Will some form of carbon pricing work to shift behaviour away from carbon intensive activities and towards a low carbon future? The answer is I don’t know. The more worrying answer is neither does anyone else.

I don’t trust economists on this. Even economists are falling out with each other since the global financial crisis began.  The relationship between prices and behaviour isn’t clear, except in theory. That relationship is mired in the deep pools of behavioural economics whose exponents have yet to arrive on the global stage as billionaires profiting from their insights in the real world.

 

I worry about carbon pricing strategies for three interrelated reasons.

1. Technical. I think it’ll all take too long to get the unit carbon price high globally, partly because of the delay in creating a global system, partly because markets don’t work perfectly and if we want to achieve a specific goal (high carbon prices) then we will probably need to experiment a lot with the specific regulations/caps/trading rules etc. before we can get the desired affect. Even then the impacts of the price will be felt differentially on a world not equally able to pay them, distorting a global market, demanding more tinkering and interrupting the delivery of urgent policy goals. On climate change we simply don’t have the time that all this will take even if we believed that it could actually work eventually.

 

2. Values. Carbon pricing requires trade in carbon to work (you can’t create a market unless someone is selling and someone wants to buy right?). So carbon becomes a commodity. It isn’t a commodity it is a planet killer. Personally I am a little terrified of leaving the process of slashing carbon emissions to the complex algorithms of the global financial trading floors whose interests are not in reducing carbon but in making money. Also putting a cash price on something also gives more power to those with money over those that haven't; the rich dominate markets, their behaviour defines market behaviour. We didn’t create a market in CFCs or in sulphur dioxide; we just created global agreements to ban or limit their use and that worked. I want us to cut carbon emissions globally fast because it is the right thing to do not because someone can make money (somehow) from doing so or because the rich and powerful need an easier way out of meeting a responsiblity to everyone that doesn't compromise their ability to make more money.

 

3. Systems. At a systems level of thinking we can’t design a complex system for controlling a price when the targets we are aiming to hit are going to keep shifting unless we have a really clear understanding of how the system works.  Climate science is getting more and more radical in the targets it is recommending. It is unlikely that the sophistication of our global politics or our global policy tools will be able to keep up with the shifting imperatives of the debate. When ice shelves melt and global food shortages (because of drought and flood) begin to bite we will start to act faster (and hope it isn’t too late) and we will have no appetite for trying to meet complexity with more complexity; there will be an argument for simplicity, clear headed action and transparent and verifiable progress in all countries in all industries everywhere. My strong view is that we move to that point now, sooner rather than later and that trying to make a global carbon market work will be a distraction, a failure and will not help us make the tougher decisions ahead.

Surely a much clearer approach is tough and globally agreed binding legislation on carbon emissions with a clear steep curve for implementation over the next 5 years with targets and big penalties set for failure to comply. This isn’t easy to do for sure but in my view it is easier than trying to create a global price mechanism for carbon. It is action that is both commensurate with the scale and speed of the problem and the complex nature of the system into which we are trying to intervene. I also think the time we would put in to making a globally binding legislative deal would be time better spent in learning how to make change effective in this unique moment in our history.

I think that this, in the end, will be what we will end up doing as the global emergency we are confronting becomes clearer to the wider public agenda and we demand paradigm shifting responses not business as usual tinkering with economic theory. Given this is where we will end up much better in my view to start working towards it now.

We should not attempt to value our collective future by putting a tradable price on it. We have already tried market economics in all sorts of areas of public life where they have little or no relevance and where we have suffered the generational consequences of that failure.

Carbon pricing could be our last and most devastating failure to apply the wrong level of thinking to an altogether bigger problem.