Citizens’ Climate Lobby Posted on December 17, 2022 in Advance Climate Policy

For over a century, economists have advocated taxing goods or services that impose greater costs on society than their price reflects. The idea isn’t to raise revenue, even if that’s a nifty benefit, but to discourage the overuse of things that cause unintended harm. 

No bigger example of such unintended harm exists today than the air and climate pollution caused by the burning of fossil fuels. The International Monetary Fund conservatively estimates that the price of such fuels fails to account for $4.2 trillion in air and climate pollution costs each year.

By imposing a fee on fossil fuels to fairly reflect those social costs, on the other hand, we can invoke the power of the market to efficiently limit their use. That’s why more than 3,600 economists call carbon fees “the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary.”

Public support for carbon fees would be stronger if everyone grasped how they work to discourage the production and consumption of goods that cause societal harm. Unfortunately, many people don’t get it. 

“The expectation that carbon taxes do not work is one of the main reasons for their rejection by people in surveys and real ballots,” an international scholarly review concluded in 2018. For example, only 39 percent of respondents in one Swedish poll understood that a carbon tax “affects my own and other people’s behavior.”