Putting a Price on Carbon: The Metaphor

33 Pages Posted: 1 Sep 2013 Last revised: 13 Feb 2014

See all articles by David M. Driesen

David M. Driesen

Syracuse University College of Law

Date Written: February 11, 2014

Abstract

This Essay analyzes the characterization of both pollution taxes and so-called cap-and-trade programs addressing greenhouse gas emissions as policies that “put a price on carbon,” a characterization that has come to dominate both policy discussion and much modern scholarship on environmental instrument choice. It shows that the rationale for characterizing cap-and-trade — a quantitative rather than a pricing mechanism — as putting a price on carbon suggests that analysts should likewise treat traditional regulation as a mechanism putting a price on carbon.

Treating “market-based mechanisms” as uniquely putting a price on carbon reflects and perpetuates a tendency to see markets and government as antonyms, with markets operating through price and governments operating through coercion, even though markets and governments are intimately intertwined and use a variety of tools. This Essay shows that an informed third generation debate about instrument design and instrument choice should focus on understanding prices’ limits as a coordinating tool, including appreciation of potential conflicts among the values price is thought to serve.

Keywords: market-based mechanisms, cap-and-trade, emissions trading, instrument choice, pollution taxes

JEL Classification: K32

Suggested Citation

Driesen, David M., Putting a Price on Carbon: The Metaphor (February 11, 2014). Available at SSRN: https://ssrn.com/abstract=2318599 or http://dx.doi.org/10.2139/ssrn.2318599

David M. Driesen (Contact Author)

Syracuse University College of Law ( email )

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