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Concentration of CO2 in the Atmosphere

U.S. On Track to Pay Climate-Pollution Tariff to the E.U.

The Energy Innovation and Carbon Dividend Act uses this three-part approach to reduce climate pollution. Image: Citizens’ Climate Lobby.

Katharine Gage

When we purchase gas for our cars, food, clothes, and other everyday essentials, we pay the price listed on the items’ price tags. When deciding among similar items, customers will naturally pick the one with the lower price. Currently, goods and services that were produced by fossil fuel-based energy are cheaper to purchase, so our producers and consumers prefer them.

It’s nice to buy inexpensive things now, but the problem with these fossil fuel-based goods and services is that they are actually very expensive – the expense comes later. These expensive hidden costs emerge in harm from local air pollution as well as climate pollution. For example, Lauri Myllyvirta of the Centre for Research on Energy and Clean Air (CREA) found that in 2018, air pollution from fossil fuels killed 4.5 million people, which comes to an average of 12,000 people every day. In terms of climate impacts, Thomas et al.1 found that our climate situation has already committed 18% of the world’s species to extinction by 2050. It is hard to assign an exact monetary value to the death of a human or the loss of an entire species, but these are examples of the costs from burning fossil fuels that are encountered down the road, rather than when the purchase occurs.

The solution to this energy-market failure, where a fossil fuel-based product appears cheap but holds external costs which get paid by society later, is a carbon price. The European Union (EU) currently has a carbon price of $26 per ton of carbon dioxide-equivalent emissions. It is great that the EU is using a carbon price to reduce its carbon pollution. However, climate change is a global problem and requires global carbon pricing to drive down carbon pollution worldwide. The EU just announced that in 2023, they will adopt a border carbon adjustment. This means they will put a tariff on trade with other countries that do not have an equivalent price on carbon pollution. This will help ensure that companies do not relocate from the EU to other countries where pollution is “free,” then export into the EU, because now the carbon price will be applied at the border. In addition to protecting EU jobs, this new border adjustment will also help enact carbon pricing around the world.

Starting in 2023, when the U.S. imports to the EU, it will have to pay the EU its carbon price of $26 per ton of carbon. When the U.S. imports from the EU, they will take their carbon price out of the export. This will go on until the U.S. implements a carbon price of at least $26 per ton of carbon. If the U.S. implements a higher carbon price and adopts border carbon adjustments, we can experience the same trade benefits that the EU is looking forward to.

Although the U.S. does not currently have a carbon price, there is a promising bipartisan carbon pricing bill in the House of Representatives. This bill is called the Energy Innovation and Carbon Dividend Act (HR 763). HR 763 puts a steadily increasing fee on the production of fossil fuels at the source that will start at $15 per ton of carbon and increase by an additional $10 per ton every year. Second, it will return all the money collected from the fee equally to all American households as a dividend each month. Third, it will use border adjustments to protect U.S. jobs and encourage global carbon pricing. This approach was recommended by a record consensus of more than 3,500 economists in the Wall Street Journal, because it is the most efficient and equitable way to reduce climate pollution.

Please take two minutes to ask your congressional representatives to support HR 763 at cclusa.org/write. Thank you!

Katharine Gage, age 17, has been volunteering with Citizens’ Climate Lobby for four years. She is also a competitive nordic skier and loves New Hampshire winters.

1 Thomas, Chris D., et al. “Extinction Risk from Climate Change.” Nature, vol. 427, no. 6970, 8 Jan. 2004, pp. 145–148, www.nature.com/articles/nature02121, 10.1038/nature02121.

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