Monday, July 9, 2018

Don't Let Them Fool You Carbon Pricing Works

Making polluters pay should not be a hard sell. Nonetheless, after so much progress we are moving away from this sensible approach to climate action in North America. Carbon pricing leverages market forces to reduce emissions. This efficient system assigns costs to major polluters commensurate with the amount of emissions generated. By making carbon intensive activities more costly it also incentivizes lower carbon alternatives and spurs investments in climate solutions. Carbon pricing does more than just combat climate change. It improves the quality of our air and our oceans.

The most obvious benefits of carbon pricing are laid out in this simple 2011 Australian government video:




There are two major variants of carbon pricing: Cap-and-trade and carbon taxes. The former puts a ceiling on greenhouse gas emissions and allows companies to buy and sell pollution credits. The latter imposes taxes based on emissions.

Over the last five years a strong body of evidence confirms that carbon pricing is compatible with economic growth. According to a WRI report, carbon pricing is among the most important tools we have to limit emissions and grow the economy. Numerous organizations have emphasized the importance of carbon pricing. This includes an international scientific conference called Our Common Future Under Climate Change and the Climate Summit of the Americas. The WEF has also called for carbon pricing as has the We Mean Business Coalition.

Four years ago the United Nations along with much of the world recognized the importance of putting a price on carbon. Seventy-three national Governments, 11 regional governments and more than 1,000 businesses and investors signaled their support for pricing carbon. Together these leaders represented more than half of global GDP and 54 percent of global greenhouse gas emissions. Some leaders joined a Carbon Pricing Leadership Coalition to drive action aimed at strengthening carbon pricing policies and redirecting investment.. The World Bank, corporate sustainability experts and many investors have also accepted the wisdom of carbon pricing.

A global review of carbon pricing in 2013 revealed that despite obstacles there was progress. Former European Commissioner Connie Hedegaard touted the virtues of carbon pricing as did the G8. However, five years later we are seeing a softening of support in North America.

Despite resistance, carbon schemes make good economic sense. Science-based carbon legislation is an absolutely essential focus of responsible government policy.  In 2009, research by the University of Illinois,

Yale University and the University of California showed that comprehensive clean energy legislation including carbon pricing could create up to 1.9 million new jobs, increase yearly household income by up to $1,175 and boost annual GDP by up to $111 billion. As reviewed above the evidence in favor of carbon pricing is strong with most economists characterizing carbon pricing as a highly effective policy option to reign in emissions.

The arguments of detractors are weak at best. They are largely based on inflated cost estimates. They like to say that the public does not support cost increases.  Most research suggests that if carbon pricing would increase a family's costs it would be by no more than a couple of hundred dollars a year. To responsibly address this question we need to do a cost benefit analysis. The numbers are clear, the costs of climate action far outweigh the costs of climate change.

As explained by Canadian economists in a new report from the Ecofiscal Commission: "Well-designed policies that put a price on carbon can reduce GHG emissions and can do so in a way that doesn’t undermine our economic prosperity." This video explains the basic economics driving interest in carbon pricing.




Despite the overwhelming logic of this argument, a national carbon pricing program has long been a non-starter in the US and it is looking increasingly unlikely in Canada. Former Canadian Prime Minister Stephen Harper actively opposed carbon pricing. He was replaced by Justin Trudeau who was elected with a strong environmental platform included putting a price on carbon. However, the recent election of Doug Ford and his Progressive Conservatives in Ontario means the end of green leadership in that province. Because Ford wants to withdraw his province's participation in cap-and-trade, it also imperils the carbon pricing agreement in Canada's national climate plan.

The opposition to putting a price on carbon runs deep in the US. There is absolutely no interest under the current administration. Nor is their any interest from Republicans who control both the House and the Senate. Although Republicans are on record as opposing carbon legislation during the Obama administration, it should be noted that conservatives are not the only ones that resist pricing emissions. In 2009 and 2010 cap-and-trade legislation failed to gain traction even though Democrats controlled both chambers. Many Democrats continue to oppose efforts to put a price on carbon. Last March  a Washington State carbon tax bill (SB 6302) failed to get support even though the Democrats control the legislature.

Despite political opposition, the fact remains that carbon pricing has been shown to work in markets throughout North America and around the world.  Carbon markets have performed well in the US including  California's cap-and-trade program and the Regional Greenhouse Gas Initiative (RGGI).  The California program has enjoyed bipartisan support from the state's lawmakers. who recently voted to extend the state's carbon pricing program.

The RGGI is comprised of nine states (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont) and at the most recent auction the price of carbon was 6 percent higher than at the previous auction in March. There has been a 59 percent increase in the last year. Sweden is among the countries that has shown that carbon pricing is compatible with economic growth and the Canadian province of British Columbia has used the revenues it earned to build a cleaner economy.

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Carbon pricing is working in many places all around the world. Forty national and 20 subnational governments have adopted some form of carbon pricing. According the the World Bank these markets are estimated to be worth more than $50 billion.

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So why don't we have a national carbon pricing program in the US? Certainly lobby groups particularly those associated with carbon intensive industries have played a role. It is also due to leaders who eschew the facts in favor of self interest and political expediency. These are often the same politicians who bait people with promises of tax cuts and lower energy costs. However, these giveaways will cost us more than we can afford to pay. Ultimately it comes down to an ill informed electorate that has been duped into believing that the cost of carbon pricing outweighs the benefits.

The politics of climate denial serves the political interests of an unscrupulous cabal. Their resistance to climate action is only a small part of their efforts to embolden their authority.

Related
Market Based Green Growth: Natural Capital and Sustainable Economic Growth (Videos)
Video - Why a Carbon Tax May be the Best Way to Reduce CO2
Video - A Price on Carbon in 5 Easy Steps
All I Want for Christmas is a Price on Carbon
A Compelling Argument for Carbon Pricing
Market Based Approaches to Combating Climate Change
The Challenge of Sustainability: Economic Growth and Emissions Reduction
Now is the Time for Carbon Pricing in Canada
Curbing fossil fuels - Carbon pricing and an End to Subsidies (WEF)
The Prospects of Putting a Price on Carbon
Corporate Actions Buoy US Carbon Pricing
BP Issues Climate Warning and Calls for Carbon Pricing
World Bank President Advocates Putting a Price on Carbon 
How the GOP Could Support a Carbon Tax
Carbon Pricing and Emissions Trading a Global Review
Corporate Sustainability Experts Want a Tax on GHGs

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