Solving the Climate Crisis Carbon Pricing 101 Basics

Solving the Climate Crisis: Carbon Pricing 101 Basics of Carbon Pricing Dr. Linda Dismore (Diz) Swift © http: //Priceon. Carbon. org

Carbon Pricing 101 Putting the Market to Work Priceon. Carbon. org Costs of fossil fuel use are not included in the current price • • • Hurricanes (Sandy $65 b), drought, health costs, sea level rise Social Cost of Carbon estimates from $37 to >$400/ton CO 2 e Fossil fuels are artificially inexpensive Put a price on carbon emissions so users pay the fair price • • • Fossil fuel use will decrease; CO 2 emissions will decrease Alternatives become more affordable and grow The economy can also grow © http: //Priceon. Carbon. org

Pricing Carbon is not a new idea Figure from World Bank report, 2014 © http: //Priceon. Carbon. org

How Do You Price Carbon? Carbon Pricing Elements Pricing Mechanism Emissions Included Revenue Use © http: //Priceon. Carbon. org

How Do You Price Carbon? Carbon Pricing Elements Pricing Mechanism Emissions Included Revenue Use Carbon Tax or Fee Cap and Trade © http: //Priceon. Carbon. org

Pricing Mechanism Both mechanisms have been tried; both can be effective. © http: //Priceon. Carbon. org

Cap and Trade Declining Cap Set by Government Cap Maximum Emissions Allowed Year 1

Cap and Trade Permits Auctioned by Government Cap Company A Emissions Company A emits above cap, needs more permits Permits Cap Company B Emissions Linda Swift © 2015 Permits Company B buys more permits than needed © http: //Priceon. Carbon. org

Cap and Trade Company A Emissions Company B Emissions Permits Company B sells permits to Company A Permits © http: //Priceon. Carbon. org

Cap and Trade Company A Emissions Company B Emissions Linda Swift © 2015 Permits

Complications Cap Permits Company A Emissions Allocations “Free Permits” Allocations Allowances (permits) can be given by government to select companies or industries “Free permits” May decrease with time © http: //Priceon. Carbon. org

Complications Offsets Cap Permits Company A Emissions Projects which sequester carbon can offset some emissions/permits Offset © http: //Priceon. Carbon. org

How Do You Price Carbon? Carbon Pricing Elements Pricing Mechanism Carbon Tax or Fee Cap and Trade Emissions Included Revenue Use Electricity generation Transportation Industrial © http: //Priceon. Carbon. org

Emissions Included EIA © http: //Priceon. Carbon. org

How Do You Price Carbon? Carbon Pricing Elements Pricing Mechanism Carbon Tax or Fee Cap and Trade Emissions Included Electricity generation Transportation Industrial Revenue Use Government Programs Mitigate/adapt Reduce deficit Infrastructure, etc Revenue Neutral Return to people Reduce other taxes © http: //Priceon. Carbon. org

How Do You Price Carbon? Carbon Pricing Elements Pricing Mechanism Carbon Tax or Fee Cap and Trade Revenue Use California Government Programs Mitigate/adapt Reduce deficit Infrastructure, etc Revenue Neutral Return to people Reduce other taxes © http: //Priceon. Carbon. org

How Do You Price Carbon? Carbon Pricing Elements Pricing Mechanism Carbon Tax or Fee Cap and Trade Revenue Use Van H ollen Bill Government Programs Mitigate/adapt Reduce deficit Infrastructure, etc Revenue Neutral Return to people Reduce other taxes © http: //Priceon. Carbon. org

How Do You Price Carbon? Carbon Pricing Elements Pricing Mechanism Carbon Tax or Fee Cap and Trade Revenue Use CCL Government Programs Mitigate/adapt Reduce deficit Infrastructure, etc Revenue Neutral Return to people Reduce other taxes © http: //Priceon. Carbon. org

How Do You Price Carbon? Carbon Pricing Elements Pricing Mechanism Carbon Tax or Fee Cap and Trade Revenue Use Briti sh C olum bia Government Programs Mitigate/adapt Reduce deficit Infrastructure, etc Revenue Neutral Return to people Reduce other taxes © http: //Priceon. Carbon. org