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“Almost everything relies on the speed, with which we are leaving the fossil age”

Should governments raise the taxes on energy in order to speed up the energy transition? The Canadian economist Professor M. Scott Taylor looks at the complex correlations between trade, environment and resources from a sound economic perspective. His guest lecture takes place April, 28 at the WWZ Auditorium.

23 April 2015

Dr. Taylor, you will be holding a public lecture at the WWZ Auditorium in Basel on February, 28. It is entitled “The Beginning of the End of the Fossil Fuel Era”. Are we on our way out of the fossil fuel trap?

I don't think there is any doubt about that. But there is a big uncertainty about the speed with which we are leaving the fossil age, and almost everything relies on that. If we leave very quickly, there is a chance that we will able to limit global warming to two degrees Celsius. If we leave slowly, there is no chance for that.

How do you determine the speed at which we are leaving the fossil fuel age?

It is difficult. Humankind has only had a few energy transitions before, for example the change from wood to coal between the 15th and the 18th century. In England, coal first replaced wood for heating in industry and in homes. This initial transition was driven by a local shortage of wood in Middlesex County. The steam engine came much later, around the end of the 18th century, together with the industrial revolution. Looking back at this early transition, we see that new energy sources take a very long time to take over a significant proportion of the market. It is a slow process. What we also see is that wood did not disappear as an energy source; the overall energy use just increased. The same happened to coal when oil took over.

What does that mean for our own transition to renewable energy sources? If energy demand just increases, and if we do not stop using oil, we will not be able to slow climate change.

We need a different transition this time. The wood-coal transition was driven by the market, as was the coal-oil transition. The transition to energy from renewable sources must be driven by a consciousness for the social costs of climate change. Unfettered self-interest has the potential to destroy us this time.

Switzerland is in the middle of a transition towards a new energy system. The Basel-lead Competence Center for Research in Energy, Society and Transition CREST is working on the scientific data that should help to optimize this transition. How can this type of economic research contribute to such a transition?

In this type of research, politics determines what goal should be reached. In Switzerland's case, the goal is a reduction of the CO2 emissions. Economics can show the way to implement that goal in a cost-effective manner. That is not easy and a lot of countries get it wrong. If you implement a policy with the aim of cutting back on carbon, it means that you must put a price on carbon. Efficiency requires that everyone in society faces that same price for carbon, and we let the market determine who are the winners and losers in such an exercise.

Doctor honoris causa of the University of Basel

Prof. M. Scott Taylor is the Canada Research Chair in International, Energy and Environmental Economics at the University of Calgary, Alberta, and Research Associate at the National Bureau of Economic Research (NBER). His path-breaking publications have appeared in the American Economic Review (five papers), Quarterly Journal of Economics, Review of Economic Studies, International Economic Review, Journal of International Economics, Journal of Environmental Economics and Management, and Canadian Journal of Economics, among others. His book “International Trade and the Environment: Theory and Evidence” (with Brian Copeland) was published by Princeton University Press in 2003 and won the Doug Purvis Prize for its outstanding contribution to Canadian Economic Policy. In 2010, he was awarded an Honorary Doctorate by the University of Basel for his pioneering work on trade, the environment, and renewable resources. In 2014, Scott Taylor has been named fellow to the Royal Society of Canada (RSC), the highest honour that can be attained by scholars, artists and scientists in Canada.

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