Did you know that the U.S. government, under the Trump administration, said carbon dioxide emissions and their externalities cost society between $1 and $7/ton? Obama set costs at $42/ton and Biden plans to start with a $51/ton cost but also to re-baseline it based on updated science. Microsoft currently prices it internally at roughly $15/ton when making business decisions. The California carbon market? ~$18/ton. Europe? $46. Scientists current recommendation? Between $40 and $150/ton.
And what do all these prices mean to a consumer? How much does $40/ton add to your gallon of gas? 40 cents. What about other products you buy? Roughly 2-3% of the total purchase price. A small price to pay considering that the alternative is to suffer through and repair damage from repeated disasters like hurricanes and wildfires. And once we've made the investments away from polluting technology, those technologies will become cheaper than our current polluting ones.
Regardless of the price, it's clear that even the most conservative and least sympathetic organizations to climate change are recognizing there are external costs to having excessive CO2 in the air and those are just starting to materialize in terms of real dollars as natural disaster intensity increases. And all of these orgs are recognizing that doing nothing to change behavior is going to have real costs that we will all pay for down the line.
Why is pricing carbon so important?
Because currently, polluting is free and finding ways to stop polluting is not free. So given the choice, all companies will pollute in order to remain competitive. Scientists price carbon between $40 and $150/ton both because that's what the damage from natural disasters will cost to deal with and because that's the price it will take to encourage companies to switch away from polluting mechanisms.
What's interesting is that the most common arguments against pricing carbon is the adverse it's unfair to existing companies to add new costs out of the blue and that a price on carbon will cause hardship on low-income communities and everyone else. But COVID has highlighted that low-income communities will be the ones paying for the brunt of climate disasters too since it's harder for them to adapt their lives as easy as those to accommodate the changes. Furthermore, it's possible to implement such carbon pricing schemes such that they don't have a regressive effect on lower income people.
Rewarding companies with more demand is one strategy but companies are much better at optimizing to avoid costs. Costs are predictable and easier to pin down while it's much harder to determine why a consumer chose your particular product.
That's why Kotoo members work to increase the price of carbon right at the source (powerplants). These emissions costs will be driven out by companies by upgrading equipment earlier than they would have otherwise. And since the costs of upgrading are subsidized by funds from pricing carbon and those that can't or choose not to upgrade, the net impact and costs to the consumers are kept in control. It's true that some companies will try to avoid the price on carbon by moving their operations and that's why the more widespread the pricing is the better. But in any case, moving has its own costs and doesn't guarantee the costs will be avoided forever so companies are better off investing right where they are so they are better prepared for the future.
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Did you know the U.S. government, under the Trump administration, says carbon emissions cost us between $1-$7/ton? Obama? $42/ton. Biden? $51+/ton. Scientists and economists? $40-$150/ton. Pricing carbon via a social cost has been in place since the 1980s starting under Regan.— Evan Maynard (@evanpmaynard) March 1, 2021