Team Carbon Price

Barack Obama explains his support for pricing carbon

Global Warming Minnesota

Contra Tony Abbott and Stephen Harper, Barack Obama believes in the utility of establishing a price on carbon and he recently explained as much to the New York Times’ Tom Friedman.

What is the one thing you would still like to see us do to address climate change? Said Obama: put a price on carbon.

The way we’ve solved previous problems, like acid rain, he noted, “was that we said: ‘We’re going to charge you if you’re releasing this stuff into the atmosphere, but we’re going to let you figure out — with the marketplace and with the technology’ ” how best to mitigate it. But “you can’t keep dumping it out in the atmosphere and making everybody else pay for it. So if there’s one thing I would like to see, it’d be for us to be able to price the cost of carbon emissions. … We’ve obviously seen resistance from the Republican side of the aisle on that. And out of fairness, there’s some Democrats who’ve been concerned about it as well, because regionally they’re very reliant on heavy industry and old-power plants. … I still believe, though, that the more we can show the price of inaction — that billions and potentially trillions of dollars are going to be lost because we do not do something about it — ultimately leads us to be able to say, ‘Let’s go ahead and help the marketplace discourage this kind of activity.’ ”

The mention of acid rain is conceivably a reference to the cap-and-trade system that already exists in the United States to deal with sulphur dioxide emissions. That system was created under a law signed by George H.W. Bush.

Mind you, President Obama isn’t actually imposing a price on carbon. At the moment, he has proposed regulations and it will be up to individual states to decide how they want to meet those targets. And that is where the carbon-pricing debate might next get most interesting—several states, including California, are already pursuing cap-and-trade and other states could conceivably follow suitHere is a quick primer on the American situation.

In Australia, it is being suggested that Prime Minister Abbott is out of step with a larger worldwide trend toward carbon trading. And though that map The Age uses seems to overstate carbon-pricing in Canada—there’s nothing currently in Ontario nor Manitoba—it is perhaps necessary to remind everyone that carbon taxes and cap-and-trade already exist here. British Columbia has a carbon tax, Alberta has a carbon levy and Quebec is aiming to link a cap-and-trade system with California. The Age seems to have borrowed from this survey of global carbon-pricing initiatives conducted by the World Bank. Manitoba and Ontario have made noises about pursuing cap-and-trade, but neither has followed through on anything.

None of which, of course, makes a carbon tax or cap-and-trade system any more right or wise. As I wrote yesterday, it’s entirely down to the details of the policy and its implementation—there is no right or wrong answer here, rather a series of options. Here, for the sake of argument, is a good debate from the Times.

(While the federal government does not want to explicitly price carbon through a carbon tax or cap-and-trade, it does use a calculation known as the “social cost of carbon” to perform cost-benefit analyses of its regulations. As of February 2013, that cost was calculated to be $28.44 per tonne of emissions. The United States has since increased its own estimate to $36 per tonne.)