A post dated 2017 by Skillings on the website of E3G, a think tank focusing on the political economy of climate change, refers (in the 5th paragraph) to:
"recent emerging consensus that, whilst carbon prices are great at optimising existing operations, they are poor at driving investment and efficiency and next-to useless when it comes to supporting innovation."
No supporting evidence or reference is given.
The claim about investment seems counter-intuitive. Suppose that there are favourable circumstances including:
- A carbon price is in place and expected to remain in place for many years ahead.
- An industry has available a choice of high-carbon and low-carbon production technologies.
- The high-carbon technology has the lower cost per unit in the absence of the carbon price, but the low-carbon technology has the lower cost when the carbon price is taken into account.
Given such circumstances it seems reasonable to expect that the carbon price would provide a strong incentive for investment to switch to the low-carbon technology.
Is there indeed a consensus as stated in the quotation (and if so references would be appreciated)? Is the point perhaps that the combination of circumstances outlined above rarely exists in practice?