but it likely won’t halt economic growth.

An incentive to encourage decarbonization should be based on a “decarbonization price”

The social cost of carbon would eventually lead us to decarbonization, more or less as it rises over time.

Conventional economics would say the carbon price should be based around the social cost of carbon, but if you step away from economics, you could implement a carbon price based on achieving decarbonization by a certain date.

This point is missing in most discussions of carbon pricing: What do you do with the revenue?

You can do whatever you want with it! It’s just normal tax revenue, it’s not special in any way. One option is to just give it back to people (called a “revenue-neutral” carbon tax) — through either tax cuts, rebates, or a “carbon dividend”. Or you can spend it on whatever national priority you feel is most important.

The important thing with a carbon price is it is optimal regardless of how the revenue is spent.

Data | Economics | NBA | Electric Vehicles Contact:

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store