CARBON PRICING

It is generally accepted by climate-change activists that burning fossil fuels, which put CO2 into our ecosystem, is the principal cause of climate change. And it is generally accepted that “putting a price on carbon”, taxing the fuels that emit the CO2 (and therefore price-favoring energy sources that do not) is a useful strategy.

Putting a price on carbon can be done two different ways. One is called “cap and trade” — setting limits on how much CO2 we will accept and selling “permits” to burn the fossil fuel that will produce that limited amount. The demand for those licenses effectively determines the price paid for them.

The other method is simply to “tax” the fossil fuels based on the emissions they generate.

There is a difference of opinion among activists about which is better. But the big differences of opinion, the one that causes disagreements that slow down the efforts to put a price on carbon, are about “what to do with the revenue raised”.

Dedicated activists often want to devote those revenues to promote green energy or to redress people suffering climate injustice. Other activists (including one of the founders of this site) support carbon-fee-and-dividend, by which all the revenue raised pricing carbon is simply returned in equal shares to everybody. This approach has the advantage of being much more politically palatable since most people — 70 percent or more — get more back in their carbon “dividend” than the fees cost them in increased energy costs.

Our own Mike Shatzkin spoke to these issues at the Sarasota Institute in the spring of 2020.

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