Carbon Tax/cap-and-trade


Burning fossil fuels is by far the greatest source of the greenhouse gases causing climate change. However, the full cost of fossil fuel energy is not included in the price of the fuel. We pay for that later when we deal with the consequences of global warming. Using a car to illustrate this point, “We pay for the gas, we pay for the car, and we pay for the insurance, but we don’t pay for the pollution that comes out of the tail pipe.”

It is time to raise the price of coal, oil, and gas and put the market on the side of fixing that inequity. This will allow all the other energy sources that do not put CO2 into the ecosystem — solar, wind, geothermal, hydro, and nuclear — to be competitively advantaged because the fossil fuel energy will be relatively more expensive. 

Here are the differences between carbon taxes and cap-and-trade: “A carbon tax directly establishes a price on greenhouse gas emissions — so companies are charged a dollar amount for every ton of emissions they produce — whereas a cap-and-trade program issues a set number of emissions “allowances” each year. These allowances can be auctioned to the highest bidder, as well as traded on secondary markets, creating a carbon price.”  

The challenge in both cases often comes down to how the revenue should be distributed.

Apparently there are 4 possibilities:
1. Climate justice. The money collected should be spent in pursuit of promoting climate justice.
2. Investments in renewables.
3. Tax swaps, such as reductions in taxes of some kind and using the revenues to make up for that.
4. Dividend. Give it back to the people in equal shares. Doing that provides people a regular check, reminding them that carbon is being taxed, which might additionally encourage them to lobby for an even larger tax.


A Carbon Tax Is Back on the Table

By Matthew Zeitlin 03/04/24
Climate policy has been all over the place lately thanks to pressure from interest groups, pre-election jitters, and the plausibility of a re-elected President Donald Trump laying waste to existing climate policy. But further in…
Read more

Carbon Markets Are in Limbo. That’s Not Stopping This Firm.

By Manuela Andreoni and Max Bearak 12/16/23
First, the little-known Emirati company set its sights on a forest the size of Maine. Then, another one that was big as South Carolina. After that, it focused on a chunk of land the size…
Read more

Petrostate windfall tax would help poor countries in climate crisis, says Brown

By Fiona Harvey 09/25/23
Petrostates should pay a small percentage of their soaring oil and gas revenues to help poor countries cope with the climate crisis, the former UK prime minister Gordon Brown has urged.
Read more

Carbon Taxes vs. Cap-and-Trade: Which is the Better Policy?

Climate change is an urgent global issue that requires immediate and effective policy solutions. As governments around the world grapple with the best way to address this crisis, two main policy approaches have emerged: carbon…
Read more

Carbon Pricing, Environmental Justice, Compromise

By Meredith Fowlie 08/07/23
As climate change gets scarier, the need for dramatic GHG reductions becomes clearer. Here in California, we’re realizing just how challenging this is going to be.
Read more

Carbon trade-offs: How firms respond to emissions controls

By Maria Cecilia Bustamante and Francesca Zucchi 08/05/23
Given that regulatory efforts to control carbon emissions are intensifying around the world, understanding the incentives that carbon pricing creates for firms is paramount.
Read more

Is a luxury carbon tax a fair and equitable way to tackle climate change?

By Sarah DeWeerdt 07/25/23
Reducing the amount of energy used by the top quintile of energy users in Europe could cut total household greenhouse gas emissions by almost 10%, according to new research. The study is one of two…
Read more

How Canada Rolled out a Carbon Tax Without Calling It One

By Akshat Rathi 07/18/23
Carbon taxes are an economist’s dream and a politician’s nightmare, as climate solutions go. Get them right and the emissions warming the planet decline. Get them wrong and you face grumpy voters and businesses. Taxes…
Read more

Confronting Climate Change Through Carbon Pricing: Is the Policy Politically Feasible and Durable?

