On climate change, justice, Heathrow, Pope Pius XII, John McCain, contracts, Barack Obama, gay marriage

SIR – You are correct to argue that the damage done by emissions is best tackled by a tax or price on the emissions rather than a subsidy for clean energy, from the perspective of correcting the market failure associated with this externality (“Green, easy and wrong”, November 8th). And you are right that some subsidies, such as those on corn-based ethanol in the United States, have been misguided and damaging. But you are completely mistaken in suggesting that all subsidies to promote cleaner technologies are wrong. The mistake that you make is to suppose that the only relevant market failure is that concerning the emissions externality. Many of the new technologies are showing, and will show, learning-by-experience: that has indeed been the cost history of key elements of investment in the electricity industry. Creating this experience is a positive externality. The ideas from new R&D in this area constitute another benefit not realised entirely by those who create them.  ... (link)