Economist Paul Krugman, while referencing an upcoming carbon pricing piece by David Roberts (@drvox) writes that:
Econ 101 tells us that if you want to reduce emissions of a pollutant, the most efficient way to do that is to put a price on emissions, so that all possible routes to reduction are taken, and the marginal cost is the same for all routes. It’s a real insight, and has had positive impacts on real-world policy — cap-and-trade has worked very well at reducing acid rain.
Krugman goes on to argue that pricing may not be the only solution, it may even be even sub-optimal in some cases, and that regulatory solutions may well develop sooner than robust international carbon markets. He concludes a few paragraphs later:
The point is that just because Econ 101 makes a smart, counterintuitive point doesn’t make that point of central importance….
Yet, we know ex-post from acid rain cap and trade plans that cap and trade regimes deliver results. And we also know that regulatory capture undermines many anti-pollution rules with solar being among the biggest targets. Next, there is the fact that massive amounts of Carbon Pollution remain unaccounted for. So both market making and regulation must be moved forward deliberately.
Why? Consider some information from the book Door To Door The Magnificent — And Maddening — Story of Transportation by author Edward Hume. In an interview with Terry Gross on NPR’s Fresh Air, Hume points out how much international trade via super-massive container ships use one of the dirtiest, i.e. the most carbon intensive fuel types–Bunker Fuel. And all its emissions on the high seas are off the books. He notes that Bunker Fuel basically the substance that remains after everything of value has been refined out of petroleum. These huge ships can burn 200 tons of bunker fuel in a day sailing. The emissions from it are “horrific”. He goes further elaborates in the interview that:
Given that there are 6,000 total in the worldwide fleet, if you take 160 of them, the emissions from just those vessels, of the type of emissions that cause smog and particulate pollution, those 160 mega ships will be the equivalent of the emissions of all the cars in the world…[this tiny fraction…of the worldwide fleet] generates about 2 to 3 percent of world carbon emissions, which would – if that fleet were a country, it would put them in the top 10 emitters of carbon dioxide in the world. In fact, it would put it ahead of Germany – the fourth-largest economy in the world.
And again, Bunker Fuel emissions are off the books. Hume goes on to elaborate:
So they are prodigious polluters. And the oddest thing about this is that it’s all off the books when we look at countries and businesses’ carbon footprints because for it to count in the global assessment of carbon pollution, it has to belong to a country. But when these ships are at sea and beyond national boundaries, their emissions aren’t part of that accounting. So this tremendous impact doesn’t even figure in our calculations about, for instance, the carbon footprint of a product or a country or a business.
At the nexus of international trade and carbon emissions, a very significant source of pollution runs off the books. So these emissions are not used in the models devised by both private and public-sector technocrats, economists, and so on.
International trade surely has its place in the complex interactions between power source marketers and trade regime captains. And rising living standards do very often lead to less pollution and less environmental degradation. Can regulations alone however, address carbon pollution. Given the evidence, both policy initiatives need serious, capable advocacy. Yet clearly no, regulation alone is not a sustainable answer.