Should cap-and-trade ever rear its head again…
Climatewire reports:
Cap-and-trade emissions programs are not a good tool for promoting long-term technological innovation, according to a study published this week in Proceedings of the National Academy of Sciences nearly four years after it was first submitted.
Policymakers tend to overestimate the cost of compliance and set the caps too generously, Lawrence Berkeley National Laboratory social scientist Margaret Taylor found in a survey of market-based programs for sulfur dioxide and nitrogen oxide control.
The dampening effect on innovation comes when companies decide not to invest in research and development because of how cheaply they can comply with the cap.
“Cap-and-trade programs are really effective at helping people find and pick up that low-hanging fruit,” Taylor said in an interview. “They’re so good at that that you actually see this effect where they suddenly free up a lot of slack under that cap in some ways”…
“Policymakers tend to overestimate the cost of compliance …”
It is my experience that the following dictum on Planning is almost a universal truth: Benefits are always overestimated by a factor of 2; costs are always underestimated by a factor of 2.
As a result, all cost/benefit analyses are hyperbolically optimistic.
To ascertain that costs of compliance are overestimated, the estimates must be compared with actual real-world costs. These are always underestimated because many are hidden, such as the energy costs required to manufacture batteries for all-electric vehicles, or the actual frequency of replacement of items of adolescent technology. When these are estimated (they have not yet been measured as the “green industry” is too new), the improved estimates of the costs of compliance will be revised upwards.