By Mitchell Hartman

A published report points to what could be a turn in thinking among big oil companies. The American Petroleum Institute, the lobbying group for fossil fuel companies, could soon endorse what’s called “carbon pricing” to fight climate change. The Wall Street Journal saw a draft proposal .

What happens if letting loose carbon dioxide is no longer free?

One way to pay directly for the cost of climate damage caused by fossil fuels, is to impose a tax on carbon, said Catherine Hausman at the University of Michigan.

“You tax the person who’s taking that barrel of oil out of the ground, so they’re going to sell that oil at a higher price to the refinery,” Hausman said.

More expensive fuel discourages consumers from burning as much and encourages fuel efficiency. The government can use the tax money it collects to promote renewables and mitigate climate change.

From the standpoint of industry, putting a price on carbon is preferable to strict new government regulation of emissions, said University of Chicago economist Michael Greenstone.

“Set a price and let people and firms make money by competing on how to reduce their emissions, and they’re going to inevitably come up with new ways, ways we haven’t thought of,” Greenstone said.

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Areas of Focus: Energy Markets
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Energy Markets
Well-functioning markets are essential for providing access to reliable, affordable energy. EPIC research is uncovering the policies, prices and information needed to help energy markets work efficiently.
Fossil Fuels
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Fossil Fuels
Under current policies, fossil fuels will play an important role in the energy system for the foreseeable future. EPIC research is exploring the costs and benefits of these fuels as...
Climate Change
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Climate Change
Climate change is an urgent global challenge. EPIC research is helping to assess its impacts, quantify its costs, and identify an efficient set of policies to reduce emissions and adapt...
Climate Law & Policy
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Climate Law & Policy
As countries around the world implement policies to confront climate change, EPIC research is calculating which policies will have the most impact for the least cost.
Social Cost of Carbon
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Social Cost of Carbon
The social cost of carbon is an essential tool for incorporating the cost of climate change into policy-making, corporate planning and investment decisionmaking in the United States and around the...