Carbon Price Today, 10% Cut in US Emissions Tomorrow

What’s the fastest way to shrink America’s emissions by ten percent?

Slap a price on carbon. Right now. Even a modest one of say $35 a metric ton. Do it through a tax, carbon trading pact or what have you.

And watch the pounds of carbon dioxide drop off -- immediately.

That, at least, is the conclusion drawn from new research out of Carnegie Mellon University that was published in the May 1 issue of Environmental Science & Technology (sub. req'd for full article).

The researchers claim to deliver the "clearest picture yet" of the likely short-run effects of establishing a cost for high-carbon fossil fuels, such as coal.

And crystal clear it is. In sum: Carbon pricing works, and it doesn't even have to sting.

To arrive at its conclusion, the researchers posed two questions:

• One, given a price on carbon, would electric utilities instantaneously switch to more efficient power plants with lower CO2 emissions?
• And two, would consumers immediately become more careful of their electricity use?

The answers are obviously yes, and yes -- even resoundingly so.

So how do they know?

The researchers simulated the impact of a price on emissions from existing power plants in three regions. They used marginal costs for generators, and hourly electricity load data from 2006.

On the consumer side, they illustrated the price elasticity of demand for a variety of carbon prices, ranging from $0 a ton to $60 a ton.

Not surprisingly, consumer demand drops as carbon prices shoot up. And $35, it seems, is a trigger price for consumer efficiency.

What about for the big power generators? The study predicts immediate changes in their investment strategies that would have near-instant effects.

Here's Jay Apt, professor at the Tepper School of Business at Carnegie Mellon and co-author of the study, driving the point home:

Our findings indicate that significant reductions in CO2 can and would be observed in the near-term, even before more efficient power generation technologies are deployed on a wide scale.

Of course, early emissions cuts would be highest in areas that use more coal for their electricity needs.

Take the Northeast and the Midwest, for example. A $35 a ton carbon price in those regions would trigger a ten percent reduction in emissions, while natural-gas-heavy Texas would see a three percent reduction at the same price.

Now, let's be clear. Carnegie Mellon didn’t reinvent the research wheel here.

But the institution has added its considerable weight to the common sense finding that if America's coal industry is forced to pay for the emissions it spews, then the whole nation would choose to use less of the dirty fuel.

Investing in clean fuels and efficiencies would become a giant no-brainer.

And our climate and economy would be all the more healthier for it.

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