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This Working Paper in International Economics by David Pearce and Warwick McKibbin explores two issues that have emerged in recent policy discussions on the need for price signals to encourage efficient abatement of greenhouse gases.
Two issues in carbon pricing: timing and competitiveness
About the authors
Warwick McKibbin
Professor Warwick McKibbin was a Professorial Fellow at the Lowy Institute for International Policy until October 2012.
The first is the question of the timing of a price signal, in particular whether the signal should be introduced 'early', or whether it would be more appropriate to first subsidise R&D — and so lower the cost of abatement — before introducing a price signal. The second question is whether, and how, Australia could 'compensate' for trade effects (or a loss of 'competitiveness' that could be experienced by particular industries) if Australia did introduce a significant carbon price signal before such a signal was introduced by our trading partners.
