In the current New Yorker, David Owen has a provocative, cautionary article on the difficulty of addressing climate change that points out that the only thing ever shown to truly lower CO2 emissions is a well timed industrial implosion.  Greenhouse gas emissions are the result, generally, of prosperity. 

While the article has many interesting observations, Owen draws a fine point on a subject that is often neglected and has relevance both to proposals to put a price on carbon and the future of Detroit, namely the mathematical equivalence between cheaper gas--anathema to many environmentalists--and, paradoxically, higher fuel economy 

The centerpiece of emissions policy for decades has been higher fuel economy standards.  However, as Owen notes, if higher gas prices such as those last summer lowered miles traveled and stimulated use of mass transit, then their mathematical equivalent, improved fuel economy or fiddling with the other side of the equation, can only reverse those trends. Higher fuel economy and, indeed, to a degree energy efficiency writ large suffer from the same problem.  Both encourage greater consumption of energy as cost declines.

Although Owen does not explore the next question, consider the impact of higher fuel economy and energy efficiency on energy independence--another major driver of efforts to get off fossil fuels.

Higher fuel economy which is to say cheaper driving if it leads to more driving as it appears to do may not reduce consumption of gas or oil and therefore either their price or money transferred to oil producing states.

This does suggest an interesting difference between hybrid and pure electric cars.  Whereas hybrids by improving gas mileage may promote more driving, limiting their effect on emissions, pure electric cars such as the planned Chevy Volt should unequivocally lower carbon emissions and oil consumption (since electricity generally produces less CO2 than gasoline thanks to its use of hydro, nuclear and natural gas-fired power not to mention renewables.)

But you say didn't cutting back on gas use last year after prices spiked, cause the price of oil to collapse, reducing payments to foreign oil producers?

First, the falloff in driving followed a price spike.  It only showed, therefore, that people consume driving like other normal goods, using more when costs drop and less when they rise.  The subsequent collapse of oil prices is much more tied to the collapse of the global economy than to any conservation efforts.

All of which brings us to the other main proposal for reducing emissions, the one now gaining traction in Congress: putting a price on carbon through a cap and trade system or tax.  In contrast, to better fuel economy or energy efficiency writ large, a cap that absoutely limits emissions or a cap and trade system that allows emissions at a price, by raising the price of fossil fuels should lower their consumption and thus greenhouse emissions.

This is not to say it will be easy to implement a cap and trade system or tax. However, it does suggest that we ought to try as the focus on fuel economy and energy efficiency alone will not get us to a lower carbon economy.