Economist Axel Ockenfels: CO2 Price Creates Politically Undesirable Cost Transparency

Axel Ockenfels, like many economists, is convinced that the CO₂ price and the associated emissions trading is a very effective tool for tackling the climate crisis. However, he also has an explanation for why the CO₂ price does not seem to be really popular in politics: the CO₂ price creates price transparency or cost transparency, and this does not always fit into the agenda of political actors. Remarkable.

The aversion, in my opinion, is less against the CO₂ price as a climate policy instrument per se, but rather against the cost transparency it creates. Politics prefers to talk about CO₂ quantity targets rather than the prices in emissions trading. And prefers to talk about combustion bans rather than the high prices for fossil fuels, which would be economically equivalent. The intransparency of costs may seem politically strategic, but it jeopardizes trust in climate policy in the medium term. Besides, it is clear that climate investments are worthwhile in view of climate change. At least if they are cleverly designed nationally and internationally.

– Economist Axel Ockenfels on the question of whether he had an explanation for why the CO2 price was no longer in vogue in politics; in “The mood can also tip again – The economist fears that inefficient climate policy and national solo efforts endanger the support for climate protection – and reveals how it could be done better”, Handelsblatt from 14., 15., 16. June 2024, No. 113