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Will the US ever price carbon as part of its climate change policy?

ConocoPhillips refinery in Wilmington, California.

Jonathan Alcorn | Bloomberg | Getty Images

The world needs to reduce its carbon footprint, and one way is to introduce a carbon tax, a strategy that the US has been debating for decades.

With urgent calls to reduce greenhouse gas emissions around the world, carbon pricing was one of the main points of discussion among world leaders at the COP26 conference in Glasgow earlier this month. The consensus on the global carbon price is growing, according to Lord Greg Barker, executive chairman of EN + and co-chair of the Carbon Pricing Leadership Coalition.

“We need countries to come together to agree on international standards to make the big transition to a low carbon economy,” Barker told CNBC in an interview with COP26 last week. “The world would be much better off if there was a common price for carbon.”

At the moment, according to Barker, in 69 countries the price of carbon ranges from $ 1 to $ 139 per metric ton. The United States is not one of them.

Barker told CNBC that most economists agree that carbon pricing is the most effective vehicle for the transition to a low-carbon economy. Carbon pricing shifts responsibility for the impacts of climate change onto pollutants who are responsible, according to The World Bank

The Biden administration has pledged $ 555 billion to tackle climate change, although the plan does not include carbon pricing. The bill does include a proposed methane fee that would incentivize oil and gas companies to cut methane emissions.

Application policy carbon tax has been reviewed as “plan B” during negotiations on the current climate package, as reported by the New York Times, following Biden’s statement clean electricity program was removed from the expense account last month.

If the US administration can keep up with the rest of the world on carbon pricing, there are other ways to take this initiative, Barker says, such as regulation, taxes and emissions trading.

The US has considered carbon import and emissions trading fees that will apply to carbon-intensive products imported into the country. “But paying for carbon imports only makes sense if you have some kind of domestic US carbon policy,” says Richard Newell, president of Resources for the Future, a non-partisan energy and environment research organization.

He believes the price of carbon is ultimately achievable as part of US policy as the world grapples with the severity of climate change and looks more to financial incentives to achieve a low-carbon ecosystem that supports the entire economy.

The Biden administration has a government-wide plan that looks at how climate change could affect all sectors of the US economy. The plan was part of a broader program to halve greenhouse gas emissions by 2030 and move to a zero-emissions economy.

“There will also be a desire to increase revenues for climate change and other public purposes, and carbon pricing does it all,” Newell said. He added that while an economy-wide carbon charge would be the best solution, the administration could start by applying carbon charges to specific sectors.

As the US decarbonizes areas such as electricity and automobiles, Newell said, pressure on government regulation will intensify. “There will be growing recognition that some kind of comprehensive policies will be needed to truly decarbonize the economy across all sectors,” he said.

“There has been a significant shift across the country in how seriously people and legislators are tackling climate change,” Newell said. “And it will continue to evolve without being limited to specific sectors.”

The controversy over the carbon pricing mechanism is now taking place at a time of growing concern over inflation and gas station prices, leading to discussions about whether the government should use the Strategic Oil Reserve. Methane bills have sparked controversy, and some have raised concerns that higher methane prices will increase electricity and heating costs for individual consumers.

Fears of rising prices for low-income households and increased costs for businesses will need to be addressed.

“If politicians are smart and expect to need compensation,” say families whose bills could be bumped up by the price of carbon, you can [carbon pricing] Barker said.

In the plan drawn up Climate Leadership Council, a climate protection group founded by former Secretary of State James Baker of the Bush and Reagan administrations, the idea is not to fund the government’s climate change efforts. The Climate Leadership Council’s plan states that the revenues generated from carbon payments “should go back to American households,” said Carlton Carroll, a spokesman for the Climate Leadership Council.

“Nothing will do more to accelerate innovation and invest all citizens in a clean energy future than paying for carbon emissions across the economy with a corresponding dividend for the American people,” Carroll said.

Carbon group dividend plan lists four main benefits for consumers, including increasing disposable income for households across the country.

Raising the price of carbon can be achieved by taxing goods and services that emit greenhouse gases, such as gasoline, or by individually taxing carbon emissions. The Climate Council is among the groups advocating for carbon pricing under the US Climate Plan “because it will go further, faster than any other single climate policy intervention,” says Carroll, “and will also drive innovation. throughout the economy. and improving the financial situation of families. ”

Historically, both parties have supported a carbon tax. The first carbon pricing proposal was made in 1990 and several other proposals have been made since then. While none were adopted, Newell said Biden’s latest carbon pricing proposal for social safety and climate has generated much more Congress interest than expected.

The Build Back Better carbon tax is charged at $ 20 per metric ton of carbon.

“I would say there is surprisingly high interest in paying for carbon as part of the ongoing budget negotiation process,” Newell said.

But Mindy Lubber, CEO of sustainability investment firm Ceres, told CNBC earlier this year that while a carbon tax is one way to prevent the US from being tied to the fossil fuel economy and stimulate the development of new energy and transportation systems, he proved to be effective. controversial in the past, and is a complex political instrument that makes it harder for all parties to reach agreement, especially in the Senate, where there are so few votes.

“The carbon tax may be closer than some think,” says Flannery Winchester, spokesman for the Citizens Climate Lobby. “It has gone from a hopeful idea to an idea that is about to come true,” she said.

The White House and 49 Senators participated in the carbon tax, but did not key voice from West Virginia Democrat Senator Joe Manchin.

“But there is clearly more consensus than ever that these policies are effective in meeting America’s climate goals,” Winchester said.


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