Carbon Pricing

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Relevance to AGW mitigation

According the the IPCC AR5 sysnthesis report on Mitigation and Adaptation (section 4.4): In principle, mechanisms that set a carbon price, including cap and trade systems and carbon taxes, can achieve mitigation in a cost-effective way, but have been implemented with diverse effects due in part to national circumstances as well as policy design. The short-run environmental effects of cap and trade systems have been limited as a result of loose caps or caps that have not proved to be constraining (limited evidence, medium agreement). In some countries, tax-based policies specifically aimed at reducing GHG emissions—alongside technology and other policies—have helped to weaken the link between GHG emissions and gross domestic product (GDP) (high confidence). In addition, in a large group of countries, fuel taxes (although not necessarily designed for the purpose of mitigation) have had effects that are akin to sectoral carbon taxes (robust evidence, medium agreement). Revenues from carbon taxes or auctioned emission allowances are used in some countries to reduce other taxes and/or to provide transfers to low‐income groups. This illustrates the general principle that mitigation policies that raise government revenue generally have lower social costs than approaches which do not.


Why add a cost to GHG instead of subsidizing renewables? A Musing Environment; Feb 2015

Do [] subsidies really help, or are there better ways to reduce greenhouse gas (GHG) emissions? At the bottom, I partially address solar subsidies. This post focuses on why economists generally prefer correct pricing to subsidies.

Time to Unleash the Carbon Market? Meredith Fowlie; Energy Institute at HAAS; 20 June 2016

compares effect of carbon pricing with subsidies

A Key Moment for California Climate Policy Robert Stavins; blog; 20 Sep 2016

With China now the largest emitter in the world, and India and other large developing countries not very far behind, California policies that achieve emission reductions through excessively costly means will fail to encourage other countries to follow, or even recognize, California’s leadership. On the other hand, by increasing reliance on its progressive market-based system, California can succeed at home and be influential around the world.

Why Climate Skeptics Should Support a Carbon Tax Greg Ip; Wall St Journal; 3 Oct 2016 (Part paywalled)

four reasons a carbon tax is a good idea even if you're unconvinced by the scientific consensus on climate change

Statement on Paris climate agreement entering into force ExxonMobil;

Today marks the entering into force of the Paris climate agreement. The agreement is an important step forward by world governments in addressing the serious risks of climate change.
ExxonMobil supports the work of the Paris signatories, acknowledges the ambitious goals of this agreement and believes the company has a constructive role to play in developing solutions.
We have been working for many years to reduce emissions in our operations and provide products that help consumers reduce their emissions.
ExxonMobil continues to pursue technology solutions with leading scientists in industry, academia and nongovernmental institutions. We have invested nearly $7 billion since 2000 on lower-emissions initiatives such as energy efficiency, cogeneration, flare reduction, carbon capture and sequestration and research into next-generation biofuels.
The Paris agreement and the initial Intended Nationally Determined Contributions (INDCs) pledged by its signatories reflect the dual challenge of minimizing greenhouse gas emissions while ensuring the world has adequate access to affordable and reliable supplies of energy.
These INDCs also reflect understanding that all economic energy sources will be necessary to meet growing global demand, and that the evolution of the energy system toward lower atmospheric emissions will take time and commitment due to its enormous scale, capital intensity and complexity.
As policymakers develop mechanisms to meet the Paris goals, ExxonMobil encourages them to focus on reducing emissions at the lowest cost to society, keeping in mind that access to affordable and reliable energy is critical to economic growth and improved standards of living worldwide.
The best policy options to achieve that goal will be market-based, predictable, transparent and globally applicable to promote innovation and technology breakthroughs required to address climate change risks. ExxonMobil has for many years held the view that a revenue-neutral carbon tax is the best option to fulfill these key principles.


