Full Title: American Opinions on Carbon Taxes and Cap-and-Trade: 10 Years of Carbon Pricing in the NSEE
Author(s): National Surveys on Energy and Environment (NSEE)
Publisher(s): University of Michigan and Muhlenberg College
Publication Date: 06/2018
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Economists have long embraced the idea of placing a price on the use of fossil fuels as the most cost-effective way to reduce greenhouse gas emissions and mitigate the threat of climate change. This is reflected in a staggering body of work by economists across the ideological spectrum in the United States and abroad, and in far-reaching support from such bodies as the United Nations and the World Bank. Carbon pricing can take two distinct forms, both unified by their adding a direct price to the continued use of fossil fuels. Under a carbon tax, the estimated cost of climate damage related to use of oil, coal, or natural gas can be added to the price at or near the point of consumption. This could build on early experimentation with carbon taxes among several Nordic nations in the 1990s. Under cap-and-trade, government sets a cap on overall emissions that declines over time, while allowing flexibility in how complying parties meet those requirements. By auctioning emission allowances, the marketplace decides the price necessary to acquire an allowance to emit carbon into the atmosphere. This could build on early experimentation with carbon cap-and-trade in nine Northeastern states under the Regional Greenhouse Gas Initiative (RGGI) during the past decade. In both instances, governments collect revenue from such a price and then decide how to allocate it.