Two climate moments of truth loom on the immediate horizon. The first will occur in Washington, DC before the end of October, and pertains to whether the United States Congress will enact a measure to price carbon nationally in line with its social cost. The second will occur between October 31 and November 12 in Glasgow, Scotland, and pertains to whether the global community will come together at the United Nations conference known as COP26 to produce an agreement for achieving a sensible global carbon pricing mechanism.
Carbon emissions from human activities lie at the heart of the climate crisis. A key reason we have a crisis at all is that these emissions have been, and continue to be excessively cheap. In this regard, emissions have been priced for decades, indeed subsidized, in a way which ignores their causal impact on global temperatures.
If the participants at COP26 manage to produce an agreement for achieving a sensible global carbon pricing mechanism, the market implications are enormous. Over the next decade, emissions trading volume can reasonably be expected to grow by a factor of 25.
It is vitally important that the US play a key leadership role at COP26, but will be hampered if its stance is “Do as I say, not as I do.” This means that the US will only be able to exercise real leadership if it can pass sensible climate measures as part of the Reconciliation bill now being debated in Congress. Among these measures is a carbon tax, meaning being a fee which if imposed will raise the relative price of any product in a way that reflects the carbon emissions embedded within the product.
For this to occur, both the US and the world at large need strong and bold leadership, and need it now.
President Biden and John Kerry, United States Special Presidential Envoy for Climate, will both be attending COP26. Recently, Kerry told the BBC: “So this is really what Glasgow is about, the last best hope to do what the scientists tell us we must which is to avoid the worst consequences of climate by making decisions now and implementing them now.” However, and this is characteristic of his longtime view, Kerry made no mention of the need for carbon pricing. As for President Biden, while he did support the idea of a carbon tax at one point, while running for the Presidency, he ceased being a strong advocate for it after becoming President.
The country needs strong, bold, creative leadership to arrive at a national carbon pricing policy which the majority already supports.
Robert Litterman, a co-director of the Climate Leadership council, places the odds at 50-50 that the Congress will pass a sensible carbon pricing policy by the end of October. He notes that the European Union is serious about imposing a border carbon adjustment mechanism, and that China, which has been making significant progress at decarbonizing, has recently instituted a carbon pricing mechanism of its own. In Litterman’s view, if the US manages to pass carbon tax legislation, if the European Union institutes a border carbon adjustment, and if China joins together with the US and the EU with a cohesive tax and carbon adjustment policy, the rest of the world is bound to follow.