The Case For Carbon Pricing

The Benefits of Pricing Carbon

The Florida Republican House representative Carlos Curbelo recently introduced legislation that would put a price on carbon. The legislation, called the Modernizing America with Rebuilding to Kick-start the Economy of the Twenty-first Century with a Historic Infrastructure-Centered Expansion Act, or the MARKET CHOICE Act (H.R. 6463), would impose a tax on carbon emissions starting at $24/ton of carbon equivalent (CO2e) in 2020 and would repeal the federal excise taxes on gasoline and diesel fuels.

Analysis of the legislation by Columbia University finds that it would lead to reductions of economy-wide net greenhouse gas emissions of 27 to 32 percent by 2025 and 30 to 40 percent by 2030. The emissions reductions would outpace the nationally determined contribution by the U.S. to the Paris Agreement of 26 to 28 percent reductions by 2025. Over two-thirds of the emissions reduction would occur in the electricity sector. Annual federal government revenues would increase by $57 billion to $72 billion in 2020 and $63 billion to $106 billion in 2030. In other words, it would be good for the economy.

The benefits of carbon pricing

A recent webinar by the American Sustainable Business Council made a compelling case for carbon pricing. The webinar noted four main benefits of a carbon price: reducing emissions, promoting fair competition, spurring innovation and creating jobs. It also noted that the U.S. energy market does not accurately reflect fossil fuel costs and has distorted competitive market forces. It fails to account for the cost of environmental damage of fossil fuels and incentivizes fossil fuel use through favorable treatments of subsidies.

A carbon tax would be good for renewable energy. It would increase the demand for renewables which could result in innovative technologies being developed.

“A carbon tax would allow renewables to compete fairly,” declared Eliza Kelsten, Policy Manager, American Sustainable Business Council.

Carbon pricing schemes in North America

There are examples of carbon pricing schemes by governments in North America. One of those is the Regional Greenhouse Gas Initiative (RGGI). It is the first mandatory market-based program in the U.S. to reduce GHG emissions. The states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont are involved in the program to cap and reduce carbon emissions from the power sector. Member states have reduced emissions by 15 percent over other states and experienced 4.3 percent more economic growth. Electricity prices decreased in participating states by 6.4 percent, and $2.3 billion in lifetime energy bill savings for over 160,000 households and 6,000 businesses were created.

California’s Cap-and-Trade program took effect in 2012 and the enforceable compliance obligation started on January 1, 2013 for GHG emissions. Since November 2012, state auction revenue has equaled almost $4.4 billion. The California Air Resources Board estimates that the program will save the average family over $200 per year by 2030. The projected net economic impacts will reach nearly $123 million, with 945 jobs created and $5.5 million in additional tax revenue in the Inland Empire.

Cap-and-trade investments in California are reducing GHG emissions and improving the environment and health in local communities while strengthening local economies, a study released in March 2018 found. Projects either underway or completed across the state’s 58 counties received over $720 million in new funding last year. The completed projects totaled 75,000 and ranged from rebates for electric cars to affordable housing units. One of the projects included the purchase of 15 zero-emission electric buses by Los Angeles County’s Foothill Transit.

British Columbia’s carbon tax passed in May 2008 and came into force in July 2008. It puts a price on GHG emissions, and all of the revenue generated is returned to taxpayers through other tax reductions. The carbon tax has brought benefits to the province. British Columbia ranked first among Canadian provinces for GDP growth in 2016. The clean energy sector in the province has developed with over 200 businesses generating almost $2 billion in annual revenues. From 2007 to 2014 British Columbia’s real GDP increased by 12.4 percent.


Gina-Marie Cheeseman
Gina-Marie Cheeseman
Gina-Marie Cheeseman, freelance writer/journalist/copyeditor Twitter: @gmcheeseman

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