Putting A Price On Carbon Essay

Today, the world is confronted by the most challenging problem ever, Global warming.  Global warming is now a reality and its impact are already being felt across the global.  Take climate change for example.  Over the recent years, the whole world has experience drastic and dangerous climate change ever which has been caused by global warming. For example, Sea level is increasing everywhere putting people at risk of flooding and hurricane. Summer temperature have become hotter and prolonged leading to drier forest which in turn increases the chances of wildfires.   Weather has also become dangerous hot, leading to destruction of forest and as well as cause famine and drought especially in countries that relies on agriculture. In addition, due to global warming, the air has become so polluted putting public health at risk of diseases such as cancer, asthma among others.  There is agreement among all scientists and environmentalist that the leading causes of global warming is carbon emission.  Therefore, to address the threats posed by global warming,   solution to the problem of carbon emission is much needed globally.  Although  good solutions such as  encouraging use of renewable  energy among others  have been suggested and implemented,  they have not be able to address the problem of  carbon emission  in a large scale.  A lot carbon is still being emitted to the environment by vehicles, industries and other human behaviours.  Unless drastic measure is take, more carbon will still be emitted into the environment because, as of today, it absolutely free to pollute.  The only viable and effective option left is to put a price on carbon emission.  This paper will explain how pricing carbon will help address the threats of global warming. It has been argued that pricing carbon will have negative   impact on economic growth.   According to the Institute  for Energy  Research (2009),   pricing carbon  will only lead to  lower energy use  which mean lower economical output simply because  the  carbon replacement  energy sources  are not readily available.  This point is reiterated by Fairley (2016), who argues that pricing carbon will increase the cost of electricity which will then increase the price of general good leading to mild inflation hence deterring economic growth. Although the opponent of   pricing carbon claim such policy will have negative impacts on the economy growth due to unavailability of sufficient non-carbon energy, their argument is far from the truth.  Pricing carbon will not  in any way have any negative long-term impacts on economic growth since non-carbon energy sources including wind, solar hydro among other are readily available, underutilized and capable of matching  the  energy supply from natural gas, oil and coal (Mclamb 2011).   Pricing the carbon will only discourage people from using fossil fuel-based energy and this will eventually encourage investment in the underutilized clean energy sources leading to replacement of dirty energy with clean energy and this wouldn’t deter economic growth in any way (REN21, 2015).  The economic growth will still remain intact and this is well evident in recent economic analysis conducted in Canada where it was found out that the Canadian economy would grow at almost the same rate between 39-34 percent with or without carbon pricing (NRTEE 2013).  Furthermore,   a regional carbon pricing program in New England and Mid-Atlantic States by the name of Regional Greenhouse Gas Initiative (RGGI) has even resulted to positive economic activities in the region. Since  RGGI  started in 2011, the  affected regions has  added up to $1.3 billion in economic activities while at the same time reducing the  carbon emitted by  15 percent (Samantha, 2015). Putting a price on carbon would therefore achieve its objectives of discouraging usage of energy from fossil fuel without any negative impact on economy.  In fact, a recent report by World Bank (2016) had shown that pricing carbon would stimulate investment and innovation in clean energy technology   and we may end up having more energy (carbon free) than ever before which may be good for economic growth and expansion.  Furthermore, if the results achieved by the Regional Greenhouse Gas Initiative (RGGI) as implemented in New England and Mid-Atlantic States are anything to go by, pricing the carbon is even likely to stimulate economic growth as it has done in the regions mentioned above. It has also been argued that pricing carbon will greatly affect low income families as they spend most of their income on energy (Grainger and Kolstad 2009). According to Grainger and Kolstad (2009) pricing carbon will increase the cost of energy which means the lower income families will spend even a higher percentage of their income on energy making them poorer. Although this argument may be seen as true due to the fact that energy from fossil fuel is relatively cheaper than those from non-fossil fuel sources at the moment, it is based on the assumption that the price of clean energy will remain relatively high even when produced on large scale. This assumption is not correct as evidences has shown that large scale production of  clean energy  decrease the cost significantly  to a point whereby in some regions  the cost is now almost equal to that  incurred generating energy from fossil fuel (IRENA  2015). For instance,   a pricing carbon program in New England and mid-Atlantic states named  Regional greenhouse gas initiative (RGGI)  has not only reduced   carbon emission by 15 percent but has also reduced the cost of electricity saving residents, business and other users up to $ 460 million (Samantha 2015).   As stated by World Bank (2016), pricing carbon will only make dirty energy to become more expensive and this will stimulate investment and innovation in low-carbon technologies. And as investment and Innovation in non-fossil energy sources increase, it is becoming cheaper to produce energy that is free from carbon (IRENA 2015).  For instance, Investment in solar and wind plant in Mexico and Morocco has already shown the sign of producing the cheapest electricity in the world (Randall 2016). It is therefore wrong to argue that pricing carbon will have negative economic impact on the low income families. In fact, if the clean energy project in Mexico and Morocco (Randall 2016) is anything to go by, the opposite will be true in the long run.  Energy will become cheaper and the low income families will even spend smaller percentage of their income on energy.   This is well evident in the regional greenhouse gas initiative (RGGI) which   actually introduced price on carbon in 2011. As result, the program has resulted to reduction in cost of energy for consumers centrally to what critic of carbon pricing argues. In conclusion,   pricing carbon give the world a good opportunity to curb global warming by reducing the amount of carbon emitted to the environment without having any negative impact on economic growth or on the poorer as claimed by the critics.  It  will not only give  the world the opportunity to discourage continued investment  and use of fossil fuel-base energy sources in favour of non-fossil fuel energy sources but it also  present an opportunity to encourage  decarbonise the energy.  Therefore, both developed and developing economies should introduce carbon pricing policies in form of tax, cap-on –trade or any other available option to tackle the   global warming.