Carbon Pricing 101

Price Carbon and Cut Pollution

We have long known that greenhouse gases are having a devastating effect on our planet’s climate. While we know we are in urgent need of action, too often politicians are stalwarted by the fear of cumbersome regulation and the threat of economic blowback. Carbon pricing allows us to continue to grow our economy and provides a clear message to how this transition can take place. Not only does carbon pollution pricing allow us to level the playing field for clean energy choices, it can also create meaningful jobs and make our communities more resilient.

Why Price Carbon Emissions?

There is widespread recognition and scientific consensus that greenhouse gas emissions must be reduced by at least 80 percent by 2050 if the climate is to be stabilized. In order to do this, we need fuel and sources of harmful carbon pollution to reflect the real cost it has on society. A basic economic principle is that the price of goods reflects their costs. However, the market has failed to account for the very significant and widespread damages from extracting and burning fossil fuels. The cost of pollution is in fact hidden behind massive subsidies, leading to overconsumption of fossil fuels without addressing the environmental and health challenges of burning them.

By properly accounting for the price of fossil fuels, we can shift towards a low carbon economy. Putting a price on carbon emissions is increasingly seen as the most powerful policy to achieve the necessary changes across the economy. Not only is it widely supported by economists, it also has bipartisan support. Carbon pricing does not pick winners or losers, but instead leaves it up to businesses, residents and industry to decide how they want to reduce their carbon footprint, and allows flexibility in addressing their emissions reductions. Therefore, while greenhouse gases are reduced, the economy continues to grow.

Policy Options

This policy is not something new. We have used pricing schemes to incentivize choices that have positive outcomes for our health as well as the health of our planet. Currently, 45 countries and 25 subnational jurisdictions already have a price on carbon pollution, and that number is growing. As the federal government lags behind on climate action, states across the union are taking matters into their own hands and introducing carbon pricing legislation at the state level.

In fact six Northeastern states proposed carbon pricing legislation in 2017 and at least three more are expected to do so in 2018. Campaigns for Carbon Pricing legislation are also active in at least 20 states and the District of Columbia.

Carbon pricing isn’t just effective at reducing GHG emissions – it also comes with the lowest cost of all known policy approaches. It allows people and private entities to make the switch away from fossil fuels in their own terms and have been shown to spur innovation and local economic growth.

Have there been successful cases of such a policy?

Yes ––Countries and localities around the world use carbon pricing to cut pollution and improve local economies.

Most experts consider British Columbia’s policy a stellar example of an effective economy-wide carbon pricing policy. In 2008, the province became the first place in North America to adopt a carbon fee and rebate system. Since then, per capita emissions have dropped 3.5 times faster than the national average despite boasting one of the highest economic growth rates in Canada.

Scandinavian countries have also demonstrated the potential of ambitious carbon pricing policies. Sweden introduced a fee on carbon pollution in 1991, at $33 per ton. The price has since risen to $160, making it the highest carbon tax rate in the world. The country has since experienced GDP growth of 60 percent while emissions have reduced by 25 percent.

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