In this edition of Wilson Center NOW, we are joined by Barry Rabe, the Arthur Thurnau Professor of Environmental Policy and the J. Ira and Nicki Harris Family Professor at the Gerald R. Ford School…
Read more

Carbon Charges Can Put Investors’ Money Where Their Mouth Is On Climate Change

By Sarah Keohane Williamson 06/14/23
Over the past decade, many countries and companies have made ambitious pledges to reach net zero greenhouse gas emissions to tackle climate change. For investors, however, the implementation of similar commitments in investment portfolios has…
Read more

How corporations use greenwashing to convince you they are battling climate change

By Tom Lyon 05/15/23
Many corporations claim their products are “green-friendly.” But how do you know if what they’re selling is truly eco-safe? SciLine interviewed Thomas Lyon, professor of sustainable science, technology and commerce at the University of Michigan,…
Read more

Frequent Flyer Tax Could Raise Billions for Climate

By Kelley R. Taylor 05/09/23
Frequent flyers contribute more carbon pollution than other people on the planet. That’s a takeaway from researcher Sola Zheng, who focuses on the environmental impacts of commercial aviation. In a piece written for TIME magazine,…
Read more


The Ultimate Guide to Understanding Carbon Credits

A carbon market allows investors and corporations to trade both carbon credits and carbon offsets simultaneously. This mitigates the environmental crisis, while also creating new market opportunities.

Key to Biden Climate Agenda: The Social Cost of Carbon Explained

Michael Greenstone, EPIC Director, said reverting to the Obama-era calculations would yield a social cost of carbon of $125 per ton, assuming it took into account lower interest rates in recent years.

Report of the High-Level Commission on Carbon Pricing and Competitiveness

The potentially adverse impact of carbon pricing on the competitiveness of businesses and economies has been a matter of concern to industry and policymakers.

Putting a Price on Carbon: Evaluating A Carbon Price and Complementary Policies for a 1.5° World

Putting a price on carbon is necessary to reduce emissions but sufficient to get to full decarbonization by 2050. Complementary policies with a carbon price are needed to achieve full decarbonization.

Climate Leadership Council

Economists agree that an escalating carbon fee offers the most cost-effective climate policy solution, sending a powerful price signal to steer businesses and consumers towards a low-carbon future. Accordingly, the first pillar of our bipartisan…

U.S. State Carbon Pricing Policies

Compared to command-and-control regulations, carbon pricing is a market-based mechanism that creates financial incentives to reduce greenhouse gas (GHG) emissions. Ten states that are home to over a quarter of the U.S. population and account…

Implementing a U.S. Carbon Tax: Challenges and Debates (2015)

Although the future extent and effects of global climate change remain uncertain, the expected damages are not zero, and risks of serious environmental and macroeconomic consequences rise with increasing atmospheric greenhouse gas concentrations. Despite the…

Citizens Climate Lobby

Citizens’ Climate Lobby is a non-profit, non-partisan, grassroots advocacy organization focused on national policies to address climate change. By building upon shared values rather than partisan divides, and empowering our supporters to work in keeping…

Carbon Tax Center

The Carbon Tax Center stands at the front lines of the struggle for a sustainable climate and a habitable Earth. Our mission: to generate support to enact a transparent and equitable U.S. carbon pollution tax…

Carbon Pricing as a Solution to Climate Change

FCNL believes that carbon pricing is one of many essential tools that Congress should use to address climate change and shift towards a clean energy economy. While we have not endorsed any particular bill at…

Cap Carbon Now

This blog explains what Pure Cap-and-Dividend means, how it differs from more limited cap-and-trade proposals, and why it is superior to other policy options...


Carbon Taxes in Theory and Practice

By Alex Muresianu   05/02/23  
Among economists, the carbon tax is a popular solution to climate change. The case for the carbon tax is clear in the abstract. Find out the social cost of carbon emissions, then tax carbon emissions…
Read more

The role of carbon capture in climate change policy

By Rick Knight   04/18/23  
Carbon capture is a way to remove carbon dioxide (CO2) from some mixture of gases. If CO2 is removed from an emissions source, such as the exhaust gas from a power plant, and then sequestered…
Read more

California Cap-and-Trade: Positive Market Outlook Ahead of Upcoming Market Reforms

By Oktay Kurbanov   03/31/23  
California has long been a national leader in ambitious climate policy, having set its original greenhouse gas (GHG) reduction targets in 2006 and implemented its cap-and-trade program in 2013. Prices for California carbon allowances (CCAs)…
Read more

Cap and Trade Heats Up—For Better or Worse

By Daniel Carpenter-Gold   03/15/23  
This past year has been big for cap-and-trade-style systems, and that momentum looks like it’s continuing in 2023. Recently, we’ve seen new programs start up in Oregon and Washington, a proposal in New York State…
Read more

US carbon pipeline faces setback as residents refuse to cede land rights

By Leah Douglas   03/09/23  
Navigator CO2 Ventures’ proposed carbon pipeline project in the U.S. Midwest is struggling to secure a site to store millions of tons of greenhouse gas it hopes to collect from the region’s ethanol plants, as…
Read more

