US President Joe Biden has shown his commitment to tackling the climate crisis; in his first three months in office, he has rejoined the Paris Agreement, ended a controversial oil pipeline, suspended fossil fuel leases on public land, proposed unprecedented investment in clean energy and started to reverse many of his predecessor’s climate regulatory rollbacks. However, there is one policy that is missing from Biden’s climate overhaul policies- a carbon price.
What is Happening?
- A carbon price is a policy that literally puts a price on greenhouse gas emissions. Rather than mandating emissions targets, it gives polluters an incentive to cut down on their emissions. It’s a policy favoured by economists for its simplicity as a market mechanism.
Joseph Majkut at the Niskanen Center, a Washington-based think-tank, says, “You’re allowing market actors to respond to incentives and the idea is that they will do that very efficiently.”
- A carbon price can take various forms. Options include a direct tax, whereby companies are charged per tonne of carbon emitted, and a “cap-and-trade” system that sets allowances, which emitters can buy and sell.
- Biden made the climate crisis a massive part of his campaign, insisting that the US needs to move away from fossil fuels. However, he has been silent on carbon pricing since taking office.
- Around 20% of the world’s emissions are currently covered by one of these carbon pricing schemes. The EU Emissions Trading Scheme, the world’s largest carbon market, is set to be expanded this year to include the maritime sector. China also plans to launch its own trading scheme this year, overtaking Europe’s in size. Canada has also established a carbon price that is expected to rise steeply.
- A carbon price in the US would provide a degree of permanency to climate policy in the country, where the political landscape of constantly-changing Democratic- Republican legislatures means that regulation can be overhauled and changed every few years.
Majkut says, “Fiscal policy is something that can be more durable, long term and less subject to legal and administrative challenges and risks. And we think it can help, under certain conditions, to resolve the political challenges of securing ambitious climate action.”
- However, support for a national system has waned since 2009. Critics say that the imperfect realities mean that carbon pricing has not worked as well as expected, and that prices imposed are invariably too low to drive the shifts needed to address climate change.
- Surprisingly, last month the American Petroleum Institute, Big Oil’s Washington lobby group, came out in support of a carbon price– a policy it previously fought to prevent becoming law.
- Despite Biden’s silence on the matter, John Kerry, Biden’s climate envoy, has offered carbon pricing advocates hope. On a trip to India last month, he said, “President Biden believes that at some point in time we need to find a way to have a price on carbon that’s effective. He hasn’t decided or made an announcement about it, but we all know that one of the most effective ways to reduce emissions is putting a price on carbon.”
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