Alberta launches $3-billion climate change strategy with carbon tax Calgary Herald; 22 Nov 2015

Albertans will pay $3 billion more annually in a new economywide tax on carbon, and will likely have to shell out more for electricity as a result of an accelerated retirement of coal-fired power plants under the NDP government’s new climate-change strategy released Sunday. Premier Rachel Notley said she thinks Alberta families will willingly pay the tax and higher price for power, but some of the tax revenue will be returned to people and businesses that need help. “Low- and middle-income families will get support to help them make ends meet,” she said following the announcement of the long-awaited strategy at the Telus World of Science in Edmonton. “I think that ultimately we’ll be able to manage this in a way that encourages reduced use of high-emission activities, while at the same time ensuring we don’t put an unnecessary burden on families.” The plan predicts the new tax of $20 per tonne in 2017 and $30 per tonne in 2018 will cost the average household $320 annually in 2017 and $470 in 2018. But 60 per cent of Albertans will receive rebates for some or all of the increased cost of home heating, electricity and gasoline.

McKenna touts "amazing" progress on climate after three ministers leave meeting Elizabeth McSheffrey, Mike De Souza; National Observer; 3 Oct 2016

Canadian Environment and Climate Change Minister Catherine McKenna praised her provincial colleagues for making "amazing" progress on discussions to tackle global warming on Monday, after her government's proposal to make polluters pay drove a few of them out of the room. According to the new federal policy, all Canadian jurisdictions must adopt a carbon pricing scheme by 2018 with a minimum price of $10 per tonne. The price must rise to reach $50 per tonne by 2022.

Justin Trudeau gives provinces until 2018 to adopt carbon price plan Kathleen Harris; CBC News; 3 Oct 2016

Prime Minister Justin Trudeau took provinces by surprise Monday by announcing they have until 2018 to adopt a carbon pricing scheme, or the federal government will step in and impose a price for them.

Canada set to introduce carbon tax Anmar Frangoul;; 4 Oct 2016

Trudeau said that the proposed price on carbon pollution would start at 10 Canadian dollars ($7.60) per tonne in 2018, rising by 10 Canadian dollars each year, and hitting 50 Canadian dollars per tonne by 2022.

Carbon price vs. regulations: The better choice is clear DON DRUMMOND, NANCY OLEWILER, CHRISTOPHER RAGAN; Globe and Mail; 5 Oct 2016

To begin, we agree that climate change is a serious issue and that reducing greenhouse gas emissions is a sensible objective of public policy.
Second, we agree that the lowest-cost approach for reducing emissions is with carbon pricing. Either economy-wide carbon taxes or cap-and-trade systems reduce GHG emissions at a lower overall economic cost than “command-and-control” government regulations.
Third, we agree that carbon prices cannot do it all; there is a case for “complementary” regulations. The emissions from some economic sectors are difficult to incorporate into a carbon price, and some existing market features weaken the effect of carbon pricing.
On a related point, we also agree that some regulations are bad and should not be used: In particular, inflexible regulations that dictate specific technologies or methods for reducing emissions constrain private choice and increase costs.
Finally, we agree that in order to drive the kinds of emissions cuts deemed necessary over the next half-century, carbon prices will need to rise significantly, likely to $100 a tonne and even higher.

Five myths about Canada’s carbon pricing plan Simon Donner; Maribo blog; 6 Oct 2016

Here are some of the common myths – and the reality:

The B.C. carbon tax - Backgrounder Pembina Institute; Nov 2014?

British Columbia’s carbon tax has been in place for six years and all available evidence indicates it has been successful. Per capita fossil fuel combustion is down and the economy has performed well relative to the rest of Canada. The policy has survived two provincial elections and a change in Premier. This backgrounder explores B.C.’s experience with the carbon tax.
B.C.’s carbon tax was implemented with a five-year schedule of rate increases starting at $10 per tonne in 2008, rising by $5 per tonne per year to $30 per tonne in 2012.1 The tax applies to almost all of the fossil fuels burned in the province (e.g., coal, gasoline, natural gas), amounting to over 70 per cent of the province’s carbon pollution. In 2013, the government decided to keep the rate and coverage stable for five years — or until other jurisdictions introduce similar carbon pricing approaches. For the 2013–14 fiscal year, the carbon tax is forecasted to raise $1.2 billion — slightly less than three per cent of total provincial revenue. The Carbon Tax Act requires that money raised by the carbon tax be used to reduce other provincial taxes (referred to as ‘revenue neutrality’). In 2013–14, the largest reduction measures were cutting corporate income taxes ($440 million) and personal income taxes ($237 million) and providing low-income tax credits ($194 million).


