Is Carbon Pricing Finally Taking Center Stage?

“We’ve now got carbon pricing on the radar screen in a way it hasn’t been before,” said the World Bank’s John Roome, “We’re moving from why to how.”

An April 24 New York Times story by Coral Davenport quoted Roome and others on the growing momentum of carbon pricing. “There is now an overwhelmingly obvious scientific consensus that the more carbon pollution we put into the air the more impact it has on warming the massive melting of the Arctic, the cycles of droughts and flooding, the die-offs of coral reefs,” the World Bank’s president, Jim Yong Kim, told Davenport. “And to our economists, who have been studying this for quite some time, there is an equally obvious consensus that putting a price on carbon pollution is by far the most powerful and efficient way to reduce emissions.”

The Bank has created a Carbon Finance Unit to help countries interested in pricing carbon. Its staff are already working with China and 17 other nations with emerging economies to put this idea into practice. “We strongly urge people to prepare for the carbon pricing that is to come,” Kim said.

The International Monetary Fund (IMF) is on the same freight train. In mid-April it teamed up with the Bank, the Organization for Economic Cooperation and Development, and the leaders of Canada, Chile, Ethiopia, France, Germany and Mexico to release a statement calling for more carbon pricing.

All this activity increases the prospect that the United States will become isolated on the climate front. As noted above, the two large countries that are our neighbors are in motion. Since Congress has not acted, some states, as well as the Northeast region, have tried to fill the void. The EPA’s Clean Power Plan, assuming it survives its brawl in the courts, is expected to lead to a patchwork of state plans that rely on carbon pricing. But that plan addresses only the power sector, whereas a carbon fee would apply to all users of carbon fuels.

We believe that there is a way for Congress to become part of the solution. A revenue-neutral carbon fee could be fashioned in such a way that it generates long-overdue tax reform, promotes economic growth--and reduces emissions. We are suggesting that half the fee’s revenue go toward reducing the corporate tax rate (the highest in the industrialized world), with most of the balance used to reimburse low- and middle-income households for slightly higher energy costs. (For example, a $35/metric ton fee would raise the price of a gallon of gas by roughly 32 cents.)

Many Republicans in Congress, including a surprisingly large number who say privately that they could support a revenue-neutral carbon fee as a market-based approach to climate change, fear that if they voice such a view they might draw a far-right primary opponent. But after the election, and with growing support from the business community, we believe the politics can change dramatically. Sixty-one percent of Republican voters support carbon dioxide regulation, according to a poll released April 26 by George Mason and Yale universities. In a September survey by three leading GOP pollsters, it turns out that 54 percent of conservative Republicans would support a carbon tax if the money were rebated.

During the heat of a national election, Congress is not going to tackle this issue. But when a new president and Congress take office in January, the American people--and all the world’s citizens--deserve action to curb U.S. emissions. With strong leadership from the business community, the growing public support for countering climate change should convince our elected representatives to do their part.