Far from optimal? Exploring the normative premises and politics of carbon pricing

Despite its limited effectiveness to date, economists continue to claim that carbon pricing is optimal for climate policy. As climate policy becomes more urgent, it is crucial to understand whether this optimality claim holds. We show how optimality is contingent upon normative premises of what constitutes well-being and politics. The optimality claim can only be sustained if well-being is conceptualized as preference satisfaction and politics is narrowly understood as the sphere within which social conflicts are resolved via efficient resource allocation. Both premises are contested, however. If well-being is understood as human needs, sustainable consumption corridors can be conceived as optimal. Alternative understandings of politics imply that carbon pricing requires revenue redistribution or an embedding in deliberative processes to become optimal, or might not be optimal at all. Based on the conceptual strengths of alternative views of well-being and politics, we illuminate blind spots in the theoretical case for carbon pricing. At the policy level, carbon pricing overlooks qualitative differences in economic production and the systemic nature of fossil fuel dependence. It bears little relation to the Earth’s biophysical limits or social justice. At the level of politics, focusing on carbon pricing fails to provide procedures beyond the market to address social conflicts. In particular, from a radical democratic view, carbon pricing represents a sustainability fix which stabilizes the fossil economy. Sustainable consumption corridors are in a much better position to re-politicize and ultimately deconstruct the hegemony of the fossil economy.

Huwe, Vera and Marc Frick (2022), Far from optimal? Exploring the normative premises and politics of carbon pricing, Energy Research and Social Science 86 , 102458