To avoid catastrophic climate change, we need carbon pricing
On Monday, the Intergovernmental Panel on Climate Change (IPCC) released its latest report, affirming that humanity has about a decade to hold global temperature increases to 1.5 degrees C. Hours later, William Nordhaus became a co-recipient of the Nobel Prize for economics. His work was some of the first to describe how our climate and economy interact and demonstrated that a universal price on carbon is the most efficient way to reduce the damages caused by climate change.
The best that science has to offer is telling us that we should act with urgency on climate change. The best that economics has to offer is telling us we have a key solution right under our noses. Carbon pricing is now a Nobel Prize-winning idea. Let’s take this occasion to remind ourselves that in Canada’s climate debate, evidence should carry the day.
The IPCC’s new report is very plainspoken. Climate change is here, and it could start to become very costly, very quickly. To hold global temperatures to 1.5 degrees above preindustrial levels, the world must cut greenhouse-gas emissions 45 per cent below 2010 levels by 2030 and become carbon neutral by 2050. If we carry on business as usual, we won’t even come close.
The IPCC report also shows how costly it will be to overshoot our 1.5 degree target under the Paris Agreement. At 2 degrees, poorer air quality and increased disease transmission pose far greater risks to our health, extreme weather poses far greater risks to our homes and infrastructure, sea-level rise poses far greater risks to our fisheries and coastlines, and warmer temperatures pose far greater risks to our natural world.
Mr. Nordhaus’s research shows that a global uniform carbon tax is the most efficient remedy to avoid the worst of these problems. According to Mr. Nordhaus, “price-type approaches are likely to be more efficient and effective” than any other approach to reducing greenhouse-gas emissions.
Maybe even more striking is Mr. Nordhaus’s optimism that harnessing market forces might solve this problem more easily than critics expect. Getting economic incentives right can drive the innovation required for a sustainable, growing economy.
Paul Romer, Mr. Nordhaus’s co-recipient of the Nobel, agrees. In a recent interview with CBC, he noted: “I believe, and I think [Mr. Nordhaus] believes, that if we start encouraging people to find ways to produce lower carbon energy, everybody’s going to be surprised at the progress we’ll make as we go down that path. All we need to do is create some incentives that get people going in that direction, and that we don’t know exactly what solution will come out of it – but we’ll make big progress. We just need to get busy and solve this problem.”
Environmental economics has come a long way since Mr. Nordhaus built his first model in 1992, but his findings have been hugely influential, including to our work. And the evidence continues to pile up. The adoption of carbon pricing is accelerating, and there are more real-world examples that carbon pricing works with each passing year.
There are three times as many countries using carbon pricing as there were a decade ago. More are getting on board every year, including China and Mexico; 10 states in the United States already use carbon pricing, and it’s a ballot question in Washington State in next month’s midterms.
We now have the benefit of 45 working examples of carbon pricing around the world. We know that we can design carbon pricing to be progressive and revenue-neutral. We know that we can design carbon pricing to protect business competitiveness. We know it reduces emissions over time. We know that carbon pricing works.
Meanwhile, the debate on carbon pricing continues to simmer here in Canada. It has turned into an election issue in 2018, and will likely remain one in 2019. And fair enough: Canadians should have a healthy public debate about new policies. But those debates should be grounded in evidence.
We talk a lot about effective and cost-effective policy here at the Ecofiscal Commission, but lately it has felt like there is something more fundamental at stake. There are plenty of facts and real-world data to bring forward. We shouldn’t have to rely on misinformation, distortions or falsehoods to get our points across.
The Nobel Prize and the IPCC report are just two more data points in a sea of evidence. Climate change is real, climate change is a problem and climate change deserves a serious policy response. There will be disagreements over how we move forward, but we need to tell the truth. We need to hold each other to account.
So let’s keep using evidence – there’s plenty to go around.