Policy Studies Carbon Pricing

A carbon tax, but at what price?

by Josiah Neeley

Dec 12, 2018

Key Points

Major reports by the IPCC and the recent National Climate Assessment have made the case for emissions reductions. William Nordhaus won the Nobel prize in economics for his work on estimating the damage from greenhouse gas emissions. A new bipartisan carbon tax bill has been filed in the House.

A lot of work has gone into trying to precisely quantify the damage from greenhouse gas emissions. While there are lots of uncertainties, it’s clear that greenhouse gas emissions are harmful and a carbon tax is an appropriate mechanism for addressing this harm. The exact price at which a carbon tax should be set is a political judgment that has to take into account all sorts of factors in addition to the climate change damage itself.

“While there can be legitimate disagreements over what an appropriate carbon price should be, this is not an argument against having a carbon tax in the first place. If we are not sure, for example, whether the “best” carbon price is $20 a ton or $50 a ton, the answer is not to set the price at $0 instead.”

Press release: R Street Institute policy paper: A carbon tax, but at what price?

Image credit: Calin Tatu