The Case for a Low Carbon Tax

The Case for a Low Carbon Tax IEEJ：November 2019© IEEJ2019 IEEJ Energy Journal Special Issue November 2019 The Case for a Low Carbon Tax Roger Pielke Jr.* Conventional wisdom in the climate debate is that a high price on carbon is necessary as a central feature of climate policy. [...] The idea is straightforward: the burning of fossil fuels results in harms to society that are not reflected in the market prices of coal, oil and natural gas. [...] The fourth assessment report of the Intergovernmental Panel on Climate Change (IPCC) explains the logic of carbon pricing as follows: “Policies that provide a real or implicit price of carbon could create incentives for producers and consumers to significantly invest in low-GHG products, technologies and processes” (IPCC 2007). [...] One reason for the necessity of carbon pricing can be found in the following argument: if alternatives to fossil fuels are deployed in such amounts that they significantly depress demand for oil, gas and coal, this will have the market effect of reducing prices of these commodities. [...] A commitment to a rising carbon price could create incentives for greater production and consumption of fossil fuels in the short term as the expected value of these commodities will be greater today than in the future.