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The drastic power of a modest carbon tax

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A recent study by an MIT Sloan professor finds that a federal carbon price of  $7 per metric ton of carbon dioxide in 2020 could reduce emissions by the same amount as the flagship climate policies adopted by the Obama administration.

The study’s authors say that wouldn’t be enough to put the United States on a long-term path to decarbonation, but believe the results demonstrate the potential power of a carbon tax. Recent competing bills introduced in Congress, if passed and implemented, would launch a carbon tax starting at $15, $30, or $40 per metric ton of carbon dioxide

In a paper released by the MIT Center for Energy and Environmental Policy Research, Christopher Knittel modeled the carbon price needed to achieve projected emission reductions under three Obama-era policies: auto mileage standards, the Clean Power Plan, and a biofuel mandate. All three have been challenged or rolled back in court or by President Donald Trump’s administration.

“This shows the power of a price on carbon,” Knittel said. “As little as a 7-cent price increase per gallon of gasoline and less than half a penny per kWh of electricity could get us the same climate benefits as the fragile, costly, and litigious regulations that represent President Obama’s climate legacy.”

A carbon tax that increases over time – something all three bills in Congress would do – could reduce emissions by the same amount as all of those regulations combined.

“We’re still only looking at $22 per ton in 2025 and $36 per ton in 2030 if we include all major greenhouse gases,” Knittel said. “If we get really serious about climate policy, the costs will only rise, and the cost-saving potential of carbon pricing will become even more important.”

Carbon taxes re-emerge in 2020 race

Carbon taxes are in play in the 2020 presidential election as candidates seek ways to curb emissions, with many prominent Democratic candidates supporting a tax. Sen. Elizabeth Warren has endorsed a carbon tax, and so has former vice president Joe Biden. Meanwhile, as former vice president Al Gore recently wrote in The New York Times, “College Republicans at dozens of schools have called on the Republican National Committee to support a carbon tax and have loudly warned the party that it will forfeit support from younger voters if it does not.”

As lawmakers and presidential contenders contemplate climate policy for 2020 and beyond, Knittel said that the study results could be groundbreaking — and consensus-building.

“This first effort to model the carbon tax equivalent of alternative climate regulations could help build a consensus around more cost-effective policies. Instead of trying to bring back earlier rules such as the Clean Power Plan, a new administration would do well to focus on one of the many carbon tax proposals introduced on Capitol Hill by both sides of the political aisle,” he said. “If we can make a given climate outcome more affordable, then we can also aim higher sooner. And we know that, under all scenarios, we have to drastically increase our efforts to meet the climate challenge.”

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