Friday 24 Sep 2021 | 22:36 | SYDNEY
Friday 24 Sep 2021 | 22:36 | SYDNEY

C02 emissions: Easy and hard problems


Stephen Grenville

11 March 2011 11:26

Sam has written again on the conundrum that, if energy use becomes more efficient, we might use more of it.

This seems an easy one to address, at least compared with the broad problem of carbon pollution. As for the Jevons Paradox, the answer is to tax the energy which has now become cheaper through greater efficiency, so that it is no longer cheaper.

So the taxed people won't like that' Then give them back all the revenue from the tax as a cash grant. Now they have a choice. They can use their entire grant to go on using as much energy as they originally did, and be no worse off. Much more likely, they will use some of the grant to buy things other than energy, so energy use declines.

They are unambiguously better off than they would be if the energy efficiency innovation never happened. They may not, however, be better off than if the energy efficiency happened and there was no tax. But hey! You can't have everything. You want to reduce energy consumption because it has unwanted externalities. This is the result you achieve with a tax. Ask M Pigou.

The far more intractable problem is a prisoners' dilemma: how to get individual countries to take tough unpopular measures on carbon use when the action of individual countries (even the largest) will not be enough to fix the problem. How do you make sovereign nations cooperate when it is in their individual interests not to cooperate'

Photo by Flickr user Surat Lowozick.