Low Oil Prices Offer an Opportunity to Combat Climate Change

The plunge in the price of oil makes this an ideal time to deploy market disincentives that can cut emissions and combat climate change. We know that if we are to stave off the worst impacts of climate change we must substantially reduce our emissions. As the leading cause of climate change fossil fuels are the most obvious focal point.

All but the willfully ignorant understand that the economic costs of inaction far outweigh the costs of engagement. We have seen a number of studies which suggest the longer we wait the more it will cost.

Scientists tell us that we are running out of time and we must address climate change as soon as possible. That is part of the reason why we must deploy market levers. They can quickly and efficiently augur the changes we need. A two tiered approach involving a carbon pricing scheme and the removal of subsidies would pull back the curtain and expose some of the hidden costs associated with fossil fuels. Together these two initiatives would correct the false impression that fossil fuels are cheap.

President Obama has said that carbon pricing allows the market to do the "heavy lifting." In 2013, Rajendra Pachauri, chairman of the UN Intergovernmental Panel on Climate Change spoke about the utility of carbon pricing calling it , "an extremely effective instrument." He went on to say, "it’s only through the market that we might be able to get a large enough and a rapid enough response."

A number of studiesincluding one from UCL conclusively demonstrate that if we are to have a shot of curtailing climate change we must keep most of the known fossil fuel reserves in the ground. The UCL study's co-author Paul Ekins explained that falling oil prices present an ideal time to remove subsidies and implement a carbon tax. 

While further innovation should be rewarded, we already possess the technological wherewithal to wean ourselves away from fossil fuels. The application of the two market levers outlined would generate billions of dollars that could be used to provide greater support for energy efficiency and renewables. This would would not only combat climate change it would improve people's health in the process. It will also create a host of economic spin-offs including jobs and reduced healthcare costs.

Now is the time to impose carbon pricing schemes and eliminate fossil fuel subsidies. The plunging price of oil coupled with advances in clean energy provide a golden opportunity for politicians to rationalize their energy policies.

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