Cameron Hepburn

12 June 2014

Climate change – The Economist

An Offer They Can’t Refuse.

ON JUNE 2nd, Barack Obama announced that he wanted total emissions from American power stations to fall by 30% from 2005 levels in the next 15 years. This has (correctly) been interpreted as a potshot at the coal industry. States will have to come up with plans to meet specific emission-reduction targets; scrapping coal plants (and replacing them with gas-fired ones, say) is an obvious avenue to get there.

Of course, a higher coal price also stimulates production; governments would need to design the policy to prevent firms from tearing the country apart in order to sell useless coal to the state. Richer countries could simply pay coal miners to leave the stuff in the ground (like the Indonesian rainforest). But many countries feel that extracting coal is their divine right and are likely to balk at this proposal. “Much coal burn is driven by domestic strategic and security interests that need to be addressed before the coal burn will slow,” says Cameron Hepburn of Oxford University. Without at least some coordination, then, governments attempting the coal-buy strategy might end up paying firms in other countries to dig up useless coal, at least until higher prices generated the desired broad shift to cleaner energy sources.

The Economist