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Carbon pricing: Harnessing market efficiency in pursuit of clean energy

Girl in China under polluted skies

Adele Morris, senior fellow and policy director for Climate and Energy Economics, and David Victor, co-chair of the Energy Security and Climate Initiative, discuss how putting a price on carbon emissions is one of the most effective measures by which the United States and the international community can encourage global climate reform.

Victor explains why creating a lasting policy is often just as important as what the details of the policy entail: “The architects of these systems…think about how to design an instrument that is durable politically, so that parties can change power, the economy can go up or go down, technologies can change, and the policy remains credible and durable. And I think one of the big insights here is that the more credible the policy, the bigger the impact on the larger economy, because the activities that really emit the most greenhouse gasses are long lived activities…so you have to get firms thinking that the policy is going to be there for a long time to then start reorienting their investments, getting consumers to change their behavior, and it’s really making the policy credible that’s almost more important than the exact details of the policy.”

Morris explains the ways that implementing a new tax could be made more ameliorable to consumers: “One of the most important things that you have to decide is what do you do with the revenue…how do you build confidence in the program, it could be important to use that revenue in a way that helps to create political sustainability for the tax. One of the ideas that has been floated is giving money back to the households in rebates or via cuts in their other taxes. There’s a huge variety of ways that you could use that revenue to help people accept the idea of a new tax that benefits them in other ways as well.”

Show Notes:

The world’s energy is getting cleaner (and cheaper)—but not quickly enough

Coal economy workers need help—and a carbon tax could provide it

A U.S. carbon tax and the Earned Income Tax Credit: An analysis of potential linkages

Global Warming Gridlock: Creating More Effective Strategies for Protecting the Planet

With thanks to audio producer Gaston Reboredo and producer Vanessa Sauter, and also thanks for additional support from Kelly Russo, Fred Dews, and Richard Fawal.

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