Pindyck on Energy Policy
The favorite sentence of the Pigou Club:
Q: Would either candidate's energy proposals make much impact on energy costs in the short term?
A: Neither of the candidate's plans would have any impact. The one exception would be McCain's proposal to eliminate tariffs on the importation of Brazilian ethanol. It would immediately reduce the cost of ethanol.
Q: How so?
A: We have a tariff on imported ethanol from Brazil, which is made from sugar cane. Ethanol here is usually made from corn. Sugar cane ethanol is about eight times more efficient than that made from corn. By removing the tariff, Brazilian ethanol becomes cheaper and will make ethanol-gasoline blends cheaper.
Look, what are going to be needed ultimately is a tax on carbon and a tax on gasoline -- a large one.