What is Carbon Pricing?

Can you imagine a world where nations have to pay a price for every ton of carbon they emit? This is slowly becoming a reality. On April 23, 2022, Pennsylvania became the first fossil fuel producing state in the US to adopt a carbon pricing policy. Carbon pricing works by putting a monetary value on carbon which makes the cost of emitting carbon explicit to those polluting. Carbon Markets can function in two ways according to the Paris agreement of 2015 -
An emissions trading system (ETS) or a ‘cap and trade’ scheme, works by setting a cap on the total overall emissions target and allocating ‘carbon permits’ accordingly. On the other hand there is a carbon offsetting scheme which provides tradable carbon credits in exchange for carbon saving projects outside the ‘capped area’. The third, is the ‘carbon tax’ which charges a premium on every ton of carbon emitted.

The Biden administration’s ‘social cost of carbon’ calculates future climate damages to justify restrictions on industries. American leaders are divided on this issue since it could cause heavy losses to businesses. Other governments like Canada, have also started taking measures like imposing fuel charges on individuals and making big polluters pay for emissions. According to the World Bank, 27 nations have started adopting some kind of carbon pricing. So, what is the problem?

The problem is that it is very difficult to put a ‘price tag’ on carbon emissions. The Biden administration has calculated 51 dollars in economic damages for every ton of carbon spewed. But the state of New York in 2020 has calculated 125 dollars keeping economic trends into account. In the Northeast USA under the Regional Greenhouse Gas Initiative, the cost is 13.50 dollars per ton, which Pennsylvania is part of. In Canada, the fuel charge is 40 dollars per ton for an individual.

Economists say that the social cost of carbon and carbon pricing in actuality must line up to reflect the true cost of rising carbon emissions to society. In the US, carbon pricing policies have fluctuated as administrations have changed . In 2009, the push to establish a nationwide cap and trade program in the US failed because the Congress continued to argue over whether climate change was even occurring. The Obama administration (2009-2017), started including future damage estimates in the cost-benefit analyses for drafting new regulations. As the Trump government (2017-21) rolled back many of Obama’s policies, they reduced the social cost to 7 dollars from 50. They calculated only domestic impacts instead of global damages.

Under the current Biden administration, the US interior department is applying the social cost of carbon to oil and gas sales. Economists are expecting the social cost to double since an overhaul of the government energy policy is essential to keep up with the impacts of climate change. Carbon pricing in Pennsylvania remains murky since there are legal challenges and the state’s Democratic governor could be replaced by a successor who opposes the regulations.

[harrinibajaj]

I am paying $100 as carbon tax every month in canada. I think govt is trying to please environmentalist by showing that we are doing our job by imposing taxes on residential category rather than bringing ground measures or systems. Any issue you will bring there will be a heavy tax at the end.

[ladyselenafelicitywhite]

I think carbon pricing is good, so long as all the money goes to investing in renewable energy sources, reforestation projects, protecting existing forests, etc.

[paultobiason]

I'm in Guam...a U.S. Territory. I've suggested for years that our power company be required to pay $1.00 for each ton of CO2 they emit. It's not much but it's a start.

I really support💪 this idea💡 carbon dioxide tax will reduce the pollution

[cvjbxvp]

🙏🏼👍🏼👍🏼

🤔I am not sure if this offsetting scheme is ok.

[anonymousdude]

That would be worst if Pennsylvania govt changes.

We all know everything depends on demand & supply so we just need to control it by reducing the demand for fossil fuels before we turn into fossil.

Increase demand for renewables by tax reduction & award initiatives for doing same

[walkwithfloraandfauna]

Thanks for your knowledge base feature.

[migspeculates]

What if the cost is based on the damages caused by climate change over all affected industries? (i.e. agriculture, water conservation, etc.)

[swatisharma]

Who is responsible for emissions from outsourced manufacturing jobs?

[dhadon]

Thankyou for uploading such knowledgeable content related to environment and climate change👍

[rashmisharma]

What about our nation .
Is it going to adopt such policy or not?
As 60% of the dwellers depend on agriculture in our country which leads to emission of carbon by burning the land to meet the nutritional value of soil.
So, how our govt. Take initiative to adopt carbon pricing policy.

Actually it is great👍 idea💡 I really have this idea💡 in my mind😏 from years thanks❤ for knowing that India🇮🇳 should have this tax