Why Put a Price on Carbon?
Benefits of a price on carbon
Affordable Clean Energy
America leads the world with technology innovation. When government puts a price on carbon, it sends a signal through the economy. Businesses respond by becoming more energy efficient and developing new sources of clean energy. These innovations will provide abundant, affordable, and reliable clean energy and drive us faster toward net zero carbon pollution.
Money in Your Pocket
A carbon tax becomes affordable for ordinary Americans when the money collected from fossil fuel companies is given as a dividend, or “carbon cash back” payment, to every American to spend with no restrictions. This protects low-and-middle-income Americans who otherwise might not be able to afford the transition.
This type of carbon tax is called a “carbon fee and dividend”. Citizens’ Climate Lobby has been advocating for this policy for over a decade.
A carbon price will save 4.5 million American lives over the next 50 years by restoring clean air across the country. It will have particular impact in communities of color, which have suffered the worst health impacts of burning fossil fuels. Exposure to air pollution has also made people in communities of color more vulnerable to the worst impacts of COVID-19.
Air pollution from fossil fuels, and its impact on our health, is worse than we thought. New research shows that premature deaths in America each year due to air pollution are nearly twice as high as previously understood. As many as 1 in 10 American deaths today is caused by air pollution.
A carbon price will incentivize innovation by America’s businesses, creating millions of new jobs that will transform our economy and put Americans back to work.
Keeps Businesses Healthy
Businesses prefer a carbon price to other climate solutions because they remain financially stable while they adjust their operations, thanks to a predictable and gradually rising price on carbon. They will not lose time or spend extra money trying to understand complicated new regulations and rules and incorporate them into their plans.
A price on carbon is the best climate solution for America’s economy because it is the most cost-efficient way to lower America’s pollution. To match its impact, multiple regulations across economic sectors would be needed, at an additional cost of hundreds of billions of dollars every year to America’s economy.
By 2050, this policy could save Americans over $800 billion each year in economic losses, or over $6,000 per household. On our current course, America’s economy is forecast to shrink by up to 7% due to the increased costs of climate change by 2050.
Pricing Carbon 101: What is Carbon Pricing?
CCL supports an economy-wide carbon tax, where the money is given to people, typically referred to as a carbon fee and dividend or carbon tax and dividend. With a carbon tax, a fee is applied wherever fossil fuels enter the economy. This carbon price flows through the economy, incentivizing businesses and people to switch to clean energy. Fossil fuels such as oil, natural gas, and coal all contain carbon. When burned, they release potent greenhouse gases (GHG) and carbon dioxide (CO2) into the atmosphere. Putting a price on carbon involves placing a fee on these fossil fuels and carbon pollution. The carbon pricing fee is based on the metric tons of carbon dioxide (CO2) the fuel would generate, and it would be assessed at the earliest point of sale into the economy—as close as possible to the well, mine, or port.
A price on carbon can also be used to refer to a “cap and trade” system. A cap and trade works by setting a “cap,” (maximum for total emissions) and then selling and trading permits for the right to pollute up to that cap. It requires bureaucracy to implement and run, and it creates price volatility that is difficult for businesses. CCL does not support a cap and trade system. A carbon tax is far simpler, with less bureaucracy, lower costs, and more predictability.
Does Putting a Price on Carbon Work?
A carbon price will quickly transform our electricity sector to net zero emissions, and then electrify our buildings and our transportation sector. Our industrial sector will transition to net zero via a mix of efficiency, electrification, carbon capture, and other carbon emission reductions technology.
Studies have shown that a steadily rising price on carbon, starting at $15/ton and rising by $10/ton per year, would cut fossil fuel pollution by 30% in the first 5 years alone. This will put America on a path to hit the targets set by the Paris accords and to reach net zero by 2050.
What’s the difference between a carbon fee and a carbon tax?
Generally, “carbon tax” and “carbon fee” are used interchangeably, and referring to the same type of legislation. Technically speaking, a tax has the primary purpose of raising revenue. By contrast, a fee is a payment in exchange for a service or privilege. People may use a carbon fee to describe a policy that does not grow the size of government. When the money raised is given to people, the policy is typically referred to as a carbon fee and dividend. For over a decade, Citizens’ Climate Lobby has supported a carbon fee and dividend. Giving money to people so that they can afford a transition to clean energy makes a carbon tax fair and politically durable.