Wednesday, February 4, 2015

Opportunity to put a price on carbon

We've been talking in class about how much prices matter: when something is priced too low, people will consume too much of it, which leads to waste. In many countries, fuel is subsidized, often since it's seen as a way for governments to help the poor. Of course, the poor aren't the only ones who use fuel, and there are a lot better ways to help the poor than by subsidizing fuel use. Taking away a price support is politically tricky, though: it can make you look pretty greedy if you are getting rid of a policy that is supposed to help the poor! That's why some people are encouraging that subsidies be dropped now, while oil prices are down. If it happens now it won't be noticed so much.

The executive director of the International Energy Agency says, "There is no time for action like the present. It's an opportunity to put a price on carbon and slash fossil fuel subsidies." Environmentalists and economists should agree on this one!

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