change the long-term regulations for power stations so that the perfected
technology is adopted everywhere. My simple-minded suggestion for this
second step is to pass a law that says that – from some date – all coal
power stations must use carbon capture.
However, most democratic polit-
icians seem to think that the way to close a stable door is to create a market in
permits-to-leave-doors-open. So, if we conform to the dogma that climate
change should be solved through markets, what’s the market-based way
to ensure we achieve our simple goal – all coal power stations to have
carbon capture? Well, we can faff around with carbon trading – trading
of permits to emit carbon and of certificates of carbon-capture, with one-
tonne carbon-capture certificates being convertible into one-tonne carbon-
emission permits. But coal station owners will invest in carbon capture
and storage only if they are convinced that the price of carbon is going to
be high enough for long enough that carbon-capturing facilities will pay
for themselves. Experts say that a long-term guaranteed carbon price of
something like $100 per ton of CO2 will do the trick.

So politicians need to agree long-term reductions in CO2 emissions
that are sufficiently strong that investors have confidence that the price
of carbon will rise permanently to at least $100 per ton of CO2. Alternat-
ively they could issue carbon pollution permits in an auction with a
fixed minimum price. Another way would be for governments to underwrite
investment in carbon capture by guaranteeing that they will redeem
captured-carbon certificates for $100 per ton of CO2, whatever happens to
the market in carbon-emission permits.

I still wonder whether it would be wisest to close the stable door directly,
rather than fiddling with an international market that is merely
intended to encourage stable door-closing.

Britain’s energy policy just doesn’t stack up. It won’t deliver security. It won’t deliver on our commitments on climate change. It falls short of what the world’s poorest countries need.

Lord Patten of Barnes, Chair of Oxford University task force
on energy and climate change, 4 June 2007.

What to do about energy supply

Let’s now expand our set of motivations, and assume that we want to get
off fossil fuels in order to ensure security of energy supply.

What should we do to bring about the development of non-fossil en-
ergy supply, and of efficiency measures? One attitude is “Just let the
market handle it. As fossil fuels become expensive, renewables and nuc-
lear power will become relatively cheaper, and the rational consumer will
prefer efficient technologies.” I find it odd that people have such faith
in markets, given how regularly markets give us things like booms and
busts, credit crunches, and collapses of banks. Markets may be a good

Figure 29.1. A fat lot of good that did! The price, in euro, of one ton of CO2 under the first period of the European emissions trading scheme. Source: