Fiddling while carbon burns: why climate policy needs pervasive emission pricing as well as technology promotion*

Abstract

Effective climate policy requires global emissions of greenhouse gases to be cut substantially, which can be achieved by energy supply technologies with lower emissions, greater energy use efficiency and substitution in demand. For policy to be efficient requires at least fairly uniform, fairly pervasive emission pricing from taxes, permit trading or combinations of the two; and significant government support for low‐emission technologies. We compare the technology‐focused climate policies adopted by Australia and the ‘Asia–Pacific Partnership on Clean Development and Climate’ (AP6), against this policy yardstick. We find that such policies omit the need for emission pricing to achieve abatement effectively and efficiently; they over‐prescribe which abatement actions should be used most; they make unrealistic assumptions about how much progress can be achieved by voluntarism and cooperation, in the absence of either adequate funding or mandatory policies; and they unjustifiably contrast technology‐focused policy and the Kyoto Protocol approach as the only two policies worth considering, and thus ignore important policy combinations.