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.


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…
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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.
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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…
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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.
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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.
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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…
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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…
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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…
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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…
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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,…
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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,…
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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…
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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...


Four new carbon pricing bills drop in Congress 

By Danny Richter   07/25/19  
Four new carbon pricing bills drop in Congress By Danny Richter Our push for carbon pricing just took some new, exciting steps forward. First, Florida Republican Rep. Francis Rooney has introduced the bipartisan Stemming Warming…
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N.J. rejoins Northeast cap-and-trade program

By Adam Aton   06/17/19  
New Jersey today rejoined the Northeast's Regional Greenhouse Gas Initiative, adding the country's eighth-largest economy to a cap-and-trade regime that already encompassed about one-fifth of the United States' gross domestic product.
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Silicon Valley gets in the game for carbon pricing and H.R. 763

By Flannery Winchester   05/21/19  
Silicon Valley gets in the game for carbon pricing and H.R. 763 By Flannery Winchester The Silicon Valley Leadership Group (SVLG) — have you heard of them? Maybe not, but SVLG is a public policy…
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Carbon Pricing Reaches U.S. House’s Main Tax-Writing Committee

By Marianne Lavelle   05/16/19  
Less than a year ago, the House voted to denounce carbon taxes. Now, it's discussing a carbon pricing plan supported by some Republican Party luminaries.
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The Lovable Carbon Tax

By Teresa Ghilarducci   03/10/19  
Last month, more than 3,500 economists—a record number—signed an open letter calling for a carbon tax to fight climate change. Several of the economists at the meeting told me something to the effect of, “I…
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Carbon Tax Plans: How They Compare and Why Oil Giants Support One of Them

By Marianne Lavelle   03/07/19  
Two plans gaining traction would both put a price on fossil fuel pollution and send revenue back to taxpayers as dividends. Only one has big oil companies on board.
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Green New Deal vs. Carbon Tax: A Clash of 2 Worldviews, Both Seeking Climate Action

By Marianne Lavelle   03/04/19  
Congress is in uncharted territory on climate policy. For the first time ever, lawmakers face competing approaches to reviving U.S. climate action. And despite hostility from the White House, each has significant support and the…
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Bipartisan carbon pricing bill reintroduced in House

A group of lawmakers in the U.S. House of Representatives has reintroduced the Energy Innovation and Carbon Dividend Act, the groundbreaking bipartisan climate solution to price carbon, give revenue to households and bring greenhouse gas…
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Economists’ Statement on Carbon Dividends

Global climate change is a serious problem calling for immediate national action. Guided by sound economic principles, we are united in the following policy recommendations.
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Forget the Carbon Tax for Now

By Justin Gillis and Jameson McBride   12/27/18  
It’s politically toxic. There are other ways to cut greenhouse gas emissions.
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D.C. passes strong clean energy bill with price on carbon

By Jamie DeMarco   12/18/18  
D.C. passes strong clean energy bill with price on carbon By Jamie DeMarco After a multi-year, grassroots-led campaign, today the Washington, D.C., City Council passed the strongest climate legislation anywhere in the country. The Clean…
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How does the new carbon pricing bill stack up?

By Jerry Hinkle   12/07/18  
How does the new carbon pricing bill stack up? By Jerry Hinkle, CCL Economics Policy Network Upon the introduction of the Energy Innovation and Carbon Dividend Act, legislation authored by Representative Deutch and others (herein referred…
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Bipartisan carbon fee bill introduced in House

Five members of the U.S. House of Representatives from both parties just introduced the most significant climate change legislation Congress has seen in over a decade...
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Republicans say they want free-market innovation. Then they should want a carbon tax.

By Catherine Rampell   11/26/18  
Republicans’ latest excuse for ignoring climate change — like all their other excuses — gets the problem exactly backward.
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A Carbon Tax Wave? 7 States Considering Carbon Pricing to Fight Climate Change

By Marianne Lavelle   10/29/18  
Considering the defeat of a carbon tax in Washington this last election, it is stunning to see that we now have 7 states considering carbon pricing! Adding these states to those that already have some…
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Washington state has a ballot to approve a carbon tax. Revenues would go to clean air, water, energy, and communities

By David Roberts   10/26/18  
Lots of controversy. The fee would be charged to large carbon emitters and fossil fuel sellers based on the carbon content of the fuels sold or used in the state. The costs would come back…
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Canada adopts carbon fee and dividend to rein in climate change

Carbon fee and dividend, the solution to tackle climate change proposed by Citizens’ Climate Lobby, has emerged as the default policy in Canada to price carbon and reduce the greenhouse gas emissions contributing to global…
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Taxing polluters to fight climate change: a conversation with a Nobel Prize winner in economic science

By Coral Davenport   10/13/18  
Decades ago, Professor William D. Nordhaus launched his plan to price carbon. That it has not happened in the United States is political in his view. He is hoping for grownups to resolve that. He…
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Here’s How to Cut Greenhouse Gas Emissions Without Taxing Them

By Justin Gillis and Jameson McBride   08/14/18  
Congress should require the share of electricity from low-polluting technologies to increase steadily over time.
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The benefits of distributing carbon fees as dividends and the nuanced differences between various plans

By Mike Shatzkin   07/31/18  
There are at least three entities pushing a version of the same basic idea, which is to tax (although none of them use that word: it's not a "tax", it's a "fee") the CO2 resulting…
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ExxonMobil’s Support for a Carbon Tax is a Sham

By Elliott Negin   07/31/18  
ExxonMobil executives just had another opportunity to convince skeptics that their support for a carbon tax is genuine. They blew it. And, it’s not the first time.
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House Republicans Vote To Ban Carbon Tax As Climate Solutions Caucus Twiddles Its Thumbs

By Steve Hanley   07/25/18  
Carlos Curbelo is co-chair of the House Climate Solutions Caucus, a group that seeks to bring together representatives of both parties to support climate change legislation and policies. “If you want to join as a…
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Blending taxes and cap-and-trade could improve carbon pricing

By Chris Busch   03/21/18  
Although Washington state’s proposed carbon tax failed at the ballot box, carbon pricing remains one of the best policy solutions to mitigate the effects of climate changes as the window to keep global warming below…
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A carbon tax is right for environment and economy

By Jerry Hinkle   09/17/18  
A carbon tax is right for environment and economy By Jerry Hinkle, CCL Economics Policy Network Economists are overwhelmingly in favor of charging for carbon pollution via a tax or fee. This blog post explores…
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Coast to coast state carbon pricing efforts

By Lynn Meyer   09/11/18  
Coast to coast state carbon pricing efforts  By Lynn Meyer  With raging wildfires polluting the air throughout the northwest, storms and flooding ravaging the east coast, and red tide closing the gulf state beaches, it’s…
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Ottawa to announce rebates in provinces without carbon tax

By Shawn McCarthy   10/23/18  
Canadians in four provinces − including the election battleground of Ontario − will receive carbon-tax rebates that will leave most families financially better off, with cheques arriving ahead of the next federal campaign, Prime Minister…
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Trudeau promises rebates as Ottawa moves to levy carbon tax on provinces outside the climate plan

By John Paul Tasker   10/23/18  
The federal Liberal government will slap a carbon tax on fuels in provinces and territories with no adequate emissions pricing plans of their own — but will send annual rebates to Canadian families to offset…
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75 Business Leaders Lobbied Congress for Carbon Pricing. Did Republicans Listen?

By Marianne Lavelle   05/23/19  
Microsoft, Pepsi, Levi's and others are calling for carbon taxes or fees that could scale up innovation fast enough to combat climate change.
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