Carbon dioxide has been known to be one of the most prevalent reasons for climate change due to the burning of fossil fuels, with the concentrations in the atmosphere rising yearly due to human activities releasing more into the atmosphere than natural processes can remove. In 2023, the global average atmospheric carbon dioxide was 419.3ppm, which is 50% higher than it was before the Industrial Revolution (Lindsey, 2023). This is detrimental because carbon dioxide traps heat and redirects it towards earth, heating up the Earth and contributing to around 2/3 of the total heating influence of all greenhouse gases produced.
A way governments are attempting to counter this continuous rise in carbon emissions is by implementing a carbon tax, which is imposing a price on carbon emissions to mitigate the negative externalities created by greenhouse gas emissions (brookings.edu). In carbon pricing, there are two different main forms: emissions trading systems (ETS) and carbon taxes. An ETS is also known as a cap-and-trade system, which limits the quantity of pollution that can be produced, but then is also able to be traded to other entities (US EPA, 2016). This allows there to still be a cap but allows for flexibility for certain industries on their path. The other is a flat carbon tax, which essentially just taxes you based on the amount of carbon released into the atmosphere. Currently, around 40 countries have implemented these mechanisms, with more planning to implement them in the future due to their success in reducing carbon emissions and increasing renewable energy.
Putting a price on carbon is essential for continuing to reduce emissions, as it helps discourage companies from using fossil fuels, which will in turn help the environment. There is some pushback from certain companies about the implementation of a flat carbon price, but it has future uses other than simply costing more money. It is not only implemented as a climate policy but can also be used as an economic policy. The taxes paid for carbon allow the government to use more funding towards creating clean energy opportunities, helping eliminate the use of fossil fuels, as well as promote and scale other future climate mitigation efforts. Also, these taxes help incentivize companies to reach the United States long-term climate goals, as companies will search for alternatives that are less expensive.
A critic about carbon pricing is that the tax is too low to make much of a difference for the major contributors of carbon dioxide. Creating too high of a tax too early could drastically limit major companies’ ability to invest in renewable energy for the future, but implementing a tax too low would not incentivize industries to invest in renewable energy at all. Also, many large companies and people are fighting against the carbon tax, especially consumers. This is because goods and services that rely on carbon-intensive processes such as transportation, energy production, electricity, and heating can all raise in price (Why Putting a Price on Carbon Has Been Fraught with Difficulty, 2023). This leads to a negative public opinion towards carbon pricing. However, the implementation of carbon pricing has statistically proven to reduce the amount of carbon emissions put into the atmosphere (Jotzo & Burke, 2020).
As shown in the graph above, the countries that had no carbon price in 2007 have majority rising the carbon dioxide emissions growth, while virtually all of the countries with a carbon price show a decrease or equal amount of carbon dioxide emissions growth.
Overall, carbon pricing is a valuable tool that the government can utilize to help reduce carbon emissions, while also building a better future for generations to come. While there may be short term detriments, the long-term implications are beneficial both monetarily and environmentally. This pricing would speed up the building of renewable energy and help drastically reduce the effects of climate change in the future.
Resources
Jotzo, F., & Burke, P. (2020, September 4). Does carbon pricing work? This is what a new study found. World Economic Forum. https://www.weforum.org/agenda/2020/09/carbon-pricing-study-emissions-global-warming-climate-change/#:~:text=Growth%20in%20annual%20carbon%20dioxide%20emissions%20was%20about
Lindsey, R. (2023, May 12). Climate Change: Atmospheric Carbon Dioxide. Climate.gov; NOAA. https://www.climate.gov/news-features/understanding-climate/climate-change-atmospheric-carbon-dioxide
US EPA. (2016, March 16). What Is Emissions Trading? | US EPA. US EPA. https://www.epa.gov/emissions-trading-resources/what-emissions-trading
Why putting a price on carbon has been fraught with difficulty. (2023, November 3). Www.ft.com. https://www.ft.com/content/d91d6daa-a5bf-42fd-9a9b-24f86e3fbc6b