The dispute is not confined to academic journals. That gap between expert consensus and public acceptance forms the backdrop for a growing body of criticism that questions whether carbon pricing models accurately represent rural and industrial energy demands.
Critics said the models often treat emissions reductions as a matter of price signals alone, without accounting for whether substitutes are available in specific places and sectors. Economists have argued that internalizing the external costs of carbon into fuel prices is the central solution to the climate crisis [1], but critics contended that the framework works best on paper and less well on a farm or in a factory.
According to critics, a carbon price can drive large emissions cuts only when low-cost alternatives exist. Where alternatives are limited, high prices face political resistance and may cost more than other strategies. The argument is a matter of substitution: When electric vehicles are near-perfect substitutes for gasoline cars, zero-emission vehicle standards or feebates may achieve reductions at little cost, according to the critique.
When no viable alternative exists, a standard may be impossible to meet, whi...