Policy perspective:Building political support for carbon pricing—Lessons from cap-and-trade policies

Energy Policy ◽  
2019 ◽  
Vol 134 ◽  
pp. 110986 ◽  
Author(s):  
Leigh Raymond
2018 ◽  
pp. 163-184
Author(s):  
Barry G. Rabe

California may be on the way toward replicating the experience of the Regional Greenhouse Gas Initiative, as it moves beyond early stages into full operation as a cap-and-trade system. It formally partners with one Canadian province, Quebec, and has begun to expand beyond its original focus on electricity. The program has experienced a number of significant challenges to longer-term operations but has retained a strong base of political support and could be poised to become a leading example of cap-and-trade effectiveness.


Subject The impact of Ontario's decision to adopt a cap-and-trade system. Significance The Ontario provincial government will introduce a cap-and-trade system in the province by joining Quebec and California's carbon-trading market. Ontario is Canada's fourth province to implement a form of carbon-pricing; once it is in place, jurisdictions responsible for 80% of Canada's emissions will have some kind of carbon pricing. The joint carbon market with Quebec will also cover more than half of the Canadian population. Impacts The joint system may facilitate Californian companies' entry into the Canadian market. Success in raising money through the system may encourage other cash-strapped US states to join. Support for climate change policies could become a wedge issue in the federal elections in October, to Harper's detriment.


2018 ◽  
pp. 185-204
Author(s):  
Barry G. Rabe

This chapter attempts to distil key lessons from recent decades of experience with carbon pricing. It notes that American emissions have actually dropped despite the lack of national carbon pricing and that future attempts to develop carbon pricing need to draw directly from past experience. This includes careful attention to building political constituencies, developing effective management systems, and setting politically realistic goals. The chapter also explores other forms of energy taxation that might serve to impose a carbon price but do so at the point of extracting fossil fuels from below the surface of the ground. Nearly all states that produce oil and gas impose severance taxes and they generally retain broad political support across partisan lines.


Significance There are some concerns about how well-developed PC policy and fiscal plans are. The left-wing New Democratic Party (NDP) is now Ontario’s official opposition and has four years to define itself as a government in waiting. Impacts Carbon pricing and cap-and-trade will be scrapped in Ontario, despite the revenues they bring the provincial government. The NDP’s greater visibility in Ontario will help the federal-level NDP. Within Canada, Ontario faces a disproportionate impact from US steel and aluminium tariffs. Ford and his caucus are likely to rely heavily on tax code changes to shape policy outcomes.


2018 ◽  
pp. 205-246
Author(s):  
Barry G. Rabe

This chapter considers the future political viability of carbon pricing, given national and international developments since 2015. This includes a range of developments, including the Paris climate accord and major new initiatives in the United States and Canada on carbon taxes and cap-and-trade. It also revisits severance taxes and a mix of other efforts such as electricity fees and methane taxes that have emerged as possible counterparts to these carbon pricing mainstays, given their greater political feasibility.


2020 ◽  
Vol 110 ◽  
pp. 113-118
Author(s):  
Joseph E. Aldy ◽  
Sarah Armitage

While a firm knows the carbon price with certainty under a tax, it must form an expectation about future allowance prices to identify its cost-effective abatement investment under a capand-trade program. We illustrate graphically how errors in forming this expectation increase the costs of irreversible pollution abatement investment under cap-and-trade relative to a tax. We describe empirical “cost-effectiveness anomalies” in allowance markets that may be attributed to cap-and-trade's inherent uncertainty. We model investment under simulated US carbon tax and cap-and-trade policies and find that allowance price uncertainty can increase resource costs 20 percent for a given quantity of emission abatement.


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