Many economists agree: we need a (global) carbon tax to fight climate change. Everything else is a second-best or worse solution. Why is this so evident to (neo-liberal) economists?

A carbon tax harnesses market forces to bring about change. When the production of carbon is properly taxed for the costs it causes elsewhere, the market can mostly take care of itself. Entrepreneurs and consumers will look for ways that save costs: with a carbon tax that will be less carbon. The higher the tax, the less carbon is produced.

The beauty of a carbon tax then is that if every country applies it, through intermediary use, the final user will bear the cost of carbon emission. Instead, we see subsidies and other indirect policies ruling the day. Investing in innovation and dissemination of sustainable technologies has its uses, but as an only course of action it is probably to little too late.

In that way, a carbon tax also prevents more experimental measures later on, like geoengineering with unforeseeable consequences.