Carbon Pricing

Editor’s Note:  Here’s a post from Jonathan Marshall on Community.  He’s written extensively about carbon pricing.   See also his recent e-book on Carbon Pricing.

A new paper by three distinguished European economists offers a simple and intuitive method for estimating the “social cost of carbon” (see this thread) in place of more complex and challenging mathematical approaches.

Cutting to the chase, they derive estimates of the social cost of carbon that start around $182 per ton of carbon dioxide today, rising to nearly $600 per ton in 2050.

Editor’s Note: On this weeks Eco-Right podcast, two policy leaders from center-right (but technically non-partisan) think tanks supported carbon pricing.  See the highlighted portion of the transcript below. Shuting Pomerleau is the deputy director of climate…

An evaluation of more than 1,500 climate policies in 41 countries found that only 63 actually worked to reduce greenhouse gas emissions. 

“The commonality in those successful cases is where we see subsidies and regulations being combined with price-based policy instruments,” said Nicolas Koch, senior researcher at the Berlin-based Mercator Research Institute on Global Commons and Climate Change and an author of the study. “This means carbon pricing, and it could be energy taxes, it could be vehicle taxes.”

Editor’s Note:  Two think tanks sponsored a bipartisan panel discussion about next year, when both parties face the expiration of the Trump tax cuts and want to fix a) major structural deficits and b) climate change.  Attached is the YouTube video of the one-hour webinar, as well as a transcript and an accurate summary generated by AI.

A major new study published in Nature Communications offers reassurance that carbon taxes really are effective. This meta-analysis of 80 evaluations of 21 carbon pricing policies around the world finds at least 17 of those policies “yielded immediate and substantial emission reductions” ranging from 4% to 15%, despite low carbon prices in most cases.

Washington’s first quarterly carbon allowance auction of 2024 has thrown two new wrinkles into the economics of the state’s fledgling — and controversial — cap-and-invest program.  

First: The auction cleared at $25.76 per allowance. That’s sharply lower than clearing prices in 2023’s four quarterly auctions, which took a lot of blame for Washington’s high gasoline prices last summer.  

Second: The March 6 auction, results …

The governor is proposing the Pennsylvania Climate Emissions Reduction Act (PACER) to set up a cap-and-invest program. 

Seventy percent of PACER’s benefits would be returned to end-use customers as rebates on their electric bill — a higher percentage than any cap-and-trade program in the country. PACER also would support projects that cut air pollution, further reduce customer energy bills and invest in new job-creating clean energy projects, including carbon capture and storage, geothermal, and clean hydrogen. 

The U.S. government is trying to “get things moving” through those subsidies, he added. “But I would tell you building a business on government subsidy is not a long-term sustainable strategy—we don’t support that …. We’re advocating to move to market forces, either through regulation and prices on carbon.” 

The Brookings Institute hosted a “fireside chat” with Senator Sheldon Whitehouse, Chairman of the Budget Committee. The Senate is preparing for a “massive” tax overhaul bill in 2025, because many of the tax breaks from prior years expire soon.   Sen. Whitehouse is angling to have carbon pricing in the bill. Here he discusses how CBAM, the tax negotiations and the politics.

To move beyond the woefully inadequate level of climate action since the 2015 Paris Accords, the world must put a global price on carbon. In one stroke, this would recalibrate consumer demand, set the market in motion, reduce emissions, and spur innovation. In the immortal words of legendary investor Charlie Munger: “Show me the incentive, and I’ll show you the outcome.”