04 September 2009

Energy R&D in Lomborg's Exercise

Lomborg's five economists ranked energy R&D as its second highest priority. They also ranked a carbon tax, of any magnitude as the lowest priority. I thought it would be worth seeing how Isabel Galiana nand Chris Green actually framed energy R&D for the panel in relation to a carbon tax in their excellent paper (here in PDF):
Our proposed approach to mitigation has technology leading carbon pricing. As explained in section IV, carbon pricing plays two roles: first, the role of funding R&D and technology change; and second, committing to the slow but steady increase in the carbon price, thereby signaling adoption of on-the-shelf, ready to deploy, and scalable energy technologies. Thus, in our approach, technology and mitigation are linked via carbon pricing. But they are not linked via today’s carbon price, but rather via tomorrow’s carbon price. In our approach, carbon pricing initially plays a largely passive and ancillary, albeit important, role. But as time passes, carbon pricing plays a more active role by sending a “forward price signal” as a result of commitments to its slow but steady rise.

Thus it is not correct to interpret our approach as emphasizing R&D but not mitigation. The two are inextricably intertwined. Also it is not correct to say that we all but ignore carbon pricing. Indeed, carbon pricing plays two important roles, one financial, one signaling. Moreover, a carbon price that starts at $5.00/t CO2 in 2010, and doubles every 10 years, reaches $80/t CO2 in 2050.
Thus, the energy R&D strategy proposed by Galiana and Green actually includes a carbon tax as a necessary element of the proposal for capitalizing on the energy R&D. Galiana and Green do turn the role of a carbon tax on its head from most proposals, by arguing for a low tax to start and rising over time, but it is strage to see Lomborg's economists cleave the teax from the R&D proposal given that the R&D strategy that was proposed to them depened upon it.

The Galiana and Green paper is absolutely excellent and it alone makes Lomborg's exercise worthwhile. A shame though that the experts decided to pick cherries on this topic as well as on geoengineering.