Regulating vs. Pricing carbon emissions, from hearing re: Economic Effects of Climate Change and the Costs of Inaction. ► Using CAFE standards as a clear example, University of Chicago Economics Professor Dr. Michael Greenstone, testified on Capitol Hill and explained why pricing carbon is so much more economically efficient and effective than typical 'command & control' regulations. CAFE = Corporate Average Fuel Economy (CAFE) standards are regulations in the United States, first enacted by Congress in '75, after Arab Oil Embargo of 1973–74, to improve the average fuel economy of cars and light trucks.
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I think CAFE is actually a terrific example of what I think of as the hodgepodge approach to regulating CO2. The textbook solution to this, which your bill (HR763) reflects, would be to have an economy-wide price on carbon. Instead we have these kind of sector-by-sector things that don't directly target carbon. They direct fuel efficiency, which is not the same thing as carbon... And in the case of CAFE we're getting reduction of CO2 probably at a cost of $100-200 per ton.
If instead, we were able to rely on clear price signals, I think there are reductions of CO2 that are available for $10 or $15 a ton.
So effectively, we're paying about ten times what we'd be able to pay for, (by) using a more direct mechanism (than regulations things like CAFE standards).
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Full hearing ( features testimonies from:
- Alfredo Gomez, Director in GAO's Natural Resources and Environment team
- Dave Jones The Nature Conservancy's Senior Director for Environmental Risk and California Insurance Commissioner from 2011 to 2018
- Dr. Michael Greenstone, University of Chicago Milton Friedman Professor of Economics
- Steven Benjamin - Mayor of Columbia, SC
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