Monday, June 30, 2014

World Congress of Environmental and Resource Economics

I am, like almost 1200 other participants, at the WCERE in Istanbul. Yesterday there was an interesting panel session on climate change with Jeffrey Sachs, Ottmar Edenhofer (who is apparently meeting the Pope today), Marianne Fay from the World Bank,  Laurence Tubiana - the new French climate change ambassador - and Carlo Carraro as chair. All the participants agreed that the new framework for climate change policy that will be established at Paris next year must make a break from previous agreements and pledges in consisting primarily of designing long-term transformation pathways rather than primarily short-term targets. Obviously, short-term steps will still be needed. The thinking behind this was best expressed by Marianne Fay. She showed a slide with a picture of the Freedom Tower in New York and a small cottage side by side. She asked: "If you wanted to build this tower, would the house on the left be a reasonable first step?" Similarly, we could ask whether shifting to natural gas is a reasonable first step to decarbonizing the economy. A long-term perspective is needed. Jeffrey Sachs made a point that spot carbon markets aren't an appropriate tool for long-term climate policy. The short-term price keeps fluctuating and there is no long-term futures market. Instead a predictably rising carbon tax is needed. Technology policies are also needed to complement the carbon price. The consensus is that this is where we should head.

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