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Carbon Pricing

Greenhouse gas emissions, primarily from energy, have harmful impacts on the future climate that are generally externalized from the emitter. Imposing a tax at the point of emission internalizes those costs.

Social Cost of Carbon

The social cost of carbon is a monetization of future damages from greenhouse gas emissions. Following are select estimates of damages.

Select estimates of the social cost of carbon, assessed per ton of CO2, 2019 USD. Sources: Interagency Working Group on Social Cost of Carbon [7], Moore and Diaz [10], Nordhaus [11], and Wang et al. [17]. A major source of variation in SCC estimates is the discount rate, or the extent to which future economic damage should be valued less than present costs. Rennert and Kingdon [12] illustrate how an SCC estimate can vary by discount rate.

Major damages in climate economic modeling include rising sea level, severe weather, wider range of tropical disease, direct impact of heat, and increased cooling costs. Models generally take into account the benefits of lower heating costs and CO2 fertilization of crops [3]. Most countries will be harmed by climate change, with India hit particularly hard, though Russia, Canada, and Scandinavian countries could benefit [13].

Throughout Urban Cruise Ship, unless stated otherwise, we use a social cost of carbon of $50/ton CO2e. This translates to 45 ¢/gallon for gasoline [15].

Carbon Pricing Policies

A carbon price typically imposes near-term economic costs with long-term climate benefits and more immediate health benefits by reducing other forms of pollution. Recent modeling has found the following costs, climate benefits, and health benefits from recent carbon pricing proposals in the United States Congress.

Image Under Development: carbon_plan.jpg

Analysis of carbon pricing proposals. A carbon price of $52/ton CO2e is assumed. Source: Hafstead [6]. The proposals analyzed are the Climate Action Rebate Act (Coons) [1], the Energy Innovation and Carbon Dividend Act (Deutch) [2], the America's Clean Future Fund Act (Durbin) [4], the MARKET CHOICE Act (Fitzpatrick) [5], the America Wins Act (Larson) [8], the Raise Wages, Cut Carbon Act (Lipinski) [9], the SWAP Act (Rooney) [14], the Healthy Climate and Family Security Act (van Hollen) [16], and the American Opportunity Carbon Fee Act (Whitehouse) [18].

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[1] Coons, C. "S.2284 - Climate Action Rebate Act of 2019". Congress.gov. July 2019.

[2] Deutch, T. "H.R.763 - Energy Innovation and Carbon Dividend Act of 2019". Congress.gov. January 2019.

[3] Diaz, D., Moore, F. "Quantifying the economic risks of climate change". Nature Climate Change 7, pp. 774–782. 2017.

[4] Durbin, D. "Durbin Introduces Bill To Fund A Clean Climate Future". Press Release, Dick Durbin. August 2020.

[5] Fitzpatrick, B. "H.R.4520 - Modernizing America with Rebuilding to Kickstart the Economy of the Twenty-first Century with a Historic Infrastructure-Centered Expansion Act". Congress.gov. September 2019.

[6] Hafstead, M. "Carbon Pricing Calculator". Resources for the Future. August 2020.

[7] Interagency Working Group on Social Cost of Carbon. "Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis". Under Executive Order 12866, United States Government. August 2016.

[8] Larson, J. "H.R.4142 - America Wins Act". Congress.gov. August 2019.

[9] Lipinski, D. "H.R.3966 - Raise Wages, Cut Carbon Act of 2019". Congress.gov. July 2019.

[10] Moore, F., Diaz, D. "Temperature impacts on economic growth warrant stringent mitigation policy". Nature Climate Change 5, 127-131. 2015.

[11] Nordhaus, W. "Revisiting the social cost of carbon". Proceedings of the National Academy of Sciences of the United States of America 114(7), pp. 1518-1523. January 2017.

[12] Rennert, K., Kingdon, C. "Social Cost of Carbon 101". Resources for the Future. August 2019.

[13] Ricke, K., Drouet, L., Caldeira, K., Tavoni, M. "Country-level social cost of carbon". Nature Climate Change 8, pp. 895-900. 2018.

[14] Rooney, F. "H.R.4058 - SWAP Act". Congress.gov. July 2019.

[15] U.S. Energy Information Administration. "How much carbon dioxide is produced from U.S. gasoline and diesel fuel consumption?". U.S. Department of Energy. May 2019.

[16] Van Hollen, C. "S.940 - Healthy Climate and Family Security Act of 2019". Congress.gov. March 2019.

[17] Wang, P., Deng, X., Zhou, H., Yu, S. "Estimates of the social cost of carbon: A review based on meta-analysis". Journal of Cleaner Production 209, pp. 1494-1507. February 2019.

[18] Whitehouse, S. "S.1128 - American Opportunity Carbon Fee Act of 2019". Congress.gov. April 2019.