Stopping the production of fossil fuels in the first place also reduces the risk of “leakage,” where producers of fossil fuels escape restrictions on their use in the United States by exporting them to laxer countries, Bozuwa said. And, she added, it would reduce the risk of “carbon lock-in,” in which mines, wells, refineries, pipelines and so on that are permitted to be built today continue to be used for decades.
Lock-in looms large as a problem. Let’s say an optimistic oil company drills a deep-sea well this year, calculating that it will be profitable based on projected revenues and costs. Next year, a big carbon tax is passed. The company never would have drilled the well if it had known about the tax, but since the well is there it will continue to pump oil out of it for as long as the marginal revenue exceeds the marginal cost of production, which is minor compared with the initial expense of exploration and drilling.
Techno-optimists argue that the best way to displace fossil fuels is to outcompete them, pointing to the fact that the all-in cost of new solar installations is already lower than the all-in cost of natural-gas-fired generating plants. But it’s not that simple, Emily Grubert, a civil engineer and environmental sociologist at the University of Notre Dame, told me. Existing gas-fired plants will continue to operate because of lock-in economics and because state utility commissions allow utilities to recoup the cost of fuel in their rates, she said. What’s more, she said, the managers and workers of fossil fuel plants tend to be more comfortable with them than with new technologies they don’t understand or trust.
“It’s not a situation where the cheaper, better thing is going to win out,” Grubert told me.
Another flaw in the outcompete theory is that oil companies are innovating, too. They’re growing more efficient at getting oil and natural gas out of the ground at prices that rival or beat green alternatives’. Major oil companies aren’t starting projects unless they can make money with oil at $30 a barrel, Reuters reported this week. The current price is around $80.
In theory, all of these problems could be solved with a carbon tax or a tradable permit system (like the one for arson!). Those measures, which economists love, are good at reducing somewhat the consumption of fossil fuels, but would not be effective in getting greenhouse gas emissions all the way down to zero by 2050, which is the goal, Grubert said.