Friday, July 17, 2009

Getting your carbon signals right

If you are environmentally conscious and want to make purchasing decisions based the carbon impact, Tim Harford points out the answer is easy.
If you put a price on carbon. The carbon-footprinting process often produces surprises. An environmentally conscious consumer in the crisps aisle of the supermarket will probably be thinking about packaging or “food miles”. The Carbon Trust reckons that about 1 per cent of the climate impact of a packet of crisps is from moving potatoes around. The largest single culprit is the production of the nitrogen fertiliser, and half of the climate impact in general takes place at the agricultural stage. The point is not that agriculture is always the problem, but that it is very hard for a well-meaning consumer to work out what the green purchasing decision actually is. For this reason, the Carbon Trust has a carbon labelling scheme. The trouble is that many consumers simply do not care enough to pay more or choose a less enjoyable product simply because of the low carbon label.

A government role is necessary, then, but it is even harder for governments to regulate such fine details. All this is why economists continue to advocate some kind of carbon price, which would give an incentive to everyone involved in these complex supply chains to trim carbon dioxide emissions. A modest and credible price for carbon is slowly becoming the conventional policy wisdom.
In other words, join Greg Mankiw and other members of the Pigou Club.

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