12 September, 2018

Carbon pricing – Dispelling the myths

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Carbon pricing is a complex topic, and unfortunately whenever you have a difficult subject there inevitably arise some misconceptions.


In the case of carbon pricing, these misconceptions are then further distorted, taken out of context, and capitalised on by lobbying groups in order to push their own agenda.


What you end up with is a complicated concept, twisted and misrepresented to the point that it’s hard to reach a level of informed understanding.


However, with climate change a looming threat and carbon pricing one of the most widely agreed methods to help us tackle it, it’s important to cut through the misinformation and clear away some of the falsehoods.


So, what are some of the most common myths of carbon pricing, and what’s the actual truth behind them?



Carbon pricing just means planting more trees


When looking at a subject as large and complex as carbon pricing, it’s easy to get confused between different terms.


Carbon pricing refers to applying a cost to carbon emissions, thereby incentivising carbon emitters to reduce their level of emissions.


Planting trees on the other hand, is a form of carbon offset. A carbon offset is an action taken that’s intended to reduce carbon in the atmosphere, thereby compensating for another action that is producing carbon emissions at the same time.


Both carbon pricing and carbon offsets are important, but they’re not the same thing.



Emitters don’t want carbon pricing and will go to extreme lengths to avoid it


One of the favourite cries of lobbying groups against carbon pricing is how much carbon emitters don’t want it. The standard claim is that if carbon pricing were to be enforced, emitters would either deliberately under-report their emissions or relocate their operations somewhere without a carbon price.


In actuality however, many emitters do in fact want carbon pricing.


In today’s world, with our widespread understanding of the role carbon emissions play in climate change as well as our high level of social interconnectivity, the majority of emitters are incentivised to see the bigger picture; they’re able to recognise the overwhelming scientific evidence, appreciate the long-term global benefits in adhering to it, and additionally acknowledge the significant social pressure they could face if they were to choose to ignore it.


Furthermore, considering the length of time the carbon policy debate has raged in the political forum, many simply want it to reach a conclusion. The ongoing uncertainty around carbon pricing serves no real benefit for the majority of emitters, instead hindering and sometimes stalling altogether decisions regarding what could otherwise be productive investments around the world.



Carbon pricing is merely another scheme that allows businesses to profit


It’s been suggested that by pricing carbon all that would effectively be achieved is carbon would become a tradeable commodity. As a result, businesses would be able to profit from trading carbon, rather than actively work at reducing their emissions for the sake of climate change.


Whilst this has a degree of truth in it, it’s worth looking at the bigger picture. Without a financial incentive it’s typically hard to motivate change. As a result, whilst yes, some businesses would earn a slight profit from trading carbon, to do so they’d have to actively be reducing their emissions. Ultimately, this is the goal which matters most.



Carbon pricing doesn’t work/only works if it’s set very high


A common misconception around carbon pricing is that it will have little to no impact on reducing carbon emissions, either failing altogether or only taking effect if the carbon price is set exceedingly high.


On the contrary, many studies have shown that in regions where carbon pricing has been enacted it does lead to a reduction in emissions, even with a carbon price set at a relatively low level [*].


Furthermore, carbon pricing can actively encourage and ultimately lead to further carbon reduction initiatives. By establishing a carbon-conscious community, it’s possible to promote a shift toward a strong, low-carbon economy, open to opportunities such as renewable energy.




Carbon pricing (in any form) just makes everything more expensive for everyone


A claim that gets significant exposure in the carbon pricing debate is that enforcing a carbon price of any kind will have a negative impact on multiple other areas of the economy, both directly and indirectly, as well as members of the general public. It’s also been claimed that carbon pricing would effectively be a regressive tax, i.e. It would impact those from lower income households more significantly than it would those from higher income households.


The argument here is that if emitters were faced with having to pay a carbon price, they’d simply increase their costs of their goods/services in order to cover it. This in turn means the people actually bearing the cost of the carbon price would be those further down the supply chain, and typically (as lobbyists argue) consumers.


However, in reality this all comes down to implementation. There are in fact many ways in which a carbon price can be offset, and if a carbon pricing policy is well-designed and properly thought out it will not inevitably mean consumers face rising personal costs as a result, and nor will the economy suffer. For example, consumers can switch to lower carbon intensity products, thus avoiding the cost. Additionally, with certain carbon pricing measures, such as Cap & Trade systems (in which emitters are essentially given a quota limiting how much carbon emissions they can produce), if targets are achieved the carbon price will actually decline over time, as well as incentivising further carbon reducing actions to be taken. Again, this has been confirmed by multiple studies [*].


Importantly, it’s also crucial when assessing any perceived cost increase as a result of carbon pricing to compare it to the costs calculated to be incurred if climate change were to remain unaddressed. The cost of inaction in the fight against climate change is significantly higher [~].



Climate change is a critical global issue, and misinformation around the tools we have at our disposal to tackle it is one of the greatest factors preventing us as a society from doing so.


However, by recognising the problem and working together, we can overcome it.



[*] Rivers and Schaufele 2012, Elgie and McClay 2013, Duke University 2015

[~] Watkiss et al. 2005