Can prices make the world better? Perhaps one could argue that it already did! Yet for the first in history, putting a price on something free could very well allow us to step into a future that’s remarkably better than the status quo. And that’s the price on carbon.
For the longest time; perhaps for far too long, emitting carbon dioxide is free. To be fair, when we breath out, we emit carbon dioxide. But that is through the food, grown during our lifetimes. One may argue of course that cows belching and the dairy industry creates a lot more greenhouse gas emissions in the form of methane as well.
Brushing food industry aside, let’s ask ourselves how a carbon price makes the difference. By charging industries for burning fossil fuel and emitting carbon dioxide through whatever industrial processes, we are saying that the release of carbon dioxide into the atmosphere when it should rightly be stored in minerals and in the ground as oil, gas and coal is harmful to the world. We are saying that people ought to pay a price for releasing the carbon dioxide in the air and causing climate change.
The issue is that we all live in a single atmosphere but the carbon price is different everywhere and we allow people in their own countries to somehow set this price or a regime to manage this price. And then we call it a carbon tax. Or in other places, we put a trading system around it and the traded price becomes the carbon price. There are times when prices work better when they are different in different places. But perhaps not this time. The fact carbon is free or much less costly in one place but not another is just going to encourage more gaming of the system.
The world needs to set a price, and really align on it. There is nowhere in the world where it is cheaper to emit carbon in terms of the environmental and climate costs.