Putting a price on carbon to cover externalities has been proposed for decades, but resisted mightily by the Fossil Fool [sic] industries. We have finally been able to try it properly in a few cases, and it works. A price for CO2 emissions set at €25 per tonne in the EU is credited with driving down emissions by 24%. (link below) Also, wind and solar output surpassed coal in 2019.
More Good News:
Carbon prices seen hitting €55 in 2030, hastening ‘major’ coal-to-gas switch
Longer term (say by 2040), we think the EU power sector will have to be completely decarbonised, with renewables and storage the end-game.
Taxes on externalities of all sorts are called Pigovian taxes after economist Arthur Pigou (18 November 1877 – 7 March 1959). He created the term "externality" while teaching at Cambridge, and proposed such taxes in The Economics of Welfare in 1920. (No, not welfare programs for the poor. The General Welfare.)
The externality concept remains central to modern welfare economics and particularly to environmental economics. The Pigou Club, named in his honour is an association of modern economists who support the idea of a carbon tax to address the problem of climate change.
This is in contrast with the reputation of economics as The Dismal Science, following a trend started in Malthus's Essay on the Principles of Population.
Here's what you need to know about carbon pricing—PRI
Carbon pricing is like good dental hygiene: It involves a bit of pain and expense but provides many benefits, including saving money, for years to come. Increasingly US politicians across the spectrum are beginning to see both the necessity and benefits of good carbon hygiene.
However, a new IMF working paper has modeled how the two systems might work for G20 countries. The analysis suggests that when a carbon tax covers carbon emissions from a country’s fossil fuel supply, it will raise substantially more revenue than today’s cap-and-trade plans. And it would be better at cutting emissions since the tax would apply to all emission sources, not just large industrial emitters such as power plants. In addition, the paper concludes that carbon pricing reduces deaths from local air pollution due to fuel combustion by roughly the same proportion as the CO2 reduction, making it worth implementing even if climate change weren’t an issue.
According to the World Bank Group publication “State and Trends of Carbon Pricing 2018,” 45 national and 25 subnational jurisdictions currently have a carbon pricing structure in place, with prices ranging from less than $1 to $139 per metric ton. In addition, more than 1,300 companies use or plan to use carbon pricing this year or next, with prices ranging from $0.01 to $909 per metric ton. Companies don’t actually pay this price, but use it as a hypothetical or shadow price in their accounting to prepare for the day when a real carbon price is in place.
International energy experts writing in the journal Nature Climate Change suggest a package of climate policies to complement a carbon price that includes boosting energy efficiency, switching to low-carbon fuels (such as from coal to gas), increasing renewable energy and removing carbon through practices such as planting trees and changing some agricultural practices. Their conclusion: A well-planned climate policy package that includes a carbon price is the way to achieve an efficient, just and publicly acceptable decarbonization transition.
Power shift: EU coal output falls 24% in 2019
Global warming emissions from the power sector fell by 12% last year, led by a steep decline in coal power generation, which was replaced half by natural gas and half by renewables, according to fresh data published on Wednesday (5 February).
Hard coal and lignite-fired power generation fell in every EU country – and by 24% overall – according to fresh data on European power sector emissions, covering all EU member states, including the UK.
The drop was sharper in 2019 than in any year since at least 1990, and could be attributed chiefly to Germany, Spain, the Netherlands, the UK, and Italy, which together accounted for 80% of coal power decline, the two think tanks said.
“If you look at Western Europe, 70% of all coal plants will have been phased out in the next five years,” said Kristian Ruby, secretary-general of Eurelectric, a trade association.
“To a large extent, this collapse was triggered by an increase in the price of CO2 emissions to around €25 per tonne, making carbon-intensive coal electricity more expensive than electricity from natural gas, nuclear power and renewable energy,” the two think tanks said.
2019 might also have marked a decisive turning point. For the first time, wind and solar power plants in the EU delivered more electricity than coal-fired power plants taken together, the report found.
State and Trends of Carbon Pricing 2018—World Bank Group
The State and Trends of Carbon Pricing series reflects on the growing momentum for carbon pricing worldwide. It targets the wide audience of public and private stakeholders engaged in carbon pricing design and implementation.This report provides an up-to-date overview of existing and emerging carbon pricing instruments around the world, including national and subnational initiatives. It also investigates trends surrounding the development of carbon pricing instruments and how they could accelerate to deliver long-term mitigation goals.
88 Parties that have submitted their nationally determined contributions to the Paris Agreement, which represents 56 percent of global GHG emissions, have stated that they are planning or considering the use of carbon pricing as a tool to meet their commitments.
More have signed on since then, as the map at the top shows.
Carbon prices across countries—Nature Climate Change (paywalled)
With country-specific development objectives and constraints, multiple market failures and limited international transfers, carbon prices do not need to be uniform across countries, but must be part of broader policy packages.
These Countries Have Prices on Carbon. Are They Working?--NYT (paywalled)
Economists have long suggested that raising the cost of burning coal, oil and gas can be a cost-effective way to curb emissions. But, in practice, most countries have found it politically difficult to set prices that are high enough to spur truly deep reductions. Many carbon pricing programs today are fairly modest. In France and Australia, efforts to increase carbon taxes were shelved after a backlash from voters angry about rising energy prices.
That means they were doing it wrong. Much of the carbon tax should be rebated to the poor.
Countries and states with prices and coverage:
Canada
Current prices per metric ton of CO2 $15-$30
Share of emissions covered per province 47%-90%
Britain
Current price per metric ton of CO2 $25
Share of emissions covered 23%
United States
9 Northeastern states
Current price per metric ton of CO2 $5
Share of emissions covered 18%
California
Current price per metric ton of CO2 $15
Share of emissions covered 85%
Australia
Current price per metric ton of CO2 $10
Share of emissions covered Minimal
Also Norway,Iceland, Canada, Ukraine, European Union, Kazakhstan, Switzerland,South , Korea, Liechtenstein, US, California, Mass., N.Y. and sevenother states, Japan, China, Mexico, Colombia, Singapore, Chile,Australia, South Africa, Argentina, New Zealand.
China
Expected price per metric ton of CO2 TBD
Expected share of emissions covered 25%-30%
Map: The Future Is Carbon-Priced and the US is Getting Left Behind
As the US pulls out of the Paris Accord, other countries charge ahead towards a clean energy future.
Source of map above.