Commercial, GHG Emissions, Industrial, Regulation  -  May 1, 2019 - By Ryan Martel

The business case for a price on carbon

Climate change poses an urgent threat to the American economy. For many companies, the physical and economic dangers of climate change are clear, and delaying action is no longer a viable option.

Last fall, a series of reports made very real the present risks of climate change. These reports underscore that keeping average global temperature rise to no more than 1.5-degrees Celsius and avoiding the worst effects of climate change requires dramatically increasing the pace and scale of greenhouse gas (GHG) emission reductions. 

Fortunately, companies across all sectors of the economy understand what is at stake and are already heeding this pressing call for action, by taking concrete steps to accelerate the transition to a zero-carbon economy and ensure they remain competitive in the global economy. More and more, major U.S. companies, including Apple, Bank of America, Citigroup, Coca-Cola, Kellogg’s, Mars Incorporated and Nike, are making ambitious commitments to reduce emissions in their operations and across their supply chains. They do this not just because it is the right thing to do, but also because they have done the math and know that it makes business sense.

However, the private sector cannot tackle climate change on its own. The sum total of corporate commitments to reduce emissions are insufficient to meet long-term climate goals and mitigate the impacts of a warming planet. We also need strong policies such as a well-designed price on carbon. 

Thanks in part to the cascade of new scientific findings showing the devastating effects of climate change and to an energized U.S. House of Representatives, momentum is building for climate action at the federal level. While the Green New Deal has certainly received significant attention, there has been a slew of other activity among members on both sides of the aisle—including several bipartisan carbon pricing proposals introduced within the last year. 

Seizing on this new momentum, companies large and small—including Ben & Jerry’s DSM, JLL, Johnson & Johnson, New Belgium Brewing, PSEG and Seventh Generation—will take Capitol Hill by storm this spring to raise their collective voice and call for a meaningful federal price on carbon. A well-designed price on carbon is a critical element of the necessary legislative response to climate change, and would help drive emissions reductions while strengthening the overall economy and creating a stable, predictable policy environment for U.S. companies and communities. 

Here in the U.S., we already have evidence that economic growth and emissions reductions can go hand in hand. States and regions that have implemented carbon pricing have some of the strongest economies in the country. For example, the Regional Greenhouse Gas Initiative (RGGI) is a cap and trade program (a type of carbon pricing) for the electric power sector in the Northeast and Mid-Atlantic states that has been in place since 2008. A recent report found that RGGI has helped reduce the electric power sector’s greenhouse gas emissions 40 percent since 2008. At the same time, electricity prices in the region have decreased by 6.4 percent, while they have increased by 6.2 percent on average in all other states. The economies in RGGI states also grew by an additional 4.3 percent relative to non-RGGI states during that time.

Another strong example is the state of California—the fifth largest economy in the world and home to one of the fastest growing and most innovative sectors of the economy. It also happens to have extremely ambitious climate policies, including a statewide carbon price in the form of a cap and trade program. As in the RGGI states, as California’s emissions have declined, the state’s economy has flourished.

Because they understand the risks of climate change, as well as the economic opportunities of tackling climate change and spurring clean energy development, the business community also increasingly supports climate action.

Major American corporations are stepping up to support climate action and carbon pricing. Nearly 40 Fortune 500 companies have declared that “We Are Still In” the Paris Agreement. Corporate support for a carbon price is perhaps most clearly articulated by members of the Climate Leadership Council, including ExxonMobil, Shell, BP, GM, Johnson & Johnson, P&G, Pepsico, Santander, Schneider Electric and Unilever.

Institutional investors are even more clear and consistent in their call for a price on carbon. Last year at COP 24, 415 investors from around the globe—many based here in the U.S. and together representing over $32 trillion in assets under management—called on governments around the world to step up action to tackle climate change, including a meaningful price on carbon.

Support for climate action is also building among everyday Americans. A March 2018 poll of registered voters by Gallup found that 71 percent of respondents favor a carbon tax on fossil fuel companies and support using the revenue to reduce other taxes. The poll found that on average Americans are willing to pay almost 15 percent more on their energy bills for this. In addition, the poll found that the most popular uses of the significant revenue raised from a carbon price are clean energy investments, infrastructure investments and transition assistance for fossil fuel workers and associated communities.

The impacts of climate change on our economy and in our communities become more real and immediate every day. We need a strong and comprehensive policy response equal to the severity of the climate challenge—and that should include carbon pricing. We urge companies to join their peers in May to raise their voices in support of a meaningful price on carbon. 


Ryan Martel is the federal policy director at Ceres, a nonprofit organization working with the most influential investors and companies to create a just and sustainable global economy.

Tags: Ceres
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