Evidenceless Grist argument of the day
Posted by Rich Sweeney on March 10, 2009
Sean Casten explains that “carbon pricing does not necessarily cause higher energy prices” because………. well because it just doesn’t. While I’m fine with his point that we shouldn’t assume that pricing carbon will lead to higher prices (just as I think we shouldn’t assume green jobs = net jobs), he provides no evidence for his assertion, and ignores the significant literature available showing that precisely the opposite is true (EIA’s L-W runs are an example). This is because carbon intensive energy generation is currently significantly cheaper than clean energy generation, and because our current, stranded, capital is built around dirty energy. Even if you transfer all the carbon revenue to clean technologies, it still won’t compensate for these losses, at least in the short run. Here at RFF I help maintain a highly parametrized US electricity market model which incorporates the two additional costs I mentioned. If anyone has an idea how to design a carbon policy that won’t raise electricity prices I would honestly love to hear it.
Finally, before Jigga Romm’s anti-econ crusaders jump on this post, I’d like to reiterate that my criticism of Casten’s argument (?) does not mean that I am against pricing carbon. In fact I wan’t to do so precisely because it will raise energy prices, which are artificially low right now since they don’t incorporate emissions externalities.