Hostname: page-component-78c5997874-94fs2 Total loading time: 0 Render date: 2024-11-19T16:36:37.922Z Has data issue: false hasContentIssue false
  • English
  • Français

Rationales for Additional Climate Policy Instruments under a Carbon Price

Published online by Cambridge University Press:  01 January 2023

Paul Twomey
Paul Twomey*
Affiliation:
The University of New South Wales
Rights & Permissions [Opens in a new window]

Abstract

Core share and HTML view are not available for this content. However, as you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

The plan to introduce a carbon pricing scheme in Australia has focused attention on the future relevance and necessity of using other policy instruments to reduce carbon emissions. Significant reports, including the Wilkins Review and reports by the Productivity Commission, have argued using the standard neoclassical economics framework that once a carbon price is established, it should be (almost) the only instrument needed to tackle climate change mitigation in Australia. With a small number of exceptions for complementary instruments to address some market failures, the use of other climate policy instruments, it is argued, will result only in unnecessary duplication and potential distortions. The aim of this article is to show that there are, in fact, a significant number of rationales for implementing several climate policy instruments in combination with a carbon price, and we should not be too quick to dismiss certain climate policy instrument combinations.

Keywords

B5Q2Q5Climate change policycarbon pricingcomplementary policiespolicy mixespolicy interactionrenewable energy policy
Type
Symposium
Information
The Economic and Labour Relations Review , Volume 23 , Issue 1: Carbon Markets: Inherent Limitations and Complementary Policies , February 2012 , pp. 7 - 30
Copyright
Copyright © The Author(s) 2012

