If you want to discourage bad behaviors, economists say, make them expensive. The strategy works for cigarettes, soda, gasoline. And it works for carbon emissions too. Adding a charge to the carbon content of fossil fuels is widely seen as one of the more powerful tools a country can use to shrink its emissions.
It works like this: A government charges a fee per ton of greenhouse gases emitted. The fee is small at first, rising gradually to give companies a chance to adapt. Individual households don't get taxed directly, but they could take a hit when the big emitters raise their rates in response.
“The beauty of a carbon tax is that everything we want consumers to do gets incentivized to be done,” says MIT economist Christopher Knittel. Residents pay more attention to their thermostats. Utilities might invest more in solar or wind farms. Manufacturers could start offering more energy-saving products, such as more efficient cars and heating and air-conditioning systems.Several countries have implemented some form of carbon pricing—just not the most-offending nations. After Sweden instituted a tax in 1991, its transportation emissions fell an average of 6 percent a year, according to one study. (A separate tax on transport fuels shrank the country's carbon footprint further.) In British Columbia, a carbon tax reduced emissions by up to 15 percent. Last year, after the province's experiment proved successful, Canada expanded carbon pricing nationwide. Researchers at MIT calculated that if the US placed a $50-per-ton tax on carbon and increased the tax 5 percent per year, emissions would drop 63 percent by 2050. If every country adopted a carbon tax with a similar effect, the world might be able to slash its emissions in half by the middle of this century.
A US tax credit for carbon storage passed in 2018 could spur retrofits of power plants that would in turn capture 54 million tons of carbon per year by 2030. That's the equivalent of taking some 10 million cars off the streets.The idea that has lately taken off among certain conservatives is one that cuts the sourness of a carbon tax with some sweeteners. US representative Francis Rooney, a Florida Republican, has cosponsored legislation that would impose a fee on metric tons of carbon emitted and then distribute the spoils back to US residents as a monthly “carbon dividend.” (You could think of it as a form of basic income, the concept that helped make Andrew Yang one of the biggest gang leaders in America over the past year.) In one proposal, crafted by the bipartisan Climate Leadership Council, a family of four might expect to get $2,000 back in the first year. Plans put forward by Rooney and the Climate Leadership Council also propose to eliminate or suspend federal regulations on carbon emissions—which perhaps helps explain why the CLC has the support of oil giants, car manufacturers, and utility companies.
Ultimately, a carbon tax needs to be global to reach its full potential. After all, heavy-emitting industries can flee to nations that have no carbon pricing. Placing a carbon tariff on goods imported from such places can incentivize dirtier countries to clean up their acts. The European Union is now considering such a measure. Revenue from that kind of tariff could again help fund a dividend, to shield people from rising costs.All good ideas, but none too likely to pass during the current US administration, which has pushed tax cuts and denied the severity of climate change. Campaigns to implement one in Washington state have failed twice. There are other options. Mark Jaccard, an economist who helped design British Columbia's carbon tax, argues that a country can tighten regulations instead, choosing to phase out coal plants, for example, or implement a low-carbon fuel standard. Regulations “may be way better politically, like way better, and only slightly less efficient economically,” Jaccard says. The key to saving the world? It's all politics.
MATT SIMON (@mrMattSimon) is a senior writer at WIRED.This article appears in the April issue. Subscribe now .
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