Why price carbon pollution?

Lake St Martin 2011 flood

Lake St Martin 2011 flood (PHOTO: CBC News)

There are only two ways to move away from our dependence on fossil fuels:

  • Regulation – Restrict the supply or usage of these fuels
  • Carbon pollution pricing – Make the price of these fuels more expensive than the renewable alternatives

If governments put the required price on carbon pollution, they will be able to recycle the carbon revenue in ways that will help people move away from their dependence on fossil fuels.

Social cost of carbon

A key reason that we burn so much fossil fuel and emit so much greenhouse gas (GHG) is because what we pay for fossil fuel does not include its true cost. Without carbon pricing, what we pay just covers the direct costs (plus some tax). But there are current and future costs that are not reflected in that “price at the pump”.

To be fair, the additional costs need to be accounted for in the cost of the fuel. These costs relate to

  • climate change impacts like changes in agricultural productivity, human health, and property damages (e.g. increased flooding)
  • infrastructure enhancements required to adapt to climate induced changes (e.g. floodway expansion, storm drainage)
  • changes in energy costs (e.g. reduced costs for heating and increased costs for air conditioning)
  • environmental impacts from fossil fuel exploration, extraction, refining, and transport. (e.g. oil spills, deforestation)

Scientists and economists have tried to put a more representative cost on carbon by modelling and estimating these costs. The US Environmental Protection Agency (EPA) and other US federal agencies use the Social Cost of Carbon (SC-CO2) to estimate the climate benefits of carbon reduction policies.

Current carbon price modelling and data don’t include all of the important physical, ecological, and economic impacts of climate change. This is because of a lack of precise information on the nature of these damages and because the science incorporated into these models naturally lags behind the most recent research.

There can be a lot of debate over what a more appropriate price should be for carbon. In its Technical paper: federal carbon pricing backstop released in 2017, the Canadian federal government proposed a starting price for carbon of $10 per tonne in 2018 increasing to $50 per tonne in 2022.

In January 2015, scientists at Stanford University presented a paper in Nature indicating a present day price of $240USD per tonne is more appropriate.

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