• Business Business

Could a government-imposed 'carbon tax' help slow the overheating of our planet?

"Savings in public health alone will be far more than the costs of the policy."

Wood embers Carbon

Photo Credit: iStock

Carbon pollution cost all of us something, whether we see it or not. 

To put a number on the negative effects of carbon-based energy, the non-profit Resources For The Future uses a measurement called the social cost of carbon (SCC). Basically, it's a dollar estimate that breaks down the cost of damages caused by every ton of carbon pollution that enters the atmosphere.

The SCC uses this measurement to help countries, businesses, and other groups understand how their decisions impact our planet. For a deeper explanation, check out this helpful video breakdown.

But here's the simple version: the Environmental Defense Fund currently estimates the social cost of carbon at $50 per ton. What's more, many consider that to be a conservative number. 

What is a carbon tax?

So, how can we cut down on the costs associated with carbon pollution? One way is through carbon taxes. 

According to the Center for Climate and Energy Solutions, a carbon tax happens when the government sets a price that businesses — or even consumers — must pay for each ton of planet-overheating gases they create. 

The goal is to encourage companies and individuals to take steps toward clean energy, like wind, solar, and even tidal power

What are the alternatives to a carbon tax?

Carbon taxes are usually compared to cap and trade programs, which have a similar goal. That said, cap and trade programs work pretty differently. 

With cap and trade, the government issues a set amount of permits to companies, which limits how much dirty energy they can produce. Any business that goes over the cap has to pay a tax. 

In this system, the number of permits decreases over time — that's so companies have the motivation to try out newer, cleaner, often less expensive energy solutions. 

What are the downsides of a carbon tax?

A common fear with carbon taxes is that they increase the price of gasoline and other dirty energies, essentially transferring the costs to consumers. 

However, the ultimate goal is to make the market more energy efficient — as time goes on, more consumers would have the option to power their cars, homes, and devices with clean energy.  

"Regardless of what opponents of carbon pricing might say, all of the evidence shows that a carbon fee that sends carbon cash back payments to households will actually improve the economy and create jobs," The Citizens Climate Lobby reports. "Savings in public health alone will be far more than the costs of the policy."

Want more? Follow The Cool Down on Instagram and join our Weekly Newsletter for cool stories and easy tips that save you money, time, and our planet.

Cool Divider