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Getting Serious About Carbon Pricing: Putting a Price on Carbon #priceoncarbon

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On April 30, WRI hosted a dynamic town hall discussion about key issues related to pricing carbon in the United States. Putting a price on carbon can provide a clear and consistent economic signal that can help shift market growth in the coming decades toward a climate-smart, low-carbon economy.

The new resource "Putting a Price on Carbon: A Handbook for U.S. Policymakers" was released. Find out more at www.wri.org/carbonpricing

Published in: Environment
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Getting Serious About Carbon Pricing: Putting a Price on Carbon #priceoncarbon

  1. 1. WWW.WRI.ORG/CARBONPRICING GETTING SERIOUS ABOUT CARBON PRICING April 30, 2015 Washington, DC
  2. 2. MICHAEL OBEITER WWW.WRI.ORG/CARBONPRICING PUTTING A PRICE ON CARBON: A Handbook for U.S. Policymakers
  3. 3. WHY PRICE CARBON? • Pricing carbon can be a core element of U.S. long-term climate change strategy • A carbon price can also serve other policy goals –Promote economic growth –Support clean energy –Transition assistance www.wri.org/carbonpricing
  4. 4. OBJECTIVES • Putting a Price on Carbon provides an overview of carbon pricing –Basic primer –Refresher and reference work • Future work from WRI will build on this foundation www.wri.org/carbonpricing
  5. 5. PAPER OVERVIEW • Basics of Pricing Carbon • A Brief History of Carbon Pricing • Key Design Features • Uses of Carbon Pricing Revenues • Economic Effects of a Carbon Price www.wri.org/carbonpricing
  6. 6. CARBON PRICING PROGRAMS AROUND THE WORLD www.wri.org/carbonpricing
  7. 7. CARBON PRICING IN THE UNITED STATES www.wri.org/carbonpricing Federal proposals • McCain/Lieberman (2003) • Waxman/Markey (2009) • Whitehouse/Schatz (2014) • Delaney (2015) • …and many more
  8. 8. PROGRAM TYPE: CARBON TAX VS CAP-AND-TRADE • Both incentivize emissions reductions • Similar design and revenue decisions • Carbon tax offers administrative simplicity and price certainty • Cap-and-trade offers emissions certainty www.wri.org/carbonpricing
  9. 9. CARBON PRICE DESIGN: KEY QUESTIONS • Which gases? • Which sectors? • Where to impose the regulation? • What price or cap level and trajectory? • Include a border tax adjustment? • How to monitor and enforce? • What complementary policies? www.wri.org/carbonpricing
  10. 10. CARBON PRICE DESIGN: EXAMPLES • Regional Greenhouse Gas Initiative – Electricity CO2 – Most revenues go to energy efficiency – $2.9 billion in lifetime savings to 3.7 million households • British Columbia Carbon Tax – Started at C$10, now C$30 – Covers ~3/4 of GHGs – Most revenues used to reduce taxes www.wri.org/carbonpricing
  11. 11. REVENUE USE • Revenue can be used to accomplish various objectives: – Promote economic growth – Offset adverse impacts – Investment in climate change protections • Substantial revenue opportunity – $15 / tonne price could generate ~$100 billion www.wri.org/carbonpricing
  12. 12. REVENUE NEUTRAL TAX SWAPS • Taxes on labor/capital discourage productive activity we want more of • A carbon tax discourages activity we want less of • Why not tax destructive instead of productive activities? – For example, use revenues to reduce income or payroll taxes www.wri.org/carbonpricing
  13. 13. LUMP SUM DIVIDEND • Send every household a check • Key advantages: –Relatively simple –Revenue neutral (or nearly neutral) –Ensures low-income taxpayers are not negatively impacted www.wri.org/carbonpricing
  14. 14. ADDITIONAL REVENUE USES • Various other policy objectives: – Deficit reduction – Transition assistance – R&D for low-carbon technologies – Climate change adaptation • Different uses of revenue are of interest to different stakeholders www.wri.org/carbonpricing
  15. 15. ECONOMISTS OVERWHELMINGLY SUPPORT A CARBON TAX Source: http://www.igmchicago.org/igm-economic-experts-panel/poll- results?SurveyID=SV_8oABK2TolkGluV7; weighted by confidence Statement: Government should raise revenue with a carbon tax instead of labor income taxes
  16. 16. ECONOMIC IMPACT STUDIES • Winners and losers in short run • Smart use of revenue can offset negative impacts • Trade-offs exist between revenue options www.wri.org/carbonpricing
  17. 17. CONCLUSION • A carbon price can be the cornerstone of long-run U.S. climate policy AND achieve multiple additional objectives • Designing a carbon pricing policy involves a number of important decisions that can broaden support www.wri.org/carbonpricing
  18. 18. FUTURE RESEARCH • WRI aims to promote dialogue on why and how to implement a carbon price • WRI will delve deeper into key issues: – Basic economics and incentives underlying a carbon price – Regional disparities and how to address them – How a carbon price can drive innovation Keep an eye on www.wri.org/carbonpricing for new research
  19. 19. PUTTING A PRICE ON CARBON: A HANDBOOK FOR U.S. POLICYMAKERS THANK YOU WWW.WRI.ORG/CARBONPRICING
  20. 20. WWW.WRI.ORG/CARBONPRICING GETTING SERIOUS ABOUT CARBON PRICING April 30, 2015 Washington, DC

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