References

Arrow, K. (1962) ‘The economic implications of learning by doing’, Review of Economic Studies, 29(3), pp. 155–173.CrossRefGoogle Scholar
Baldwin, R. (2008) ‘Regulation lite: The rise of emissions trading’, Regulation and Governance, 2(2), pp. 193–215.CrossRefGoogle Scholar
Bartle, I. (2009) ‘A strategy for better climate change regulation: Towards a public interest orientated regulatory regime,’ Environmental Politics, 18(5), pp. 689–706.CrossRefGoogle Scholar
Bennear, L. S., Stavins, R. N. (2007) ‘The use of multiple policy instruments for environmental protection’, Environmental and Resource Economics, 37(1), pp. 111–129.CrossRefGoogle Scholar
Borenstein, S. (2008) The market value and the cost of solar photovoltaic electricity production, CSEM Working Paper 176, University of California Energy Institute, Berkeley, California.Google Scholar
Spectator, Climate (2011) ‘NSW power bills set to surge’, 14 April, available: http://www.climatespectator.com.au/news/nsw-power-bills-set-surge [accessed 3 December 2011].Google Scholar
Commonwealth of Australia (2008a) Strategic review of Australian Government climate change programs (Wilkins Review), Department of Finance and Deregulation, Canberra.Google Scholar
Commonwealth of Australia (2008b) Australia’s fifth national communication on climate change, Department of Climate Change, available: http://unfccc.int/resource/docs/natc/aus_nc5.pdf [accessed 10 December 2011].Google Scholar
Commonwealth of Australia (2011) Securing a Clean Energy Future — The Australian Government’s Climate Change Plan, Commonwealth of Australia, Canberra.Google Scholar
Compston, H. (2009) The politics of climate policy: Strategic options for national governments, Paper prepared for 5th European Consortium for Political Research General Conference, Potsdam, 10–12 September.Google Scholar
Courvisanos, J. (2009a) ‘Optimize versus satisfice: Two approaches to an investment policy in sustainable development’ in Holt, R., Pressman, S., Spash, C. L. (eds) Post Keynesian and Ecological Economics: Confronting Environmental Issues, Edward Elgar, Cheltenham, UK and Northampton, US, pp. 279–300.Google Scholar
Courvisanos, J. (2009b) ‘Political aspects of innovation’, Research Policy, 38(7), pp. 1117–1124.CrossRefGoogle Scholar
Daley, J., Edis, T. (2011) Learning the hard way: Australia’s policies to reduce emissions, Grattan Institute Report No. 2011-2, Melbourne, April.Google Scholar
de Laurentis, C., Cooke, P. (2008) Green innovation and policy: A co-evolutionary approach, Paper presented at the DIME International Conference on Innovation, Sustainability and Policy, Bordeaux, 11–13 September.Google Scholar
Denniss, R., Macintosh, A. (2011) Complementary or contradictory? An analysis of the design of climate policies in Australia, Policy Brief No. 22, Canberra, May 2011.Google Scholar
Dequech, D. (2000) ‘Fundamental uncertainty and ambiguity’, Eastern Economic Journal, 26(1), pp. 41–60.Google Scholar
Edquist, C. (2001) ‘Innovation policy — a systemic approach’ in Archibugi, A., Lundvall, B. (eds) The Globalizing Learning Economy, Oxford University Press, Oxford, pp. 219–238.Google Scholar
Ellerman, D., Convery, F., De Perthuis, C. (2010) Pricing Carbon: The European Union Emissions Trading Scheme, Cambridge University Press, Cambridge.Google Scholar
Fankhauser, S., Hepburn, C., Park, J. (2010) ‘Combining multiple climate policy instruments: How not to do it’, Climate Change Economics, 1(3), pp. 209–225.CrossRefGoogle Scholar
Fear, J., Denniss, R. (2009) Zero-sum game? The human dimensions of emissions trading, Australia Institute Paper No. 2, Canberra, August.Google Scholar
Foxon, T., Gross, R., Chase, A., Howe, J., Arnall, A., Anderson, D. (2005) ‘UK innovation systems for new and renewable energy technologies: Drivers, barriers and systems failures’, Energy Policy, 33(16), pp. 2123–2137.CrossRefGoogle Scholar
Foxon, T. (2008) ‘A co-evolutionary framework for analysing transition pathways to a low carbon economy’, Paper for EAEPE (European Association for Evolutionary Political Economy) Conference, Rome, 6–8 November.Google Scholar
Frank, R. (2005) ‘Positional externalities cause large and preventable welfare losses’, American Economic Review, 95(2), pp. 137–141.CrossRefGoogle Scholar
Frey, B. (1997) Not Just for the Money: An Economic Theory of Personal Motivation, Beacon Press, London.Google Scholar
Galbraith, J. (2008) ‘Innovation and predation’ in Laperche, B., Uzunidis, D. (eds) Powerful Finance and Innovation Trends in a High-Risk Economy, Palgrave Macmillan, Basingstoke, pp. 13–18.CrossRefGoogle Scholar
Garnaut, R. (2008) The Garnaut Climate Change Review, Cambridge University Press, Melbourne.Google Scholar
Garnaut, R. (2011) The Garnaut Review 2011: Australia in the Global Response to Climate Change, Cambridge University, Press, Melbourne.Google Scholar
Gillingham, K., Sweeney, J. (2010) ‘Market failures and the structure of externalities’ in Moselle, B., Padilla, J., Schmalenese, R. (eds) Harnessing Renewable Energy in Electric Systems, RFF Press, London, pp. 69–91.Google Scholar