Why EPA’s huge social cost of carbon might fail to halt CO2

By Jean Chemnick   03/09/23  
EPA is about to finalize a sky-high value for carbon that could be used whenever the federal government leases land to oil drillers or buys new mail trucks.
Read more

A Poorly Designed Boondoggle

By Jonathan A. Lesser   03/07/23  
Last December, New York’s Climate Action Council released its Final Scoping Plan, an all-encompassing proposal to cut the state’s carbon emissions to zero by 2050. The 400-page regulatory framework would introduce new, sweeping rules across…
Read more

Following California, Washington Starts Cap and Trade Market

By David R Baker   03/07/23  
Washington State reported the results of its first cap-and-trade auction for fighting climate change, as carbon markets gain renewed interest among US policy makers trying to slash greenhouse gas emissions.
Read more

Fighting Climate Change Was Costly. Now It’s Profitable.

By Emma Marris   02/08/23  
It is a good time to be in the decarbonization business in the United States. The Inflation Reduction Act—with its $374 billion cornucopia of green incentives, subsidies, and grants—was designed to entice private companies to…
Read more

Where is the carbon premium? Global performance of green and brown stocks

By Michael D. Bauer, Daniel Huber, Glenn D. Rudebusch, Ole Wilms   01/12/23  
A pressing question for policymakers, researchers, and financial advisors is whether private businesses are appropriately positioned for climate-related changes in the physical, economic, financial, and policy environments. Companies may have assets that are at risk…
Read more

Should Hawaiʻi enact a carbon tax?

Hawaiʻi tax experts are recommending a new carbon tax for the state. If implemented, Hawaiʻi will become the first state in the nation to do so. A new blog by University of Hawaiʻi Economic Research…
Read more

U.S. Carbon Emissions Grew in 2022

By Elena Shao   01/10/23  
America’s greenhouse gas emissions from energy and industry rose last year, moving the nation in the opposite direction from its climate goals, according to preliminary estimates published Tuesday by the Rhodium Group, a nonpartisan research…
Read more

Can a Nation Replace Its Oil Wealth With Trees?

By Dionee Searcey and Others   11/03/22  
Evening and the rainforest. A riverbank packed with elephants. Treetops so dense they obscure all but a chimpanzee’s hairy arm. And, as the sun sets, a twinkle on the horizon: an offshore oil platform.
Read more

How Is the US Pricing Carbon? How Could We Price Carbon?

By Joseph E. Aldy and Others   10/13/22  
Economists have for decades recommended that carbon dioxide and other greenhouse gases be taxed—or otherwise priced—to provide incentives for their reduction. The United States does not have a federal carbon tax; however, many state and…
Read more

‘Carbon offsetting’ is just greenwash. Here’s what we need instead

By Adam Ramsey   10/13/22  
Fifteen years ago, as Valentine’s Day approached, a trio of entrepreneurs took to the streets of Britain selling a brave new idea. Bearing heart-shaped helium balloons and red red roses, they told passers-by about their…
Read more

Pace of Climate Change Sends Economists Back to Drawing Board

By Lydia DePillis   08/25/22  
Economists have been examining the impact of climate change for almost as long as it’s been known to science. In the 1970s, the Yale economist William Nordhaus began constructing a model meant to gauge the…
Read more

Why We Don’t Have a Carbon Tax

By Paul Krugman   08/16/22  
Three and a half years ago, an open letter that more than 3,600 economists eventually signed declared that “climate change is a serious problem calling for immediate national action.” The signatories included 15 former chairs…
Read more

As Evidence of Cap and Trade Problems Mounts, California Air Regulators Remain Defiant

By Aaron Cantu   02/24/22  
At a state Senate hearing on Wednesday, top regulators dismissed concerns about the ability of California’s cap and trade program to help the state meet its climate goals. The hearing focused on a recent report…
Read more

Price hike marks new era for Calif. cap and trade

By Benjamin Storrow   01/03/22  
When California lawmakers passed a 10-year extension of the state’s cap-and-trade program in 2017, it was celebrated as a crowning climate achievement. Four short years later, the program has become a political albatross. Environmental justice…
Read more

This Climate Bill Would Actually Send Checks To Americans. Can It Help Save The Planet And Grow Our Economy?

