Digest

This podcast delves into the economic perspective on climate change, highlighting the concept of market failure and exploring potential solutions like carbon taxes and cap-and-trade systems. It then focuses on Washington state's ambitious cap-and-trade program, detailing its implementation, challenges, and potential impact. The podcast features Luke Martland, a key figure in the program's development, and discusses the political backlash and public concerns surrounding the program's impact on gas prices and consumer costs. The podcast also explores the broader context of climate change as a collective action problem and the significance of Washington's program as a proof of concept for other states. Finally, it discusses the uncertain future of cap-and-trade in Washington and its potential consequences for the fight against climate change.

Outlines

00:00:25

Climate Change and Market Failure

This chapter explores the economic perspective on climate change, highlighting the concept of market failure. It introduces carbon taxes and cap-and-trade systems as potential solutions to address this failure.

00:01:42

Cap and Trade: A Detailed Explanation

This chapter delves into the mechanics of cap-and-trade systems, explaining how they work and their potential benefits. It discusses the role of government in setting caps, issuing permits, and allowing companies to trade them.

00:04:48

Washington's Cap and Trade Program: Implementation and Challenges

This chapter highlights the ambitious nature of Washington state's cap-and-trade program, aiming to cut carbon emissions significantly by 2030 and 2050. It discusses the challenges and opportunities associated with implementing this system, including outreach efforts, market design, and political backlash.

00:19:55

The Future of Cap and Trade: Global Implications and Proof of Concept

This chapter explores the broader context of climate change as a collective action problem and the limited impact of Washington's program on a global scale. It emphasizes the significance of Washington's cap-and-trade program as a proof of concept for other states and discusses the potential consequences of its success or failure for the fight against climate change.

Keywords

Q&A

• What is the economic perspective on climate change, and how does it relate to market failure?

  Economists view climate change as a classic market failure, where companies and individuals pollute without paying the full cost of their actions. This leads to excessive emissions and environmental damage.

• How do carbon taxes and cap-and-trade systems aim to address market failure in the context of climate change?

  Both carbon taxes and cap-and-trade systems aim to internalize the cost of pollution by making it more expensive to emit carbon. This incentivizes businesses and individuals to reduce their emissions and adopt cleaner technologies.

• What are the key components of a cap-and-trade system, and how do they work?

  A cap-and-trade system involves setting a cap on total emissions, issuing permits (allowances) to pollute, and allowing companies to trade these permits. The market price for allowances reflects the cost of emitting carbon, incentivizing companies to reduce emissions.

• What are the challenges and opportunities associated with implementing a cap-and-trade system?

  Implementing a cap-and-trade system can be challenging due to the need for extensive outreach, complex market design, and potential political backlash. However, it offers the opportunity to reduce emissions efficiently and generate revenue for climate-related investments.

• How does Washington state's cap-and-trade program differ from other similar programs, and what are its goals?

  Washington's cap-and-trade program is more ambitious than other programs, aiming to cut emissions significantly by 2030 and 2050. It covers a wider range of industries and aims to generate revenue for climate-related investments.

• What are the potential consequences of Washington's cap-and-trade program for other states and the broader fight against climate change?

  If Washington's program is successful, it could inspire other states to adopt similar initiatives, accelerating the transition to a low-carbon economy. However, if it fails, it could discourage other states from pursuing similar policies.

Show Notes