Global Footprint Network (2010) Data sources, available: http://www.footprintnetwork.org/en/index.php/GFN/page/data_sources/ [accessed 10 December 2011].Google Scholar
Goulder, L. H., Parry, I. W. (2008) ‘Instrument choice in environmental policy’, Review of Environmental Economics and Policy, 2(2), pp. 152–174.CrossRefGoogle Scholar
Grubb, M., Chapius, T., Ha Doung, M. (1995) ‘The economics of changing course: Implications of adaptability and inertia for optimal climate policy’, Energy Policy, 23 (4–5), pp. 417–432.CrossRefGoogle Scholar
Grubb, M., Ulph, D. (2002) ‘Energy, the environment, and innovation’, Oxford Review of Economic Policy, 18(1), pp. 92–106.CrossRefGoogle Scholar
Helm, D. (2009) ‘EU climate-change policy — a critique’ in Helm, D., Hepburn, C. (eds) The Economics and Politics of Climate Change, Oxford University Press, Oxford, pp. 222–246.CrossRefGoogle Scholar
Hirsch, F. (1977) Social Limits to Growth, Routledge & Kegan Paul, London.Google Scholar
Hirsch, P., Michaels, S., Friedman, R. (1990) ‘Clean models vs. dirty hands: Why economics is different from sociology’ in Zukin, S., DiMaggio, P. (eds) Structures of Capital: The Social Organization of the Economy, Cambridge University Press, New York and Melbourne, pp. 39–56.Google Scholar
Hodgson, G. M. (2004) ‘Reclaiming habit for institutional economics’, Journal of Economic Psychology, 25(5), pp. 651–660.CrossRefGoogle Scholar
International Energy Agency (2011) Policies and measures, Brussels, available: www.iea.org/textbase/pm/?mode=cc [accessed 10 December 2011].Google Scholar
Jackson, T. (2009) Prosperity Without Growth: Economics for a Finite Planet, Earth-scan, London.CrossRefGoogle Scholar
Jaffe, A. B., Newell, R. G., Stavins, R. N. (2005) ‘A tale of two market failures: Technology and environmental policy’, Ecological Economics, 54 (2–3), pp. 164–174.CrossRefGoogle Scholar
Lehmann, P. (2010) ‘Justifying a policy mix for pollution control: A review of economic literature’, Journal of Economic Surveys, 26(1), pp. 71–97.Google Scholar
Lempert, R., Groves, D., Popper, S., Bankes, S. (2006) ‘A general analytic method for generating robust strategies and narrative scenarios’, Management Science, 52(4), pp. 514–528.CrossRefGoogle Scholar
Levinson, A., Niemann, S. (2004) ‘Energy use by apartment tenants when landlords pay for utilities’, Resource and Energy Economics, 26(1), pp. 51–75.CrossRefGoogle Scholar
Lipsey, R. G., Lancaster, K. (1956) ‘The general theory of second best’, The Review of Economic Studies, 24(1), pp. 11–32.CrossRefGoogle Scholar
McKinsey, (2009) Pathways to a Low Carbon Economy, Version 2 of the Global Greenhouse Gas (GHG) Abatement Cost Curve , McKinsey and Company.Google Scholar
Montgomery, W. E. (1972) ‘Markets in licenses and efficient pollution control programs’, Journal of Economic Theory, 5(3), pp. 395–418.CrossRefGoogle Scholar
Moore, S. (2011) 2020 hindsight: Does the renewable energy target help the UK decarbonise?, Policy Exchange Working Paper, London, May.Google Scholar
Moselle, B. (2011a) Climate change policy — Time for Plan B, Policy Exchange Working Paper, London, April.Google Scholar
Moselle, B. (2011b) Why support renewables?, Presentation at Electricity Policy Research Group Research Seminar Spring, Cambridge UK.Google Scholar
Nelson, R. R. (1994) ‘The co-evolution of technology, industrial structure, and supporting institutions’, Industrial and Corporate Change, 3(1), pp. 47–63.CrossRefGoogle Scholar
Nelson, R., Winter, S. (2002) ‘Evolutionary theorizing in economics’, Journal of Economic Perspectives, 16(2), pp. 23–46.CrossRefGoogle Scholar
Neuhoff, K. (2011) Climate Policy After Copenhagen, Cambridge University Press, London.CrossRefGoogle Scholar
Newell, R., Jaffe, A., Stavins, R. (1999) ‘The induced innovation hypothesis and energy-savings technological change’, Quarterly Journal of Economics, 114(3), pp. 941–975.CrossRefGoogle Scholar
Newell, R. G., Pizer, W. A. (2003) ‘Regulating stock externalities under uncertainty’, Journal of Environmental Economics and Management, 45 (2, Supplement), pp. 416–432.CrossRefGoogle Scholar
Nill, J., Kemp, R. (2009) ‘Evolutionary approaches for sustainable innovation policies: From niche to paradigm?’, Research Policy, 38(4), pp. 668–680.CrossRefGoogle Scholar
Nordhaus, W. (2009) Designing a friendly space for technological change to slow global warming, Snowmass Conference on Technologies to Combat Global Warming, August, Snowmass, Colorado.Google Scholar
OECD (Organisation for Economic Cooperation and Development) (2007) Instrument Mixes for Environmental Policy, OECD Publishing, Paris.Google Scholar
OECD (2008) Environmental Outlook to 2030, OECD Publishing, Paris.Google Scholar
Oikonomou, V., Jepma, C. J. (2007) ‘A framework on interactions of climate and energy policy instruments’, Mitigation and Adaptation Strategies for Global Change, 13(1), pp. 131–156.CrossRefGoogle Scholar
