Geoscience Reference
In-Depth Information
above, automobile standards are expensive to implement because re-
quiring such large miles-per-gallon improvements is uneconomical.
Other policies range from modestly to horribly ineffective.
It should be noted that Table 12 has biases in both a negative and
positive direction. It is likely to understate the costs of CO
2
reduction
because it assumes that the policies are optimally designed. If there are
exemptions or loopholes, then the costs will be higher. At the same
time, it overstates costs to the extent that consumers make poor deci-
sions (as discussed later in this chapter).
Other policies, not shown in Table 12, actually have a perverse ef-
fect. The best example is a subsidy to ethanol production for automo-
tive fuels. The ethanol provisions (in place for many years but expired
at the end of 2011) provided a subsidy of 45 cents a gallon to ethanol
when blended with gasoline. You might think that this is a good idea
because ethanol replaces fossil fuels. Not so. Careful studies indicate
that corn-based ethanol emits about as much CO
2
-equivalent as gaso-
line when all fossil fuels and greenhouse gas-producing fertilizers are
included. Ethanol is truly a medicine that causes rather than cures
diseases.
NONREGULATORY APPROACHES
There are many other ideas about how to tackle global warming,
which cannot be systematically analyzed within the scope of this topic.
However, it will be useful to sketch them here.
Some policies are complementary to putting a market price on
emissions. For example, strong support for public and private research
and development on low-carbon energy technologies would lower the
costs of these technologies and is defi nitely recommended. They would
lead to greater emissions reductions and lower costs for attaining the
targets. These policies are analyzed in Chapter 23.
Some alternatives are in the dubious category. One example is the
“clean development mechanism” included in the Kyoto Protocol and
the European Emissions Trading Scheme, which allows poor countries
to sell emissions reductions to rich countries, which then get credit for
the reductions in a cap-and-trade regime. For example, China built a
