Handbook offers U.S. policymakers comprehensive guidance on options and key elements of carbon pricing

WASHINGTON (April 30, 2015) — World Resources Institute (WRI) released Putting a Price on Carbon: A Handbook for U.S. Policymakers, a new paper that concludes that carbon pricing should serve as a core element to reduce carbon emissions and would produce a range of economic benefits to the U.S. economy. The paper comes as support for carbon pricing is growing among stakeholders across the political and economic spectrum.

“We cannot continue to use the atmosphere as a dumping ground for carbon pollution. It surely makes no sense to tax productive activities like labor, income and profits, while giving a free ride to carbon emissions that degrade the environment and imperil public health,” said Andrew Steer, president and CEO, WRI. “It’s abundantly clear that putting a price on carbon is the right choice to deliver multiple benefits, including driving innovation, boosting economic growth and reducing emissions.”

The handbook is the first in a series of publications from WRI designed to examine the key issues surrounding carbon pricing mechanisms. The new paper draws from current literature and frequently-cited studies representing diverse perspectives about how to correct market failures inherent to carbon pollution. It profiles design features of carbon pricing, identifies economic impacts from varying emissions reduction incentives, and details options for distributing and investing new resources generated by industries that emit at high levels and produce carbon-intensive goods.

“Environmental tax reform is America's opportunity to achieve cleaner air and faster economic growth,” said Bob Inglis, former member of Congress and executive director of the Energy and Enterprise Initiative. Inglis will join representatives from WRI and other stakeholders today for a town hall on carbon pricing at WRI’s office in Washington, D.C.

Recent polling has shown broad public support for a carbon price in the U.S., with a significant majority of Americans favoring a tax on carbon emissions as a means to confront and combat climate change. According to a survey conducted in January 2015 for Stanford University and Resources for the Future, more than 60 percent of respondents approve of charging a fee for polluting emissions, which climbs to two-thirds (67 percent) backing if the new revenues were directed to consumers.

By establishing a value on carbon, the financial burden of harmful pollution will no longer be borne by taxpayers alone. Carbon pricing appropriately shifts responsibility to those whose energy and electricity generation or manufacturing produces emissions. Far-sighted companies can move quickly to invest in efficient technologies that rely on less energy and emit fewer heat-trapping emissions. They will be rewarded by a parallel growth in consumer demand for more affordable goods and services.

One of the more attractive co-benefits of carbon pricing is the flexibility for revenue distribution, according to the paper. Revenues can fund tax cuts, refunds and rebates, or be used to achieve additional public policy objectives, such as reduce budget deficits, finance innovation and infrastructure, and help ease the transition away from carbon-intensive goods and services.

Carbon pricing is well-established and has been successfully implemented in many countries and regions. Already, close to 40 countries and more than two dozen sub-national jurisdictions are utilizing carbon-pricing programs.

For example:

  • British Columbia implemented a carbon tax in 2008 that is reducing greenhouse gas emissions while creating revenue to lower other tax rates. The fee is on track to drive emissions at least 33 percent below 2007 levels by 2020.

  • The Regional Greenhouse Gas Initiative (RGGI), a power sector cap-and-trade program made up of nine northeastern U.S. states, has generated more than $2 billion in consumer savings and distributed $700 million in revenues to further accelerate renewable energy and create jobs in the region.

  • Several Nordic countries have had carbon taxes in place since the early 1990s. For example, Sweden implemented a carbon tax in 1991 covering heating and motor fuels, with some full or partial exemptions for industry and agriculture. Revenue generated from the tax is used to offset the country’s labor taxes.

In addition, California has had a cap-and-trade system since 2012, and China is currently piloting several cap-and-trade and other carbon pricing mechanisms in five cities and two provinces.

“Carbon pricing is an effective tool that can simultaneously address multiple policy priorities,” said Kevin Kennedy, deputy director, U.S. Climate Initiative, WRI. “A well-designed carbon price would spur innovation, drive low-carbon economic growth and put the U.S. on a path to achieve its long-term climate goals. It can also generate revenue for any number of tax reforms and reductions, consumer dividends or other priorities. Putting a Price on Carbon is a comprehensive reference guide to help U.S. policymakers debate the features and options of a carbon price.”

Carbon pricing structure has strong and growing support from a number of industries, academics and influential leaders across the political spectrum, including Sen. Sheldon Whitehouse (D-R.I.), Rep. John Larson (D-Conn.), Hank Paulson (former U.S. Secretary of the Treasury), George Shultz (former U.S. Secretary of State) and Jerry Taylor (president of the Niskanen Center). Just last year, at the UN Climate Summit in New York, more than 1,000 companies and 73 countries signed onto a letter voicing their support for pricing carbon.

The handbook can be found on WRI’s website at: http://wri.org/publication/carbonpricing.