By John Cumbers   08/03/21  
Climate change is an all-hands-on-deck crisis. The problem comes from many quarters of Spaceship Earth, and while many solutions can help solve it, none of them can do it alone. Vegan diets and paper straws…
Read more

The Best Way to Tax Carbon at the Border

By Sara Schonhardt   08/02/21  
As more world leaders consider levying border taxes on climate-damaging goods, a new study looks at ways it can be done in countries—including the United States—that haven’t established a domestic market for carbon emissions.
Read more

Washington’s Oil Lobby Pivoted on Climate Change—and Made No One Happy

By Timothy Puko and Ted Mann   07/28/21  
The American Petroleum Institute, Washington’s biggest lobby for the oil-and-gas industry, spent decades leveraging its financial muscle to fight almost every green initiative in its path. Then in March, the group signaled an about-face. It…
Read more

Wildfires rage and a tool to combat climate change goes up in smoke

By Debra Kahn   07/27/21  
Massive wildfires in Oregon and Washington are torching more than vegetation. They’re also burning through a system used by states and businesses to fight climate change.
Read more

Some In the Environmental Justice Movement Oppose A Carbon Tax. That’s A Problem For Democrats

By Howard Gleckman   07/20/21  
While President Biden has called climate change an existential threat, his proposals for addressing it remain modest relative to the enormity of the problem. In part, that’s because he’s taken off the table a carbon…
Read more

Why Pricing Carbon Is Still More Theory Than Reality

By Lars Paulsson   07/15/21  
It’s an idea that’s been around for more than two decades: To slow climate change, make polluters pay for the damage they cause. Worldwide, more than 60 nations, states and cities have adopted what’s known…
Read more

US’s Yellen urges better coordination on carbon policy

By David Lawder   07/09/21  
U.S. Treasury Secretary Janet Yellen called on Friday for better international coordination on carbon-cutting policies to avoid trade frictions, days before the European Union is due to unveil a controversial carbon border tax.
Read more

How Not to Freak Out About a Carbon Tax

By Akshat Rathi   07/06/21  
Indonesia is proposing a carbon tax of about $5 per ton of emissions in a bid to raise state revenues and meet climate goals. That’s less than a tenth of the current price of carbon…
Read more

Close to Home: For wineries, a carbon tax is pro-business

By Robin Lail and Beth Novak Milliken   05/23/21  
Drought, heat extremes, wildfires, power outages, smoke — in the past four years these have become part of our normal experience in the Napa Valley and in all winegrowing regions in the western United States.
Read more

JPMorgan Chase Releases Carbon Reduction Targets for Paris-Aligned Financing Commitment

JPMorgan Chase today released comprehensive steps it is taking in its efforts to align its financing activities with the climate goals of the Paris Agreement. As part of its Paris-aligned financing commitment announced last fall,…
Read more

Washington Passed its Cap-and-Trade Climate Legislation. Now What?

By Levi Pulkkinen   05/10/21  
Washington state lawmakers have passed a sweeping set of environmental regulations meant to cut net greenhouse gas emissions to zero by 2050 while pumping billions of dollars into the state coffers and addressing environmental racism.…
Read more

The Oxford Offsetting Principles & carbon removal—w/ Eli Mitchell-Larson: RCC podcast S2E62

Many corporations, organizations, and governments have made net zero commitments, and most are leaning on voluntary carbon offsetting to achieve these climate goals. But how can we be sure that such carbon offsets demonstrate a…
Read more

Researchers demonstrate how carbon taxes can reduce global poverty . . . not exacerbate it

By Sarah DeWeerdt   05/04/21  
The burden of climate change will fall disproportionately on the world’s poor: economic damage from increased temperatures will be worse in the Global South, and within any given country climate disruptions affect poorer people more.…
Read more

Economists: A US carbon tax would be progressive

By Gilbert E. Metcalf and Lawrence Goulder   04/28/21  
Environmental justice concerns have been at the forefront in discussions of U.S. environmental policy. They have been central, in particular, to discussions of proposals for a nationwide carbon tax to address climate change. While economists…
Read more

Biden Administration Sets Social Cost Of Carbon At $51 Per Ton

By Steve Hanley   03/06/21  
The Biden administration has set the social cost of carbon at $51 per ton — 7 times higher than the price set by the prior administration. What does that mean? Economists talk about “untaxed externalities”…
Read more

Spending $500B On Electric Trucks Could Make Economic Sense, But Only With A Carbon Tax