EPA’s war with California proves America needs a carbon tax Dana Nuccitelli; The Guardian; 10 Apr 2018

Artificially low fuel prices are the root of the problem

Washington State

Open Letter on I-732 from Climate Scientists Scientists for I732; 9 Oct 2016

Environmentalists’ Disdain for Washington’s Carbon Tax Shi-Ling Hsu; Slate; 20 Oct 2016

The first such law in the nation is being hampered by idealists. Instead, they should band together and make history.

Appeal to Conservatives

There is some support, and attempts to gather support, from conservatives for carbon pricing/taxation, sometimes using the word "fee" rather than "tax".

Jerry Taylor, Niskanen Centre

The arguments that convinced a libertarian to support aggressive action on climate

To the casual observer, the American right can appear an undifferentiated wall of denial and obstructionism on climate change, but behind the scenes there are signs of movement. A growing number of conservative leaders and intellectuals have come to terms with climate science and begun casting about for solutions. Led mainly by libertarians and libertarian-leaning economists, they've begun to coalesce behind a carbon tax, which they consider the most market-friendly of the available alternatives.

The Conservative Case for a Carbon Tax Jerry Taylor; Niskanen Center; 23 Mar 2015

Costly and economically inefficient command-and-control greenhouse gas regulations are firmly entrenched in law, and there is no plausible scenario in which they can be removed by conservative political force. Even were that not the case, the risks imposed by climate change are real, and a policy of ignoring those risks and hoping for the best is inconsistent with risk management practices conservatives embrace in other, non-climate contexts. Conservatives should embrace a carbon tax (a much less costly means of reducing greenhouse gas emissions) in return for elimination of EPA regulatory authority over greenhouse gas emissions, abolition of green energy subsidies and regulatory mandates, and offsetting tax cuts to provide for revenue neutrality.
Arguments that unilateral action by the United States produces little climate benefit, that a carbon tax will expand the size of government, that a carbon tax is a regressive, that adaptation and geo-engineering is preferable to emissions constraint, that economists cannot confidently design a carbon tax that does more good than harm, that the legislative process cannot deliver a carbon tax worth embracing, and that promoting a carbon tax puts conservatives on a slippery political slope are explored and found wanting.

Citizens' Climate Lobby

The Basics of Carbon Fee and Dividend Citizens' Climate Lobby

How Carbon Fee and Dividend Works
1. Place a steadily rising fee on fossil fuels
To account for the cost of burning fossil fuels, we propose an initial fee of $15/ton on the CO2 equivalent emissions of fossil fuels, escalating $10/ton/year, imposed upstream at the mine, well or port of entry.
Accounting for the true cost of fossil fuel emissions not only creates a level-playing field for all sources of energy, but also informs consumers of the true cost comparison of various fuels when making purchase decisions.
2. Give 100% of the fees minus administrative costs back to households each month.
100% of the net fees from the carbon fee are held in a Carbon Fees Trust fund and returned directly to households as a monthly dividend.
About two-thirds of households will break even or receive more than they would pay in higher prices. This feature will inject billions into the economy, protect family budgets, free households to make independent choices about their energy usage, spur innovation and build aggregate demand for low-carbon products at the consumer level.
3. Use a border adjustment to stop business relocation.
Import fees on products imported from countries without a carbon fee, along with rebates to US industries exporting to those countries, will discourage businesses from relocating where they can emit more CO2 and motivate other countries to adopt similar carbon pricing policies. Building upon existing tax and trade systems will avoid complex new institutional arrangements.
Firms seeking to escape higher energy costs will be discouraged from relocating to non-compliant nations (“leakage”), as their products will be subject to import fees.

