Oregon Public Broadcasting

We got a direct challenge for our guest Kristen Sheeran, the environmental economist, near the end of Friday's show about the Copenhagen climate change conference. Taylorj wrote:

Having studied climate science since the 1970s, and having lived in Canada and seen firsthand the consequences in the far north, I have no doubt the world is facing a massive problem, yet listening to this show, I'm having a massive problem taking the conversation seriously.  The environmental community has spent several decades trying to legislate change.  Kristen Sheeran and many others are very good at proclaiming all that we have to do, but I find myself shutting down when she starts talking, not because I disagree with her, but because everything I see, and everything I've ever studied about the past (I'm a historian) suggests that her approach is not how societies actually change.  I hate to sound like a disciple of Stewart Brand, but I wonder whether we would be further along the path if Sheeran and company spent less time trying to legislate and more time building that non-carbon grid. For better and worse, this is a country and culture built on entrepreneurial energies, not policy.

Kristen Sheeran responded by email:

I couldn't agree more that the solution to the climate problem involves innovation. What dismays me most about skeptics who claim that we can't solve this problem is that they profess so little faith in human ingenuity and invention. Where I disagree with you, perhaps, is on the importance of public policy in steering innovation. Absent a national policy that imposes a "price" on carbon emissions, what incentive does anyone have to innovate in this regard? The reason we haven't solved the climate problem is not that we don't have, or are incapable of, developing the technical know-how. The reason is that there has been no economic incentive to do so. As soon as we set a firm cap on carbon emissions at the national level, a price emerges for carbon and it becomes more expensive to generate carbon emissions. At that point, capital flows into innovations that will reduce our carbon footprint. But this is also only part of the story. We not only need to level the playing field for these innovations by setting a price on carbon, we need to tilt the playing field heavily in that direction. Public policy can influence the pace and direction of innovation - it always has. Most of the technologies we take for granted today - the internet for example - are the by-products of deliberate government spending on R&D for the military. Many of the large-scale changes that need to take place - redesigning the grids, public transportation, etc - are public goods by definition. These are investments that we cannot rely on the private sector to produce on its own - it lacks the incentive to do so.

I agree that it would be totally impossible to legislate the myriad of different decisions that have to be made if we are to solve the climate problem. But we won't alter the business-as-usual course without an incentive to do so, and this is where a national policy that sets a firm carbon price becomes so important.

Sheeran is talking about large-scale changes in behavior and technology — innovation, in other words — that would follow a price on carbon. How would more expensive carbon change your behavior?