In the renowned book “Physics for Future Presidents”, the author (Richard A. Mueller) makes a statistical calculation indicating that the observed global warming from 1957 to now has < 5% chance to be a result of ordinary climate variation.
Something has forced the climate to change. The causes can range from solar variation to human produced CO2. Furthermore, there is a > 90% chance that humans are responsible for at least some of the warming.
There is little debate on whether using fossil fuels is affecting the climate – the main point of contention is how large the effect is. Governments around the world have been implementing various policy tools to reduce climate change – and one of the main tools is a carbon tax.
What a carbon tax is. A carbon tax is aimed at reducing human generated CO2 by decreasing the economic viability of fossil fuels. The tax essentially charges a certain amount of money for carbon emissions. This tax can be charged to fossil fuel producers as well as consumers.
Carbon taxes for fossil fuel producers. An example of carbon tax for fossil fuel producers can be seen from the “Specified Gas Emitters Regulation (SGER)” in the Canadian province of Alberta. This particular policy requires fossil fuel producers that emit more than 100,000 tonnes of greenhouse gases (on an annual basis) to pay $20/tonne as of 2016. The proceeds of this tax goes to the “Climate Change and Emissions Management Fund CCEMF)”.
Carbon tax for consumers. An example of carbon tax for consumers can be seen in the Canadian province of British Columbia. The policy will put carbon pricing at $30/tonne, and equates to consumers paying an additional 7.2 cents per litre (an additional 27 cents per gallon) for gas at the pump.
This BC policy is slightly unique in the sense that the carbon tax will be revenue neutral. The province will reduce corporate and income taxes at an equivalent rate so that the government isn’t actually making more money by taxing carbon. Furthermore, low income individuals and families are shielded from the carbon tax through a climate action tax credit.
Vancouver, British Columbia
Carbon taxes in the United States. Notably, the United States is one of the few remaining industrialized nations that have not implemented a direct carbon tax. The image below estimates how much an effect a $15/ton and $25/ton carbon tax would have on US electricity generation. As can be seen, a carbon tax would likely reduce the amount of coal usage.
Anticipated effect of a US carbon tax
Even though the US government has yet to implement a carbon tax, many American companies have started to develop their own “cost of carbon” that is used to evaluate investment decisions. This is a very positive step as it mean that companies are starting to see the economic benefit of sustainability.