A carbon price remains essential to meeting US climate commitments

By Dana Nuccitelli, research coordinator at CCA

At CCL, we have long advocated for Congress to put a price on carbon pollution. We have often argued that research shows that a carbon price, alone or combined with complementary policies, would be sufficient to meet America’s climate commitments.

But things have changed. Many years have passed since we began advocating for a price on carbon, and Congress passed a landmark climate bill, the Inflation Reduction Act (IRA), almost two years ago. Since then, we’ve been waiting for someone to model the climate policy landscape in a post-IRA world. And finally, a group of climate economists teamed up with the Hamilton Project and the Brookings Institution. do just that!

I recently provided training at Citizen Climate University to inform CCL volunteers about these important updates. Watch the full training here or read on for a recap:

The future is what you make it, so make it a good one

The Hamilton and Brookings report took a short trip back in time to 2021, when the Build Back Better framework was under construction, including a variety of possible climate policies. Three types of policies were under study:

• A clean electricity standard that would require utilities to obtain a certain percentage of their electricity from clean sources on a specific schedule;
• A price on carbon pollution; And
• Subsidies in the form of tax credits and reductions.

During the bill’s negotiation process, the concept of a clean electricity standard was abandoned in August 2021. A carbon price would have obtained 49 of the 50 votes in the Senate, but was never able to get the final key vote. So in the package that became the Inflation Reduction Act, climate policies were largely limited to politically acceptable tax credits and reductions.

The Hamilton and Brookings report therefore asked the question: which of these three approaches would work most effectively in a post-IRA world? Should we still implement the clean electricity standard proposed in early 2021, extend IRA subsidies or establish a price on carbon pollution? The report also assessed what would happen if the IRA and/or EPA climate regulations were reversed in the years to come.

To meet Paris, we need a carbon price

Of the seven scenarios modeled in the report, only one came close to meeting the US Paris commitment to reduce our climate pollution by 50% by 2030: keeping the IRA and EPA rules in place and add a modest carbon price. The authors found that this combination of solutions would achieve reductions of 47% by 2030, and it is fair to say that also implementing a reform allowing clean energy and/or a price more ambitious carbon measures like that of the energy innovation law would lead us to reach our 50%. commitment.

Expanding tax credits and clean energy subsidies were found to only slightly reduce climate pollution because the IRA already invests a lot of money in these areas. It was also not thought that a clean electricity standard wouldn’t have much more of an effect on carbon pollution in the United States, as the IRA already does a lot to decarbonize the electricity sector .

In contrast, a carbon tax would hit virtually every sector of the economy with a pollution pricing signal, and has therefore proven to be the most effective post-IRA climate policy.

The report also concludes that a carbon price would be the most cost-effective way to reduce carbon emissions. Indeed, pricing pollution provides a financial incentive for industries to reduce their emissions in the cheapest way possible. Subsidizing individual clean technologies and regulating electric utilities are less economically efficient approaches. A carbon price therefore remains the best climate policy option on the table.

Email your members of Congress to make sure they have seen the new study and support this important climate policy!