New U.N. Climate Report Says Put a High Price on Carbon

Source: By Brad Plumer, New York Times • Posted: Wednesday, October 10, 2018

The Tesoro Los Angeles oil refinery in California. Economists have long been enthusiastic about carbon pricing because of the idea’s simplicity.Lucy Nicholson/Reuters

WASHINGTON — In its landmark report on the fast-approaching dangers of climate change, a United Nations scientific panel said on Sunday that putting a price on carbon dioxide emissions would be central for getting global warming under control.

More than 40 governments around the world, including the European Union and California, have now put a price on carbon, either through direct taxes on fossil fuels or through cap-and-trade programs. But many of them have found it politically difficult to set a price high enough to spur truly deep reductions in carbon emissions.

The concept of carbon pricing received another implicit endorsement on Monday from the Nobel Prize committee, which awarded Yale’s William D. Nordhaus a share of the 2018 Nobel Memorial Prize in Economic Science for, among other things, making a case that “the most efficient remedy for the problems caused by greenhouse gas emissions would be a global scheme of carbon taxes that are uniformly imposed on all countries.”

Scientists who worked on the United Nations report hailed Professor Nordhaus’s work as influential for thinking about how to tackle climate change.

“It’s great to see the importance of Bill’s work being recognized,” said Drew Shindell, a climate scientist at Duke University and an author of the report. “Though many think a price on carbon is too expensive, it’s really a way of getting the true impacts of emissions into the economy so we can make better decisions.”

In the 1970s, Professor Nordhaus conducted the first detailed look at the economic damages that global warming could inflict on human society, right as climate scientists were starting to sound the alarm about rising greenhouse gas emissions.He argued that companies that burn fossil fuels should be taxed at a rate that reflected the harms they were imposing on the rest of the world.

William Nordhaus shared the Nobel prize in economics in part for showing that carbon taxes are an efficient way to reduce global carbon emissions.Christopher Capozziello for The New York Times

Economists have long been enthusiastic about carbon pricing because of the policy’s efficiency. Give companies a financial incentive to reduce their fossil-fuel use, and they will find creative and cost-effective ways to do so without the need for heavy-handed government regulations.

To date, however, policymakers have often had more success in reducing emissions by relying on those heavy-handed government regulations. Examples include France’s state-led push to build nuclear power in the 1970s and 1980s and the United States’ strict fuel-economy standards for cars and light trucks, which have reduced domestic oil consumption by billions of barrels.

“It is safe to say that policies other than carbon pricing have driven the majority of emissions reductions to date,” said Jesse Jenkins, a postdoctoral researcher at Harvard’s John F. Kennedy School of Government.

One possible reason for that: While government regulations can often be more expensive in reducing emissions on a per-ton basis, they also tend to hide their costs from voters, and therefore can be a safer political bet. A policy that requires utilities to build more renewable energy has visible benefits — more wind and solar — and murky costs. But a carbon tax that directly increases the price of gasoline at the pump or electricity rates brings more obvious pain, and hence is more likely to garner opposition.

A case in point: In 2012, the Australian government enacted a cap-and-trade program that effectively set a price on carbon of $23 per ton. Emissions fell nationwide under the program. Yet the policy faced a fierce political backlash from industry groups and voters, and when the nation’s more conservative Liberal Party swept into power in 2013, it quickly moved to repeal the program.

A recent report from the Organization for Economic Cooperation and Development found that the average carbon price across 42 major economies was around $8 per ton in 2018, far below the level most experts say is necessary to address climate change. Those low prices, some researchers have argued, may reflect political constraints on pricing carbon directly.

For comparison, the United Nations report estimated that governments would need to impose effective carbon prices of $135 to $5,500 per ton of carbon dioxide pollution by 2030 to keep overall global warming below 1.5 degrees Celsius, or 2.7 degrees Fahrenheit.

The O.E.C.D. report did mention, however, that carbon pricing is starting to show signs of momentum in many parts of the world. Portugal launched its own carbon tax in 2015, and Chile followed suit in 2017. China has launched an early carbon-trading program in several of its provinces. California recently expanded its own cap-and-trade program to cover 85 percent of its statewide emissions. This fall, voters in Washington State will decide whether to enact their own statewide carbon tax.

Some scientists hope that the new United Nations report on the dangers of further climate change may spur nations to step up efforts like these. “If the report works and governments take it seriously, it should increase their ambition for expeditiously reducing emissions,” said Michael Oppenheimer, a climate scientist at Princeton.

But getting anywhere near the high levels of carbon pricing envisioned by the report may take creative new strategies, said Mr. Jenkins, the researcher at Harvard. In the short term, policies that are widely popular with voters, such as mandates for renewable energy, can help reshape the political landscape to make more ambitious climate action feasible. And policies that spur innovation and drive down the cost of cleaner alternatives to fossil fuels, such as electric vehicles, could potentially make higher carbon prices more palatable.

But whether they ultimately rely on carbon pricing, direct subsidies for clean energy or other types of policies, nations will have to do far more than they are currently doing for the world to have hope of avoiding drastic climate change.

In an interview with the Nobel committee on Monday, Dr. Nordhaus said he was “concerned about the fact that we’re doing so little.” He added: “The policies are lagging very, very far — miles, miles, miles — behind the science and what needs to be done.”

Coral Davenport contributed reporting from Incheon, South Korea.

Brad Plumer is a reporter covering climate change, energy policy and other environmental issues for The Times’s climate team. @bradplumer