Putting Price on Carbon – A Premium for Secure Future

This year’s Climate and Society class is out in the field (or lab or office) completing a summer internship or thesis. They’ll be documenting their experiences one blog post at a time. Read on to see what they’re up to.

By Arpit Soni, Climate and Society 2014

As world leaders, scientists and businesses around the globe are working towards finding radical solutions to the climate change problem, the phrase ‘putting a price of carbon’ is becoming increasingly crucial. But why is it so popular?

Photo: Mark Jensen/Flickr

Our planet provides us with ecosystem services, which makes the planet habitable. Maintaining the fine balance of carbon¹ and keeping the global temperature within check is one of these services. Unfortunately our current economic system does not account for these generous services offered by our environment, in economic terminology, they are considered externalities. This creates a real problem!

We don’t value our environment’s ability to absorb carbon. Not only are we constantly dumping more and more carbon in our air and oceans but also depleting carbon sinks in the form of forests. If we continue at on the same path at the current rate, then the natural system will be severely disturbed making conditions less livable for humans and financially costing us more to adapt and mitigate the problem in the future. Thus, in an economically-y driven system, the only legitimate way to prevent this collapse is to put a price on our unfortunate habit of spewing carbon. This means charging anyone for putting another extra unit of carbon in our atmosphere.

So, if pricing carbon is so important then why haven’t we adopted it, basically, everywhere? Well, all stories have their villains, don’t they? The ‘antiheroes’ of this story are businesses with vested interests in the status quo. Companies that might face some imminent losses, in an attempt to secure a sustainable future for our planet, have been working very hard to prevent adoption of widespread carbon pricing. Nevertheless, momentum is building for a major climate treaty in 2015 and carbon pricing is back on the top of the agenda.

The flexibility of choosing diverse electives in C+S allowed me to learn from and work with the best economists, scientists and lawyers in the field. And by the virtue of that, I get to learn the dirty details of the trade like abatement cost curves, the social cost of carbon and discount rates. This helped me land an exceptional opportunity to work with the International Emissions Trading Association (IETA) and carry forward the baton of carbon pricing.

IETA is currently working on a special initiative with the World Bank Group to encourage global support for carbon pricing throughout the global economy. A campaign for putting a price on carbon launched earlier this year calls on businesses and governments to take action and show their support for the Carbon Pricing Statement, to be featured at the United Nation’s Climate Summit being held in September. Under IETA’s banner, I’m at the forefront of gathering this support from the global community to adopt and internalize this concept of carbon pricing.

If all major economies and businesses came together and agreed to pay a small premium for their emissions now, it would allow us to secure a safe and sustainable future.