Ostrom, E. (2010) A polycentric approach for coping with climate change, World Bank Policy Research Paper No. 5095, Washington, World Bank.Google Scholar
Paton, J., Bryant, G. (2010) Priceless! The value of pollution and sustainable climate change, Proceedings of the Ninth Australian Society of Heterodox Economists Conference, Sydney, December, pp. 196–211.Google Scholar
Perth Now (2011) Scrap renewable energy target - Premier Colin Barnett, 24th August, available: http://www.perthnow.com.au/business/wa-company-news/scrap-renewable-energy-target-premier-colin-barnett/story-e6frg2s3-1226121433367 [accessed 1 December 2011].Google Scholar
Pigou, A. C. (1920) The Economics of Welfare, Macmillan, London.Google Scholar
Pink, D. (2010) Drive: The Surprising Truth About What Motivates Us, Canongate Books, Edinburgh.Google Scholar
Pollitt, M. (2011) Some inconvenient economics of energy and climate policy, Presentation at the annual joint Electricity Policy Research Group — Centre for Energy and Environmental Policy Research (MIT) Conference, London, September.Google Scholar
Productivity Commission (2008) What roles for policies to supplement an emissions trading scheme, Submission to the Garnaut Climate Change Review, May.Google Scholar
Productivity Commission (2011) Carbon Emission Policies in Key Economies, Productivity Research Report, Melbourne.Google Scholar
Quiggin, J. (2008) ‘Uncertainty and climate change policy’, Economic Analysis and Policy, 38(2), pp. 203–210.CrossRefGoogle Scholar
Robinson, J. (1972) ‘The second crisis of economic theory’, American Economic Review, 62(2), reprinted in Collected Economic Papers, vol 4, ch10, Basil Blackwell, Oxford, pp. 1–10.Google Scholar
Rosewarne, S. (2010) ‘Beyond Hansen’s economics: Rethinking carbon in the cradle to grave value chain’, Proceedings of the Ninth Australian Society of Heterodox Economists Conference, Sydney, December, pp. 241–246.Google Scholar
Schleich, J., Betz, R. (2004) ‘EU emissions trading and transaction costs for small and medium sized companies’, Intereconomics: Review of European Economic Policy, 39(3), pp. 121–123.CrossRefGoogle Scholar
Sorrell, S., Sijm, J. (2003) ‘Carbon trading in the policy mix’, Oxford Review of Economic Policy, 19(3), pp. 420–437.CrossRefGoogle Scholar
Spash, C. (2009) ‘The brave new world of carbon trading’, New Political Economy, 15(2), pp. 169–195.CrossRefGoogle Scholar
Stavins, R. N. (2003) ‘Experience with market-based environmental policy instruments’ in Maler, K. G., Vincent, J. V. (eds) Handbook of Environmental Economics, Vol I. Elsevier Science, Amsterdam, pp. 355–435.Google Scholar
Stern, N. (2006) UK Treasury speech on the release of the Stern Review, 30th October, available: http://www.world-rights.org/pdf/sternreview_speakingnotes.pdf [accessed 2 December 2011].Google Scholar
Sterner, T. (2002) Policy Instruments for Environmental and Natural Resource Management, RFF Press, Washington.Google Scholar
Stirling, A. (2003) ‘On the economics and analysis of diversity’, Science Research Policy Unit (SPRU), University of York, Electronic Working Papers Series, Paper No. 28, available: http://www.uis.unesco.org/culture/Documents/Stirling.pdf [accessed 1 December 2011].Google Scholar
Stirling, A. (2007) ‘A general framework for analysing diversity in science, technology and society’, Journal of the Royal Society Interface, published electronically by FirstCite, February, available: http://www.journals.royalsoc.ac.uk/content/a773814672145764/fulltext.pdf [accessed 25 February 2011].Google ScholarPubMed
The Australian (2011) ‘States face call to axe inefficient climate schemes’, 24 August, available: http://www.theaustralian.com.au/national-affairs/states-face-call-to-axe-inefficient-climate-schemes/story-fn59niix-1226120781550 [accessed 2 December 2011].Google Scholar
Thompson, M., Ellis, R., Wildavsky, A. (1990) Cultural Theory, Westview Press, Boulder and Oxford.Google Scholar
Tietenberg, T. (1995) ‘Tradable permits for pollution control when emission location matters: What have we learned?’, Environmental and Resource Economics, 5(1), pp. 95–113.CrossRefGoogle Scholar
Twomey, P., Betz, R., MacGill, I. (2010) Additional action reserve: A proposed mechanism to facilitate additional voluntary and policy efforts to reduce emissions in the CPRS, Environmental Economics Research Hub Research Reports 1048, Environmental Economics Research Hub, Crawford School, Australian National University.Google Scholar
Unruh, G. (2000) ‘Understanding carbon lock-in’, Energy Policy, 23(12), pp. 817–830.CrossRefGoogle Scholar
Veblen, T. (2004 [1899]) Theory of the Leisure Classes: An Economic Study of Institutions, Penguin Classics, London.Google Scholar
Veblen, T. (2006 [1914]) The Instinct of Worksmanship and the State of the Industrial Arts, Cosimo Inc., New York.Google Scholar
Weitzman, M. L. (1974) ‘Prices vs. quantities’, Review of Economic Studies, 41(4), pp. 477–491.CrossRefGoogle Scholar