An Introduction To Carbon Pricing

This training covers Carbon Pricing, the flagship element of CCL’s policy agenda. It provides an overview of why this is an important policy area for addressing climate change and what types of policies CCL supports.

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What is Carbon Pricing and why is it an Important Climate Solution?

A strong, economy-wide price on carbon could reduce America’s carbon pollution by 50% by 2030, putting us on track to reach net zero by 2050.

When government puts a price on carbon, corporate polluters pay a fee for the carbon pollution that will result from burning the fossil fuels they sell. Businesses respond by becoming more energy efficient and developing new sources of clean, renewable energy. These innovations will not only lead to reduced greenhouse gas emissions but will also provide abundant, affordable, and reliable clean energy and drive us faster toward net zero carbon pollution.

A carbon tax becomes affordable for ordinary Americans when the money collected from fossil fuel companies is given as a dividend, or “carbon cash back” payment, to every American to spend with no restrictions. This protects low- and middle-income Americans who might otherwise bear a disproportionate burden during the transition to clean energy.

Studies show that the monthly carbon cash back payments are enough to essentially cover increased costs of 85% of American households, including 95% of the least wealthy 60% of Americans.

This type of carbon tax is called a “carbon fee and dividend.” Citizens’ Climate Lobby has been advocating for this policy for over a decade (see more below).

Scientists, economists, businesses and most Americans support a price on carbon.

What Policies Does CCL Support?

CCL supports an economy-wide carbon tax, where the money is given to people, typically referred to as a Carbon Fee and Dividend (CF&D) or carbon cashback. This type of carbon fee is applied where a fossil fuel first enters the economy. This price flows through the economy, incentivizing businesses and consumers to reduce their usage and/or switch to clean energy. Fossil fuels such as oil, natural gas, and coal all contain carbon. When burned, they release potent greenhouse gases (GHG), mostly carbon dioxide (CO₂), into the atmosphere. Putting a price on carbon ensures that the cost of that pollution is included in the price. This fee is based on the metric tons of carbon dioxide (CO₂) the fuel would generate, and it would be assessed at the earliest point of sale into the economy—as close as possible to the well, mine or port. MIT has produced a short explainer and podcast episode on the subject.

Any carbon fee should include a carbon border adjustment mechanism (CBAM), which levels the playing field for businesses that have taken steps to clean up their operations. American manufacturing is already among the cleanest in the world. While we work to reduce pollution in the U.S., other countries who don’t do so should not get a free ride. Implementing a carbon border adjustment mechanism on foreign manufacturers who would otherwise undercut U.S. businesses with cheaper, more carbon-intensive goods can help solve that problem. It will encourage people and businesses to buy American-made goods because the lower emissions would be reflected in the price.

Our minimum criteria for carbon pricing policies that we can support are:

They are effective at reducing emissions.
They ensure that Americans with the greatest financial need can maintain their standard of living.

Other Benefits of a Carbon Fee and Dividend

Saves Lives

A carbon price will save 4.5 million American lives over the next 50 years by restoring clean air across the country. It will have particular impact in communities of color, which have suffered the worst health impacts of burning fossil fuels. Exposure to air pollution has also made people in communities of color more vulnerable to the worst impacts of COVID-19.

Air pollution from fossil fuels, and its impact on our health, is worse than we once thought. New research shows that premature deaths in America each year due to air pollution are nearly twice as high as previously understood. As many as 1 in 10 American deaths today is caused by air pollution.

Creates Jobs

A carbon fee will incentivize innovation by America’s businesses, creating millions of new jobs that will transform our economy and put Americans back to work.

Keeps Businesses Healthy

Businesses prefer a carbon price to other climate solutions because they remain financially stable while they adjust their operations, thanks to a predictable and gradually rising price on carbon. They will not lose time or spend extra money trying to understand complicated new regulations and rules and incorporate them into their plans.

Strong Economy

A carbon fee is the best climate solution for America’s economy because it is the fastest, most cost-efficient way to lower America’s pollution. To match its impact, multiple regulations across many disparate economic sectors would be needed, at an additional cost of hundreds of billions of dollars every year to America’s economy.

By 2050, this policy could save Americans over $800 billion each year in economic losses, or over $6,000 per household. On our current course, America’s economy is forecast to shrink by up to 7% by mid-century due to the increased costs of climate change.

Specific Legislation We Are Supporting

The Energy Innovation and Carbon Dividend Act of 2021 (117th Congress)
Legislation to be determined in the 118th Congress

Learn more about carbon pricing bills that have been introduced into Congress.

How We Will Engage

CCL will utilize all of our levers of political will in our advocacy for carbon pricing. Since our primary aim is federal legislation, our focus will be on Congress, as well as any work in local communities that can build support for this important policy with our federal elected officials.

An Introduction To Carbon Pricing