The argument for a carbon price

We are paying a price for fossil fuels, but that price is not paid by those that burn the fossil fuels – we need to change that

It is a mistake to believe that we are not paying for emitting greenhouse gases. Even if we do not pay a monetary price for carbon emissions we do pay a very large price, the consequences of climate change.

Without a monetary carbon price it is those who have the smallest emissions that suffer the largest costs from climate change. A carbon price, in contrast, means that those who cause the emissions also pay for them.

A key reason why voters are not in favour of carbon pricing is that many believe it won’t actually reduce emissions, but empirical research and theory show that this is wrong: pricing carbon emissions – either via a carbon tax or a ‘cap and trade’-system – is effective. It shifts production and consumption from carbon-intensive goods and services to low-carbon alternatives and does reduce emissions.

Many are deeply concerned about climate change yet feel hopeless that anything can be done to meet this challenge. Increasing the understanding that carbon pricing works, correcting common misconceptions, and showing that there is a way forward are key steps for a successful fight against climate change.

I believe a carbon price should be complemented by other policies and in this article I make the case that it is one of the most important policy options we have to achieve a better future.

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