US States Benefit From Carbon Tax

A new U.S. study has found that market-based mechanisms such as pricing fossil fuels are the cheapest way for states to prepare for President Obama’s Clean Power Plan

As the carbon tax faces the axe in Australia’s parliament this week, a new U.S. study has found that market-based mechanisms such as pricing fossil fuels are the cheapest way for states to prepare for President Obama’s Clean Power Plan; which mandates a 30 per cent drop in carbon emissions from the power sector below 2005 levels nationwide by 2030.

The study, by financial consultancy firm Analysis Group, examined carbon pricing schemes in several states across the U.S. and found those economies had experienced a net benefit in job creation and productivity, as well as cheaper energy prices for consumers.

“Several states have already put a price on carbon dioxide pollution, and their economies are doing fine. The bottom line: the economy can handle – and actually benefit from – these rules,” said Analysis Group Senior Advisor Susan Tierney.

President Obama’s Clean Power Plan utilises power under the Environmental Protection Agency’s (EPA) Clean Air Act to require that by 2030 all power plants in the US cut carbon emissions from the power sector by 30 per cent below 2005 levels. They also demand a cut in particle pollution, nitrogen oxides and sulfur dioxide by more than 25 per cent, plus will shrink power bills by up to eight per cent by improving energy efficiency and reducing demand in the electricity system.

It is up to individual states to decide how they will meet the cuts – the EPA has set a June 2016 deadline for plans to be submitted – but the Analysis Group report found that a well-designed and thoughtful approach to carbon pricing would be the least disruptive method of complying with the new rules, particularly if there is cooperation at state level.

“States that work together to form carbon markets or other collaborative initiatives have the potential to experience greater benefits than they would by trying to meet the new standards by themselves,” the report reads.

Australia’s carbon tax is set to be repealed this week after the Abbott Government agreed to amendments by the Palmer United Party. Mr Palmer has proposed a zero-price emissions trading scheme (ETS), which would only be implemented if and when Australia’s major trading partners sign up.

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