Global Price on Greenhouse Gas Emissions

Why is coal, which is one of the worst sources of carbon emissions, used so universally? Because it is cheap and available. But the price of coal does not reflect the cost of emissions to the environment. In order to put the market system to work, we need to extend the price of emissions to the consumer who actually uses the energy. Conceptually, the plan works like this. Energy sources emitting no carbon or other greenhouse gases would have no charge for emissions. The price of emissions would go up proportionate to the amount of greenhouse gas emitted. Therefore coal would have higher emission charges than methane because the carbon emissions from coal are much higher. And the market, driven by money, would quickly take over to build the – now relatively cheaper – renewable sources.

Proposals for putting a price on GHG emissions include a direct carbon fee, charge or tax (which may be a swap tax, with a proportionate lowering of another tax, such as income tax), or cap and trade. Currently, cap and trade proposals are primarily for emissions from the power sector, such as the Regional Greenhouse Gas Initiative in the northeastern U.S., but will extend to transportation fuels in 2015 with California’s new Cap-and-Trade program.