Topic: Carbon Pricing and Carbon Tax

originally published April 2016; most recently updated July Nov. 201819. 


“Our government has heard loud and clear that Canadians care about standing up for our environment and our livelihoods. Carbon pricing is an effective tool to do just that – to reduce emissions and stimulate investments in green infrastructure and innovation. Thanks to early action by Canadian provinces, more than 85 percent of Canadians live in jurisdictions with existing or planned carbon pricing. We will continue to work with our provincial and territorial partners to develop a more coordinated, pan-Canadian approach to climate change and carbon pricing, – so that our children and grandchildren can inherit a Canada more prosperous and sustainable than the one we know today.”
PM Justin Trudeau. Apr 21, 2016.


Canada passed a carbon tax that will give most Canadians more money. Dana Nuccitelli, Guardian. Oct. 26, 2018.

Last week, Prime Minister Justin Trudeau announced that under the Greenhouse Gas Pollution Pricing Act, Canada will implement a revenue-neutral carbon tax starting in 2019, fulfilling a campaign pledge he made in 2015. 

The federal carbon pollution price will start low at $20 per ton in 2019, rising at $10 per ton per year until reaching $50 per ton in 2022. The carbon tax will stay at that level unless the legislation is revisited and revised. 

This is a somewhat modest carbon tax – after all, the social cost of carbon is many times higher – but it’s a higher carbon price than has been implemented in most countries. Moreover, a carbon tax doesn’t necessarily have to reflect the social cost of carbon. The question is whether it will be sufficiently high to meet the country’s climate targets. ...

Why carbon taxes would be the ultimate energy game changer. Henry Hewitt, via naked capitalism. Aug. 3, 2015.

Climate tipping requires precautionary accumulation of capital and an additional price for carbon emissions. Rick van der Ploeg, Aart de Zeeuw, voxeu. Jul 31, 2014.

Carbon pricing leadership: vision statement. Apr 21, 2016.

Carbon pricing leadership.

This controversial carbon proposal could be the key to success for the world’s new climate agreement. Washington Post. Apr 22, 2016.

The idea of carbon pricing has long been touted by economists as an effective tool for lowering emissions and combating climate change, and it’s increasingly gaining the support of business and political leaders as well... 

Still, the idea has been slow to catch on with many political leaders — particularly in the U.S., where talk of carbon taxes has been highly controversial. California remains the only state with any pricing scheme in effect (a cap-and-trade system)... 

Currently, only about 12 percent of global emissions are already covered by carbon pricing schemes. The new goal would expand this coverage to 25 percent by 2020 and, most ambitiously, 50 percent within the next decade.

Most of the current 12 percent comes from just a few places... mainly the emissions trading schemes in the European Union and California... Other programs include a trading scheme in Quebec and a carbon tax in British Columbia. 

Carbon Pricing Becomes a Cause for the World Bank and I.M.F. New York Times. Apr 23, 2016.

Any policy that drives up the cost of fossil fuels can be expected to generate intense opposition. In the United States, voters — especially in the depleted middle class — are leery of the economic pain, and political groups funded by the billionaire brothers Charles G. and David H. Koch stand in the way. 

“It’s frustrating to watch unelected bureaucrats like the World Bank and other institutions try to leverage their power to force elected leaders to take actions that harm their citizens,” said Tim Phillips, the president of Americans for Prosperity, a Koch-backed advocacy group.

A global coalition mapping and motivating decarbonization. The Guardian. Apr 26, 2016.


study:
Overcoming public resistance to carbon taxes. Carattini, Carvalho, via Wiley Online. June 2018,

Abstract

Carbon taxes represent a cost‐effective way to steer the economy toward a greener future. In the real world, their application has however been limited. In this paper, we address one of the main obstacles to carbon taxes: public opposition. We identify drivers of and barriers to public support, and, under the form of stylized facts, provide general lessons on the acceptability of carbon taxes. We derive our lessons from a growing literature, as well as from a combination of policy “failures” and “successes.” Based on our stylized facts, we formulate a set of suggestions concerning the design of carbon taxes. We consider the use of trial periods, tax escalators, environmental earmarking, lump‐sum transfers, tax rebates, and advanced communication strategies, among others. This paper contributes to the policy debate about carbon taxes, hopefully leading to more success stories and fewer policy failures.

Carbon pricing and deep decarbonization. Endre Tvinnereima and Michael Mehling, Journal of Energy Policy. 2018.

Highlights

• Reaching agreed climate targets requires zero net greenhouse gas emissions.
• Experts recommend prices on greenhouse gas emissions for efficiency reasons.
• Emission prices constrain emissions but have not to date led to deep reductions.
• It is therefore necessary to acknowledge the role of broader policy portfolios.

Abstract

Experts frequently point to carbon pricing as the most cost-effective tool for reducing greenhouse gas emissions. Empirical studies show that carbon pricing can successfully incentivise incremental emissions reductions. But meeting temperature targets within defined timelines as agreed under the Paris Agreement requires more than incremental improvements: it requires achieving net zero emissions within a few decades. To date, there is little evidence that carbon pricing has produced deep emission reductions, even at high prices. While much steeper carbon prices may deliver greater abatement, political economy constraints render their feasibility doubtful. An approach with multiple instruments, including technology mandates and targeted support for innovation, is indispensable to avoid path dependencies and lock-in of long-lived, high-carbon assets. We argue that carbon pricing serves several important purposes in such an instrument mix, but also that the global commitment to deep decarbonisation requires acknowledging the vital role of instruments other than carbon pricing.

The Business Case for Carbon Pricing. Julia Pyper, GreenTechMedia. Oct. 3, 2018.

audio interview

Special Issue on EMF 32 Study on U.S. Carbon Tax Scenarios; Guest Editors: A. A. Fawcett, J. McFarland, A. C. Morris and J. P. Weyant. Climate Change Economics. Volume 9, Issue 1. Feb. 2018. Open Access

in every policy scenario, in every model, the U.S. economy continues to grow at or near its long-term average baseline rate, deviating from reference growth by no more than about 0.1% points. We find robust evidence that even the most ambitious carbon tax is consistent with long-term positive economic growth, near baseline rates, not even counting the growth benefits of a less-disrupted climate or lower ambient air pollution

... 

carbon price scenarios lead to significant reductions in CO2 emissions, with the vast majority of the reductions occurring in the electricity sector and disproportionately through reductions in coal … Expected economic costs (not accounting for any of the benefits of GHG and conventional pollutant mitigation), in terms of either GDP or welfare, are modest

The 5 most important questions about carbon taxes, answered. David Roberts, vox. July 23, 2018.

A carbon tax can lower emissions, but it needs to be pretty damn high. 

Here are the top five questions advocates, policymakers, and informed citizens should be asking about a carbon tax:

1. Can it reduce greenhouse gas emissions?
2. What economic sectors will it hit hardest?
3. What overall effect will it have on the US economy?
4. Will it be fair and equitable?
5. Will it be enough to address climate change?

Let’s walk through what the research shows, one answer at a time.

Carbon Taxes and Carbon Pricing Are Not Solutions to the Climate Crisis. Richard Murphy via nakedcapitalism. Nov. 6, 2019.