Post on 08-Jan-2018
description
Solving the Climate Crisis: Carbon Pricing 101
Basics of Carbon Pricing
Dr. Linda Dismore (Diz) Swift
© http://PriceonCarbon.org
Costs of fossil fuel use are not included in the current price • Hurricanes (Sandy $65b), drought, health costs, sea level rise
• Social Cost of Carbon estimates from $37 to >$400/ton CO2e
• Fossil fuels are artificially inexpensive
Put a price on carbon emissions so users pay the fair price • Fossil fuel use will decrease; CO2 emissions will decrease
• Alternatives become more affordable and grow • The economy can also grow
Carbon Pricing 101Putting the Market to Work PriceonCarbon.org
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Pricing Carbon is not a new idea
Figure from World Bank report, 2014
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How Do You Price Carbon?
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Carbon Pricing Elements
Pricing Mechanism
Emissions Included
Revenue Use
How Do You Price Carbon?
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Carbon Pricing Elements
Pricing Mechanism
Carbon Tax or FeeCap and Trade
Emissions Included
Revenue Use
Pricing Mechanism
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Both mechanisms have been tried; both can be effective.
Cap and Trade Carbon Tax
Emissions Declining emissions cap set by government
Emissions volume based on market
Price Price based on marketRising price set by
government
Linda Swift © 2015
Declining Cap Set by Government
MaximumEmissionsAllowed
Cap
Year 1 Year 2 Year 3 Year 4
Company A
Cap and Trade
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Linda Swift © 2015
Permits Auctioned by Government
Company A emits above cap, needs more permits
Company B buys more permits than neededCompany B
Cap
Cap
Company AEmissions Permits
Emissions Permits
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Cap and Trade
Company B sells permits to Company A
Company B
Company AEmissions Permits
Emissions Permits
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Cap and Trade
Linda Swift © 2015
Company B sells permits to Company A
Company B
Company AEmissions Permits
Emissions Permits
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Cap and Trade
Allocations
Allowances (permits) can be given by government to select companies or industries“Free permits”
May decrease with timeEmissions
Permits
Cap
Allocations“Free Permits”
Company A
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Complications
Offsets
Projects which sequester carbon can offset some emissions/permits
Emissions
Permits
Cap
Offset
Company A
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Complications
How Do You Price Carbon?
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Carbon Pricing Elements
Pricing Mechanism
Carbon Tax or FeeCap and Trade
Emissions Included
Electricity generationTransportationIndustrial
Revenue Use
How Do You Price Carbon?
© http://PriceonCarbon.org
Carbon Pricing Elements
Pricing Mechanism
Carbon Tax or FeeCap and Trade
Emissions Included
Electricity generationTransportationIndustrial
Revenue Use
Government ProgramsMitigate/adaptReduce deficitInfrastructure, etc
Revenue NeutralReturn to peopleReduce other taxes
How Do You Price Carbon?
© http://PriceonCarbon.org
Carbon Pricing Elements
Pricing Mechanism
Carbon Tax or FeeCap and Trade
Revenue Use
Government ProgramsMitigate/adaptReduce deficitInfrastructure, etc
Revenue NeutralReturn to peopleReduce other taxes
California
How Do You Price Carbon?
© http://PriceonCarbon.org
Carbon Pricing Elements
Pricing Mechanism
Carbon Tax or FeeCap and Trade
Revenue Use
Government ProgramsMitigate/adaptReduce deficitInfrastructure, etc
Revenue NeutralReturn to peopleReduce other taxes
Van Hollen Bill
How Do You Price Carbon?
© http://PriceonCarbon.org
Carbon Pricing Elements
Pricing Mechanism
Carbon Tax or FeeCap and Trade
Revenue Use
Government ProgramsMitigate/adaptReduce deficitInfrastructure, etc
Revenue NeutralReturn to peopleReduce other taxes
CCL
How Do You Price Carbon?
© http://PriceonCarbon.org
Carbon Pricing Elements
Pricing Mechanism
Carbon Tax or FeeCap and Trade
Revenue Use
Government ProgramsMitigate/adaptReduce deficitInfrastructure, etc
Revenue NeutralReturn to peopleReduce other taxes
British Columbia
For more information…
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http://PriceonCarbon.org