Winnipeg: The Frontier Centre for Public Policy today released The Economic, Environmental and Political Consequences of Carbon Pricing. Using eight case studies from around the world, the paper examines the consequences of ambitious carbon pricing policies and proposals. The case studies suggest that the international experience with carbon pricing has, for the most part, been unsuccessful. In many instances, the projected negative economic effects provoked strong political opposition, which either blocked implementation completely or caused key participants to withdraw.
Eric Merkley, Ben Eisen and Kenneth Green examine the economic, environmental and political effect of ambitious carbon pricing policies and proposals. The case studies in question are:
American Clean Energy and Security Act of 2009; Regional Greenhouse Gas Initiative; Western Climate Initiative; European Union Emissions Trading Scheme; Liberal Party of Canada’s Green Shift; British Columbia Carbon Tax; Australian Carbon Pollution Reduction Scheme; and, Norway’s Carbon Tax.
Some specific key findings from the study are:
- Generally speaking, carbon taxes are easier to implement successfully than cap and trade plans.
- Proponents of carbon pricing plans have often seen their proposals become unpopular, and paid a severe political price. For example, support for ambitious carbon pricing measures contributed to recent electoral defeats for congressional Democrats in the United States and the Liberal Party of Canada.
- Opposition to carbon pricing plans often coalesces around the notion that these policies are a “revenue grab” by governments. This source of opposition can be softened somewhat, if policy proposals are clearly revenue neutral and include transparent revenue recycling mechanisms.
- Even carbon pricing plans that are revenue neutral overall can cause significant harm to specific industries, groups and regions within a jurisdiction, leading to the development of fierce, concentrated political opposition that can result in policy reversal or block implementation altogether. If policy design ensures identifiable groups (such as low-income individuals) and regions that are likely to be harmed are compensated, the likelihood of fierce political opposition can be somewhat reduced.
Download a copy of The Economic, Environmental and Political Consequences of Carbon Pricing HERE.
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