TAX WHAT YOU DON'T WANT:

America has only the crudest energy policy. And yet its carbon emissions have been falling sharply. Why? Because the United States is switching from coal to gas. At the same time, Europe is moving from gas, which is expensive there, to much more polluting coal -- especially in Germany, which is phasing out its nuclear plants following the Fukushima disaster in Japan.

Europe's "answer" to global warming is wind farms and other current renewables. But the numbers won't ever add up. It just isn't possible to reduce carbon emissions much with small-scale disaggregated wind turbines. There isn't enough land for biofuels, even if corn-based ethanol were a good idea (a questionable proposition). Current renewable-energy sources cannot bridge the gap if we are to move away from carbon-intensive energy production. So we will need new technologies while in the meantime slowing the coal juggernaut.

There are three sensible ways to do this: tax carbon consumption (including imports); accelerate the switch from coal to gas; and support and finance new technologies rather than pouring so much money into wind and biofuels.

Putting a price on carbon is fundamental. If consumers and businesses do not bear the cost of their carbon pollution, they won't do much about it. This carbon price should not discriminate between locations: global warming is global. If China does not put a price on carbon, and Europe does, then China will effectively receive a huge export subsidy.

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