Climate change: Can pricing carbon help ease greenhouse gas emissions?

Dozens of nations, including the United States, and many local governments are putting a price tag on these emissions that cause more floods, droughts and other destructive events.

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Emissions rise from the smokestacks at the Jeffrey Energy Center coal power plant near Emmett, Kansas.

Emissions rise from the smokestacks at the Jeffrey Energy Center coal power plant near Emmett, Kansas.

Charlie Riedel / AP

As climate change bakes the planet, dozens of nations and many local governments are putting a price tag on greenhouse gas emissions that are increasing flooding, droughts and other costly catastrophes.

Pennsylvania has just become the first major fossil fuel-producing state in the United States to adopt a carbon pricing policy to address climate change.

It joins 11 states where coal, oil and natural gas power plants are required to buy credits for every ton of carbon dioxide they emit.

President Joe Biden is attempting a less direct approach — known as the social cost of carbon — that calculates future climate damages to justify tougher restrictions on polluting industries.

Republicans say that could crush many businesses. They want the U.S. Supreme Court to stop the administration after lower courts in Missouri and Louisiana split on the issue.

Governments elsewhere have moved more aggressively. Canada, for example, imposes fuel charges on individuals and also makes big polluters pay for emissions. It’s one of 27 nations with some kind of carbon tax, according to The World Bank.

The varied strategies come as scientists warn that climate change is accelerating — and all can help reduce emissions.


It varies. A lot.

The Biden administration’s social cost estimate is about $51, meaning every ton of carbon dioxide spewed from a power plant or tail pipe is projected to contribute to $51 in economic damages in coming years.

New York has its own social cost of carbon, updated in 2020 to $125 a ton.

Emissions most recently were valued at $13.50 a ton at auction under the Regional Greenhouse Gas Initiative in the Northeast, which Pennsylvania is joining.

A similar “cap-and-trade” emissions program is in place in California. One is due to take effect in Washington in 2023.


The social cost of carbon attempts to capture the value of all climate damage centuries into the future. Carbon pricing reflects how much companies are willing to pay today for a limited amount of emission credits offered at auction.

In other words, the social cost of carbon guides policy. Carbon pricing represents policy in practice.

“You’re trying to get the price to reflect the true cost to society,” said economist Matthew Kotchen, a former Treasury Department official now at Yale University. “A more stringent policy would have a higher carbon price. A more lax policy would give you a lower carbon price.”


Emissions from northeastern states would have been about 24% higher if the carbon pricing consortium hadn’t been in place, according to Duke University and Colorado School of Mines researchers.

The carbon auctions also have brought in almost $5 billion that can be used to reduce household energy cost increases and promote renewable energy.

The consortium began in 2009 — the year of a failed push in Congress to establish a nationwide cap-and-trade program. The bipartisan proposal died amid arguments over cost and whether climate change was even occurring.

After lawsuits from environmentalists, President Barack Obama’s administration crafted the social cost of carbon and began including future damage estimates in analyses for new regulations, using that calculus for tightened vehicle-emissions standards and regulations aimed at closing coal plants.

President Donald Trump moved to roll back many of the Obama-era rules — to help justify the changes, the Republican administration cut the social cost of carbon from about $50 per ton to $7 or less. The lower number included only domestic climate impacts.


On the day Biden took office, he set up an inter-agency group that revived the Obama estimate and promised a revised figure incorporating previously overlooked consequences of climate change. Many economists expect the revised figure to be higher, perhaps more than double the current $51.

Without a nationwide cap-and-trade program, environmentalists and some economists want the government to be more aggressive in using the social cost of carbon to overhaul government energy policy.

The Interior Department for the first time is applying climate damage considerations to oil and gas sales on public lands and waters. An upcoming lease sale in Wyoming, for example, could result in future emissions of 34 million tons of carbon dioxide. That’s equivalent to more than $1.5 billion in future damages.

But the agency still plans to sell the leases because officials said there were no “established thresholds” to evaluate whether the increased emissions are acceptable.

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