Carbon Targets

I have to admit that I'm getting a little confused here (thank you to the wag at the back who asks "What's new then?") about the actions necessary to avert the worst effects of climate change. We've a new report out from PwC about what needs to be done:

Richard Gledhill, head of climate change services at PwC, said: "Governments in all major economies must demonstrate their political will to establish a well functioning global carbon market that puts a price on carbon emissions. That will send the right economic signals to investors and consumers to deliver the new technologies and changes in behaviour required to combat global warming."

Hawksworth said the carbon price that would be needed to be set to encourage the switch away from carbon towards cleaner energy sources was around $40 (£20) a tonne, close to where it is now.

That looks like a remarkably low price to me, very low indeed. There's two things.

Firstly, if we take out the most recent price rises in coal and oil (and gas is following fast) and assuming that they do mean a carbon price not a carbon dioxide price, then that £20 is a reasonably small percentage of prices. Twenty to thirty percent perhaps. Given that renewables are in fact two to three times more expensive than fossil fuels I just don't see how such a minor price change is going to make all that much difference: despite the way in which long run elasticities are of course vastly greater than short run ones.

The second is that if we add in the recent price rise of those fossil fuels, oil at $140 a barrel, coal at $120 a tonne or so, then we've already got the prices rises necessary. Instead of having to create carbon trading systems, all governments need do now is state that prices will not be allowed to fall from here. If they do fall in the global markets then taxes will be added to keep the domestic price up (reducing other domestic taxes to compensate).

All of which makes me rather confused. I just don't think that the solution is going to be that cheap (leave aside all of the questions about whether we need a solution etc.) so somehow I rather doubt the original PwC figures.