By Ed Hirs   07/17/20  
Transitioning to a low carbon economy is in progress. It is not political. According to the Yale Program on Climate Change Communication, a majority of Americans of both parties are in favor.
Read more

Western Climate Initiative auction results show resilience of cap and trade and benefit of long-term climate investment strategy

By Katelyn Roedner Sutter   05/28/20  
The results of the latest joint California-Quebec cap-and-trade auction were released today. As expected, the auction was significantly undersubscribed, something not seen since February 2017. The low revenue from this auction points to a need…
Read more

Is this carbon price enough? Here’s what the experts say

By 5/20/20   05/20/20  
Is this carbon price enough? Here’s what the experts say By Jerry Hinkle, CCL Economics Policy Network CCL volunteers are currently advocating for the passage of the Energy Innovation and Carbon Dividend Act (H.R. 763).…
Read more

Pa. carbon cap and fee plan projected to cut emissions, hasten coal closures

By Laura Legere   04/24/20  
Pennsylvania's plan to begin requiring power plants to pay to release carbon dioxide into the air would reduce greenhouse gas emissions over the next decade and...
Read more

How carbon fees promote “free-market innovation”

By Jonathan Marshall   03/12/20  
How carbon fees promote “free-market innovation” By Jonathan Marshall, CCL Economics Policy Network When USA Today recently editorialized in favor of a national carbon fee and dividend to “prevent further catastrophic changes in the world’s…
Read more

Could Hawaii Pass The Country’s First Tax On Carbon Emissions?

By Ryan Finnerty   03/09/20  
The idea of a carbon tax has broad support from economists and a version was already approved by the state Senate. If agreed to by the House and Gov. David Ige, it would become the…
Read more

JP Morgan warns of end to human life in climate report

By Ed Clowes   02/21/20  
The human race could cease to exist without massive worldwide action to tackle global warming, economists at JP Morgan have warned in a hard-hitting report on the "catastrophic" potential of climate change.
Read more

We Can’t Slow Climate Change Without the Energy Companies

By Ted Halstead   01/09/20  
Bigger and faster emissions reductions are possible if environmentalists and industry work together.
Read more

An Exxon-Owned Firm Figured Out How to Curb CO2 in 1991

By Eric Roston   12/04/19  
An oil company figured out that only a high carbon price—even for today—could slow emissions.
Read more

Lawmakers, criticizing Wolf’s executive order on joining cap-and-trade program, say it’s their call

By Scott Blanchard   11/20/19  
Some state lawmakers are telling Gov. Tom Wolf he went too far with an executive order for the commonwealth to join a regional effort to cut power plant emissions...
Read more

Columbia University economists publish study of bipartisan carbon pricing bill

A group of five economists from Columbia University’s Center on Global Energy Policy has published “An Assessment of the Energy Innovation and Carbon Dividend Act.” This study offers an up-to-date, independent assessment of the Energy…
Read more

Carbon price could allay ‘astounding’ cost to attain New York’s zero carbon target: Report

By Robert Walton   10/04/19  
Introducing carbon pricing into competitive wholesale power markets could provide billions of dollars in net economic benefits, the New York Independent System Operator (NYISO) said Thursday.
Read more

Impervious to a carbon price? The myth of transportation and carbon fees

Impervious to a carbon price? The myth of transportation and carbon fees By Jonathan Marshall More than 3,500 U.S. economists, including 27 Nobel laureates, insist that carbon taxes offer “the most cost-effective lever to reduce [greenhouse gas] emissions at…
Read more

Why carbon tax is crucial to curbing climate change

By Feike Sijbesma   09/22/19  
As world leaders gather in New York City this week for the UN General Assembly, climate change is front and centre. And rightly so: the window for action is closing.The 2015 Paris Agreement is the…
Read more

Climate Town Hall: Several Democratic Candidates Embrace a Carbon Tax

By Coral Davenport and Trip Gabriel   09/04/19  
At a CNN forum on climate change, the first such prime-time event in a presidential campaign, candidates vowed to take aggressive action to combat global warming.
Read more

Guest post: What the UK can learn from carbon pricing schemes around the world

By Joshua Burke and Rebecca Byrnes   08/02/19  
The UK government has set itself an unprecedented challenge in legislating to reach net-zero greenhouse gas emissions by 2050, the first major economy to do so. It now faces the task of actually reaching that…
Read more