The only way to reduce the threat posed by climate change is to reduce the burning of carbon, so any industry that extracts or sells fossil fuels is vulnerable to a carbon fee. To succeed in the marketplace, therefore, those industries must adapt.
Regional disparities would be small, according to most studies in recent years. “We … find that the regional variation is at best modest,” wrote economists Kevin A. Hassett, Aparna Mathur and Gilbert E. Metcalf in “The Incidence of a U.S. Carbon Tax: A Lifetime and Regional Analysis,” a January 2008 working paper by the American Enterprise Institute (AEI). They concluded that “variation across regions is sufficiently small that one could argue that a carbon tax is distributionally neutral across regions.”
Putting a price on carbon would make gasoline, home heat and air conditioning, and carbon-intensive products (e.g. steel and cement) more expensive. Those at the upper end of the income ladder generally spend more on such items. For example, for every gallon of gasoline used by the poorest 20 percent of households, the richest 20 percent use three or four.
Support for putting a price on carbon is growing rapidly, especially in the business community. This is due in part to the effective debunking of myths about carbon pricing. Below, is the first in a series of blogs explaining why the most common criticisms of carbon pricing do not hold up.