Comparing Cap and Trade with Carbon Pricing

Overview:

The article dives into the hurdles of implementing carbon pricing in the US, highlighting challenges such as upfront costs, political resistance, and the debate over effectiveness. Drawing from successful cases, it suggests tying policies to public concerns, fostering innovation, and emphasizing state-based approaches to avoid federal debates. Despite concerns about global competitiveness, successful US implementation could set a climate leadership example. While immediate political gains might be elusive, the strategy could leave a transformative legacy for future administrations. Overall, it explores strategies and challenges, proposing a state-based approach as the way forward.

Summary:

There are many challenges and potential strategies related to implementing carbon pricing in the United States. The strategies highligh inherent difficulties in pursuing this approach due to its upfront costs, lack of immediate returns, and minimal short-term evidence of success. Politically, carbon pricing faces significant hurdles in terms of cost burdens on businesses, the lack of public support, industry backlash, and the intricate operational details of its execution. Additionally, there's debate about whether carbon pricing is the most effective or feasible policy among various alternatives.

However, it is worthwhile to draw insights from successful case studies like British Columbia's carbon tax tied to an emotionally resonant cause, the U.S. Regional Greenhouse Gas Initiative (RGGI), the methane fee under the IRA, and Washington state's cap-and-invest legislation. These examples emphasize strategies such as linking policies to tangible public concerns, providing flexibility in revenue use, fostering innovation through market-driven approaches, and focusing on indirect benefits beyond direct emission reduction.

Source: NPUC

Overall, based on previous literature- the optimal strategy should be to adopt a state-based system for carbon pricing in the U.S. This approach allows states to innovate while meeting federal standards, potentially avoiding contentious federal debates over execution. It proposes a bipartisan approach, highlighting the environmental commitment for Democrats and the revenue potential for Republicans. Furthermore, the emphasis on returning revenue to citizens and green projects aims to consolidate wider Congressional support.

Despite the potential success of such a system in reducing emissions domestically, concerns exist regarding the competitiveness of American businesses in global markets without equivalent policies in other major economies. However, successful implementation in the U.S. could also position the nation as a leader in climate action, potentially inspiring similar measures globally.

However, academia underscores the long-term nature of carbon pricing and suggests that its implementation might not yield immediate political benefits but could become a transformative legacy for a president beyond their immediate term. In essence, it is beneficial to explore the challenges, strategies, and potential ramifications of implementing carbon pricing in the U.S., drawing insights from successful case studies and proposing a state-based approach as the most promising path forward.

Sources

Clausing, K., Garicano, L., & Wolfram, C. (2023, June 13). How an international 

agreement on methane emissions can pave the way for enhanced global cooperation on climate change. PIIE. 

Rabe, B. (2023, June 8). Carbon pricing enters Middle Age. Wilson Center. 

Rabe, B. G. (2018). 5: When Cap-and-Trade Works, and 6: A Carbon Pricing Work in 

Progress. In Can we price carbon? essay, The MIT Press. 

Rabe, B., Kaliban, C., & Englehart, I. (2020, January 13). Taxing flaring and the politics 

of State Methane Release Policy. Wiley Library.