By Dave Roberts
Carbon taxes are in the news these days. In recent months, not one but two conservative national carbon tax proposals have emerged, disrupting the usual partisan dynamic on climate policy.
First there was the proposal from the Climate Leadership Council, a group of (mostly older, retired) Republicans and centrists, which was released last year but recently gained the backing of a new big-money conservative PAC. Then on Monday, Rep. Carlos Curbelo (R-FL), co-chair of the House Climate Solutions Caucus, released a carbon-tax proposal of his own.
Neither proposal has a snowflake’s chance in hell of passage any time soon. And on Thursday, the House passed a resolution trying to squash even the possibility of a carbon tax. But the existence of these proposals does indicate a heightened level of awareness of and interest in carbon taxes. So now seems like a good opportunity to review some of the basics.
The economic theory behind carbon prices is that, if carbon is priced correctly — i.e., at the true “social cost of carbon” — then the economy will respond with the optimal level of carbon reduction.
There are all kinds of difficulties with this theory, not least determining the social cost of carbon, which is as much art and ethics as it is science.
But the main problem is less theoretical than practical: Political resistance has kept carbon prices well below any reasonable social cost of carbon pretty much everywhere carbon prices have been implemented. Nowhere in the US, certainly not in the Regional Greenhouse Gas Initiative or the Western Climate Initiative, or even the carbon tax in BC, has carbon prices close to $50/ton, which is the central case in the Columbia research. (Prices in the EU’s carbon trading system are just over $19/ton.)
And some researchers believe that the true social cost of carbon may be much higher than today’s estimates, as high as $250/ton.
Researchers @impact_lab are going super granular – dividing the globe into 25,000 county-sized parcels – to amass real world data on the social costs of #climatechange. @Marketplace takes a look at their efforts to hone the Social Cost of #Carbon: https://t.co/lux7uvLxJP pic.twitter.com/ePf5XUbo59
— Energy Policy Institute at UChicago (@UChiEnergy) July 20, 2018
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