Citizens' Climate Lobby Introductory Video TouTube

Baker etc / Climate Leadership Council

THE CONSERVATIVE CASE FOR CARBON DIVIDENDS James A. Baker III, Martin Feldstein, Ted Halstead, N. Gregory Mankiw, Henry M. Paulson Jr., George P. Shultz, Thomas Stephenson, Rob Walton; Climate Leadership Council; Feb 2017

How a new climate strategy can strengthen our economy, reduce regulation, help working-class Americans, shrink government & promote national security
Mounting evidence of climate change is growing too strong to ignore. While the extent to which climate change is due to man-made causes can be questioned, the risks associated with future warming are too big and should be hedged. At least we need an insurance policy. For too long, many Republicans have looked the other way, forfeiting the policy initiative to those who favor growth-inhibiting command-and-control regulations, and fostering a needless climate divide between the GOP and the scientific, business, military, religious, civic and international mainstream.
Now that the Republican Party controls the White House and Congress, it has the opportunity and responsibility to promote a climate plan that showcases the full power of enduring conservative convictions. Any climate solution should be based on sound economic analysis and embody the principles of free markets and limited government. As this paper argues, such a plan could strengthen our economy, benefit working-class Americans, reduce regulations, protect our natural heritage and consolidate a new era of Republican leadership. These benefits accrue regardless of one’s views on climate science.

A climate solution where all sides can win Ted Halstead; TED; 2017

Talk on Climate Leadership Council proposals, with footnotes

Fee and Dividend James Hansen; ; 8 February 2017

Hansen's press release on the above:
A group of conservative thought leaders1 is bringing forth the pure Fee & Dividend plan. As their report states, fee & dividend is a climate plan that “can strengthen our economy, reduce regulation, help working-class Americans, shrink government and promote national security.”

Republicans Offer to Tax Carbon Emissions Dave Levitan; Scientific American; 8 Feb 2017

A group of prominent Republicans released a “conservative” plan to reduce carbon dioxide emissions today, arguing that replacing Obama-era policies with a carbon-tax-and-dividend system would be a politically feasible way to fight off the worst effects of climate change. The plan, released by the Climate Leadership Council in a report titled “The Conservative Case for Carbon Dividends,” would tax carbon beginning at $40 per ton. The price would then rise each year to help push emissions down. The revenues generated—about $194 billion in the first year, rising up past $250 billion within a decade—would then be redistributed by the Social Security Administration in the form of quarterly checks to every U.S. household. Proponents hope that idea would swing public support toward aggressive climate change mitigation.

The proposed US carbon tax – a recipe for disaster Roger Andrews; Energy Matters; 15 Feb 2017

A group of Republican elder statesmen have recommended that the US adopt a $40/ton carbon tax as the “most efficient and effective way of reducing CO2 emissions”. This post reviews the potential economic impacts of such a tax on the US energy sector. It concludes that the impacts on the oil and natural gas sectors would be comparatively minor but that the impacts on the coal sector would be severe. Electric utilities with a high percentage of coal in their generation mix could well be driven into bankruptcy.


Exxon, BP and Shell back carbon tax proposal to curb emissions Oliver Milman; The Guardian; 20 Jun 2017

Oil giants ExxonMobil, Shell, BP and Total are among a group of large corporations supporting a plan to tax carbon dioxide emissions in order to address climate change. The companies have revealed their support for the Climate Leadership Council, a group of senior Republican figures that in February proposed a $40 fee on each ton of CO2 emitted as part of a “free-market, limited government” response to climate change. The fossil fuel companies announced their backing for the plan alongside other major firms including Unilever, PepsiCo, General Motors and Johnson & Johnson. In a full-page newspaper ad on Tuesday, the companies called for a “consensus climate solution that bridges partisan divides, strengthens our economy and protects our shared environment”. Exxon and the others were listed as founding members of the plan, alongside the green groups Conservation International and the Nature Conservancy.