> Carbon pricing works and is an everyday thing over here in Europe & UK

How do you measure how much it works? From 2005-2018, the US, with no carbon pricing, reduced CO2 emissions per GDP by 45% and the Euro Area reduced it by 52%. So is your claim that the 7% percentage points extra over 13 years is what Carbon pricing achieved for the EU? E.g. a gain of 0.5% per year? At this rate, after 100 years you would have achieved a reduction that is 65% better than the what the US would achieve without carbon pricing.

https://data.worldbank.org/indicator/EN.ATM.CO2E.PP.GD?locat...

Of course in absolute terms, the US increased efficiency more over the same period (but I think percent change is more relevant, as the US started with a higher base).

At the same time, the EU is facing very high electricity bills, there was a backlash at further increase in gas taxes in France, and the EU is straining to push this agenda further. Meanwhile there are electrical outages in China forcing China to rollback its coal reduction targets.

So what I see is a lot of pain and political capital expended for very small gains in terms of CO2/GDP. If you have a different conclusion, then I'd love to see your methodology and the numbers you are coming up with to measure how effective this is.

> How do you measure how much it works?

There is a set, yearly decreasing amount of emission rights in circulation so it's fairly well quantified.

You can argue that the set rate is too lax, but the current rates are quite steep and it seems obvious that it's having an effect.

I don't think you read my post at all.

If there is no difference in emissions between a nation that has no carbon pricing and a nation that does, then how do you measure the effect of carbon pricing?

If there is only a small difference -- a .5% change per year -- between a nation that has no carbon pricing and one that does -- then how can you argue that the effect of carbon pricing is more than a very slight increase in efficiency?

My reply was too short in light of your lengthy message, I

The central idea of the european carbon pricing system is NOT that we set a price for carbon and hope that it works to decrease emissions.

Instead, we set a certain amount of emissions per year that we allow, and auction the emission rights. And there is a set rate of relative decrease in the annual tonnage of floated emission rights. The annual decrease is currently 2.2%, which is a steepening compared to the pre-2021 1.7%. [1]

So, as long as the mechanism is working (and it is), it makes limited sense to talk about measuring how much emissions happened under the emission trading scheme, since that's a set parameter assigned by political decisionmaking. [2]

But a better critique / caveat about the system is that not everything is covered by the emission trading system. Some big sectors, eg transport, have emission reductions enacted by other mechanisms in more traditional ways.

To tackle your argument of "a lot of pain and political capital expended for very small gains in terms of CO2/GDP" - this is I feel a tangent and feels a bit like moving the goalposts and it would be hard to productively debate this - my opinion is that the gains are big, not only because we've effectively reducing emissions today, but also because we have a robust system for the years to come that we know can cap emissions, steered by the democratic process. You also brought up efficiency in your later comment. My main argument is not really efficiency, although economists do usually tend to think that these kinds of emission auction systems do shine in department too. Efficiency and pain (aka fairness) are often in opposing cups of the scale.

[1] https://ec.europa.eu/clima/eu-action/eu-emissions-trading-sy...

[2] Of course there are second order issues, like fraud, etc that merit discussion. But these aren't being ignored either.

> To tackle your argument of "a lot of pain and political capital expended for very small gains in terms of CO2/GDP" - this is I feel a tangent and feels a bit like moving the goalposts

No, this is my point.

Look, this is a political process. Just like the law that caps deficits to be less than 3% of GDP, which is ignored when there is some political desire to have bigger deficits.

These are political things that do respond to pressure as to whether they will be enforced. So when the Yellow vests threatened to bring down the French govt, the government backed off, precisely because they weren't prepared to pay the political cost.

So what matters is not the promise to do X, but actually doing X, right? And X is measured in total emissions. There is little benefit in saying "90% of the economy is subject to the system and we exempt the 10% where it would be too painful to meet."

So after all the promises and exemptions, at the end of the day you have some reduction in CO2. If that reduction ends up being not much different than the same reduction in other large industrial economies that didn't go through the whole cap system, then what reasonable claim can you make about the cap system making a difference?

We expect, just with increasing technology, that CO2 efficiency will increase. Just as you go from burning trees for firewood to coal to oil to natural gas to gas combined with hydro, etc, you are switching to more efficient energy sources. But everyone is doing that, because more efficient energy sources are cheaper.

The difference will be when the allotments really start to bite - at which point it will be political pressure, and not the agreement itself, that will decide whether these caps will be respected or whether they will be like the deficit caps. So the only way to determine what difference you are actually making is to look at total economy emissions and compare that to nations like the US that don't bother with any caps. If those situations are indistinguishable in terms of CO2 reductions, then I don't see the benefit of spending all this money in fees for carbon pricing. Do you? Lots of other economies are not spending these fees and they are getting the same reductions.

The reason why I am saying this is that I don't like these types of micro-management free market solutions for a nation's energy policy. People don't care where their electricity comes from. If the government wants clean electricity, they should build 100 nuclear reactors, and have 100% clean electricity. Then they can give choices to people to use electric cars that are basically free to power or gas cars if they really need the gas car. And you can electrify the rail system and public transit, at a subsidy, but then let people fly planes without subsidies if they want to do that as well. This way you are solving the problem directly and giving people more choices and more freedom. You are not pushing the problems of a nation's power sources onto individual businesses or end consumers and then constantly taxing them to use dim light bulbs or whatnot. There are much simpler ways you can accomplish much more. But there is something in the Euro spirit that wants Germany to buy more gas from Russia and shut down its nuclear plant but have lots of little micromanagement of individual consumer choices by slapping surcharges on everything and banning random things. Maybe this is done so end users can feel like they are saving the planet by participating in the struggle, as opposed to having the government provide the entire economy with clean, abundant electricity at very low cost. The whole thing has an air of theater to me.

I really disagree - the most valuable thing is that we have an overarching mechanism that can control emissions. Of course yes it can be politically dismantled, but this applies to all imaginable policy based mechanisms.

And like I described in my comment, the reduction rate of was just recently increased in the EU mechanism, but this is not visible in the historical numbers yet.

And re comparing to total economy emissions of the US, let's not forget how much bigger those are in the US than in the EU, more than double. The US has a lot more low hanging fruit to pick.

One thing I question, is the equity of this solution. Don't the pricing solutions essentially price out lower income people while allowing the wealthy to be largely unaffected? It seems that would lead to a more stratified society. If it's really about reducing emissions, why not force the wealthy to use the alternatives that the lower class are economically forced to use?

The fundamental idea of carbon pricing is that businesses right now have basically no disincentive to spewing out as much CO2 as they want, except possibly for angering a relatively small amount of people who care strongly about the environment. Why on earth would they voluntary spend the money to needed to reduce their carbon footprint? (unless they determine it is cheap enough to buy offsets or whatever to be able to call themselves carbon neutral for marketing purposes.)

This also means that development of sustainable alternatives is often slowed, as they will cost more at first, even if they happen to end up being less expensive in the long run (which is unlikely to be true in all cases, but which could potentially be true in a few specific scenarios).

But what are the alternatives? Simply outlawing burning of gasoline effective on some future date will be no more equitable.

Putting a strict quota system on companies would also cause prices to rise and be unequitable to.

I don't see any realistically implementable system that does not potentially cause prices to rise, and obviously rising prices on most goods disproportionately affects lower income people.

You showed up with the wrong sign.

We also have fairly big income transfers in many countries, making this a somewhat orthogonal question.