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Wednesday, December 02, 2009

Quote of the Day - December 2nd, 2009

"Attaining the 2 degree goal in the United States with existing technology will likely be very expensive. Doing so in the developing world with existing expensive technology is likely to be impossible. ...

While an emissions price is an absolute requirement for an efficient regulatory framework, it is likely not the sole requirement. Due to some imperfections in any market economy, price signals may be dampened or be short circuited. This is particularly true in the market for research and development, where it is well known that firms have incentives to under‐invest in research and development (R&D) due to the fact they cannot capture all the returns to R&D--some of those returns spill over to others in the market that did not invest as much. In this case, the emissions price cannot fully motivate the R&D market and therefore a well‐designed regulatory program will contain a role for government funding of R&D. ...

In addition to the economic rational for government support of R&D, there is a political case to be made. Spurring R&D and demonstration and deployment of financially risky technology investments may require an emissions price that is not politically viable (that is, it is too high to be politically acceptable). In this case, absent the market imperfections above, the price is simply too low to generate the needed investments and government must step in to support the required levels of from R&D and demonstration and deployment."

-Ray Kopp, Senior Fellow at Resources for the Future, in testimony before the Senate Energy and Natural Resources Committee, Dec. 2, 2009.

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