Pricing Carbon in the United States
A well-designed carbon price can be a key policy lever to spur innovation, create lasting economic growth and help the United States decarbonize its economy by mid-century.
The impacts of climate change impose costs on society as a whole by increasing the risk of natural disasters that can lead to economic damage and worsening public health conditions. Pricing carbon can help factor those costs into decisions made by those responsible for the emissions, providing an incentive to reduce them.
Pricing carbon across the economy will make the goods and services with the greatest impact on climate more expensive. Higher prices for carbon-intensive goods and services will encourage businesses and consumers to look for alternatives that meet their needs and have lower carbon-emission footprints. In this way, a carbon price can help the United States meet its near- and long-term climate goals.
But a carbon price is more than a climate policy; it is an economic policy. Revenues raised by a carbon price can go toward supporting other policy priorities, including investing in communities affected by pollution, investing in clean energy, helping provide a just transition for communities dependent on fossil fuels or returning money to households.
WRI’s experts are diving into the design choices and potential economic effects of carbon pricing and the associated uses of revenues. This includes preparing a series of issue briefs and publications that provide guidance on effectively mobilizing a carbon price to address climate change.
In Putting a Price on Carbon: A Handbook for U.S. Policymakers, WRI provides an overview of carbon pricing — the types of decisions that need to be made in designing a program, including the political decisions about the use of revenue, and the expected economic impacts of alternative approaches. Putting a Price on Carbon: Reducing Emissions dives deeper into how a national price on carbon would reduce emissions across key sectors of the economy using empirical evidence and real-world case studies.
Other publications investigate the limitations of a carbon price and how they can be addressed through complementary polices and careful policy design. Putting a Price on Carbon: Ensuring Equity describes the differing effects of a carbon price on regional and socioeconomic groups across the United States. The analysis finds that the revenues from a carbon price can be used to address regional disparities and ensure that unfair burdens are not imposed on households that cannot afford them. Most recently,
Putting a Price on Carbon: Evaluating A Carbon Price and Complementary Policies for a 1.5° World emphasizes that a carbon price is not a silver bullet for addressing climate change and complementary policies to a carbon price are needed. These policies and programs must address market barriers and drive deep emissions cuts over the long-term.
WRI leverages this research to cultivate a shared understanding among public and private sector partners that underscores economy-wide carbon pricing as an important lever to decarbonize the United States economy by mid-century. This understanding should also position carbon pricing as a critical addition to investment-focused climate policy. To further promote this understanding, WRI serves as a resource for policymakers and engages as an environmental voice in coalitions with important private sector voices, like the CEO Climate Dialogue.