Carbon is not a driving force of technological innovation, Mark Trexler, the managing director of EcoSecurities’ Global Consulting Services, told the audience at the Carbon Forum America on Tuesday. Well, that’s no surprise, considering that carbon still has no cost here in the States. But even in Europe, where the European Trading Scheme (EU-ETS) is mandated and a ton of carbon is trading at around $30, the carbon market isn’t pushing innovation there either, he and his fellow panelists contended.
It’s a counterintuitive thought, but as Charlotte Streck, executive director of Climate Focus, explained, there is a big difference between technological development and deployment. Streck said markets are good at finding the cheapest existing means of abatement and promulgating them across the carbon-constrained landscape. But because the capital investment in cleantech research is so high and the time horizon is long, a pure market approach to carbon regulation won’t further innovation.
As a case in point she cited how the EU-ETS and feed-in tariffs have facilitated the deployment of solar in Streck’s not-particularly-sunny home of Germany while it hasn’t pushed for new, more geographically appropriate technologies.
There is an exception to that thought, Trexler noted. If the price of carbon goes north of $30 a ton, then carbon markets could start to push innovation. Trexler proposed a long-term minimum price of $30-50 a ton, and estimates that it will take a carbon price in the $50-70 a ton range to push carbon capture and sequestration over its “enormous” technological barriers. He predicts that it won’t be until carbon hits $90 a ton that the transportation industry will start to react.
The problem is that the various sectors of our carbon-producing economy have very different elastic properties when it comes to reacting to a carbon cost. Because of this, Trexler says, special trading schemes with one-way trade laws will have to be developed to prevent abatement in only the cheapest sectors.
To this end Streck said that while the programs like the U.N.’s Clean Development Mechanism (CDM) are good at deploying technology, the framework needs to move away from the CDM’s project-by-project approach and start looking to further global abatement on a sector-by-sector basis.