Why it's important

The heart of the climate change issue is the amount of greenhouse gases that are released into the atmosphere every year. The one that does much of the damage and that would be the easiest to control is CO2. Plus, reductions in CO2 would likely lead to reductions in other greenhouse gases as well. This one section could help nearly every other section on this website accomplish its goals.

Polluting the atmosphere with products that contribute to climate change has no direct cost to the polluter, but it's effects cost everyone. The carbon emitted in large quantities every day damages the Earth and its estimated $2.9 trillion per year in services it provides us. A carbon tax or cap and trade system take into account the economic effect of climate change to give less carbon-intensive technologies an economic advantage in the free market and to force those who are causing the most damage to pay for it.

The theory behind these systems is that pollution is considered what is called a negative externality because it has a negative effect on those who are not directly involved in a transaction. There have been a huge number of economic reports that attempt to place values on the risks of climate change versus the cost to mitigate climate change effects, the most high profile of which was the Stern Review by HM Treasury official Nicholas Stern, who said that unless we invest 1% of the global GDP into mitigating the effects of climate change, we could risk a recession worth up to 20% of the global GDP. While this report has taken some criticism, it is safe to say that the effects of global climate change could be huge economically. A carbon tax or cap and trade would attempt to account for this social cost of global climate change that currently no one is paying for, but will cost everyone in the future. This tax would make those producing greenhouse gases pay for them and would help level the playing field for less carbon-intensive technologies that are still more expensive.

A carbon tax or cap and trade system would bring in a large amount of money to those governments issuing permits or collecting the tax. There has been a lot of talk about what to do with the profits from a cap and trade or carbon tax system, with the United States Congressional Budget Office estimating that an economy-wide cap and trade program could make the US alone $50-300 billion per year. This money could be used to offset the cost of higher energy costs on the poor as well as potentially to invest in low carbon technologies. For more information on options for revenues, check out the How We Get There section.

In short, putting a price on carbon will prevent those who have been polluting and contributing to climate change from continuing to emit harmful chemicals for free, putting pressure on industry to adopt cleaner, safer alternatives. This will help nearly every other technology discussed on this website get a leg up over the status quo by taking into account the true costs of the way we currently do things. And if done right, pricing carbon will do this without drastically raising costs on the lower income energy consumers by using proceeds to offset increased costs to the average consumer.