William & Mary Environmental Law and Policy Review
Abstract
This Article evaluates an emerging literature claiming that carbon pricing (emissions trading or carbon taxes) has not performed very well and therefore cannot be the basis for the sort of transformative change now required to address the climate crisis. This is an important claim, as carbon pricing has been viewed as being at the heart of global efforts to address one of our most important contemporary problems.
We provide theoretical and empirical support for these critics’ claim that carbon pricing by itself cannot catalyze the technological transformation now required, and that other approaches have done and will likely do better. We also agree with critics that pricing approaches have suffered from insufficient ambition and effectiveness in routine emission reductions. But we do not think that the critics have shown that alternative approaches have and will perform better in those terms. We develop a framework for enhancing empirical evaluation of past programs, as we now have a wealth of experience with both carbon pricing and a variety of alternatives, but a dearth of econometric comparative studies of past performance.
We also explore the normative implications of the critics’ claims. We argue that even if they are entirely right, we should welcome even insufficiently ambitious pollution taxes as likely to enhance other programs and raise revenue to support them. We point out, however, that the trading programs now common around the world may undermine rather than support more successful programs and suggest that regulators consider cap-without-trade (imposing mass-based caps on pollution sources without allowing the trading of obligations) as an alternative. We also discuss the possibility of overcoming the critics’ objections by improving carbon pricing programs.