Carbon Pricing
Grounded in 8 cited sources spanning center-left · center · center-right · right — each linked below, so you can judge them yourself.
Carbon pricing makes companies pay to put carbon dioxide into the air. That makes dirty energy cost more and cleaner choices look better.
What it is
Carbon pricing makes companies pay for the carbon dioxide they put into the air, and there are two main ways to do it: a carbon tax sets a fixed price for each ton, while cap-and-trade sets a limit on total carbon and lets companies buy and trade permits. California uses cap-and-trade -- from its start through 2023-24, its auctions raised about $31 billion. Supporters say pricing cuts pollution at a lower cost than strict rules would, but studies of real programs find the yearly cuts are limited, generally between 0% and 2% a year. A carbon price can also cost lower-income families more, though how much more depends on how you measure it, and how the government spends the money can change who pays.
How it works
There are two main tools. A carbon tax puts a set price on each ton of carbon, and that price guides the choices people and businesses make. Cap-and-trade instead sets an overall limit, called the "cap" -- the government then sells or hands out a limited number of permits, called allowances, and companies that pollute less can sell their extra allowances to companies that pollute more. Either way, the goal is the same: make dirty energy cost more so people switch to cleaner options. People disagree for a few reasons. One is fairness: a carbon price raises the cost of energy, like gas, heat, and electricity, which can hit lower-income families harder. One study that looked at a price on all greenhouse gases found the burden on the poorest fifth of households would be about 3.25 times as high as for the richest fifth, measured by yearly income -- though measured over a person's whole life, it was only about 1.4 times as high. A second reason is the money: governments collect billions of dollars, and there is no single agreed way to spend it. Some want to mail it back to families; others have different ideas. A third reason is competition -- one place may charge for carbon while another does not, so some factories may move to the cheaper place to avoid the cost.
The debate — equal weight, both sides
Supporters say pricing carbon is the cheapest, fairest way to cut pollution: the government need not write detailed rules for each company, since a price lets each business and family find its own cheapest way to pollute less. Researchers at the Brookings Institution say a carbon tax brings "market-based incentives." One survey of economists asked a key question: could a carbon tax raise money with less harm than higher income taxes? Supporters also say the tax need not hurt poor families, since the government can send the money back as a "dividend." Analysts at Resources for the Future say this check "will likely exceed the increased costs" for a low- or middle-income family -- many families, they say, could get back more than they pay.
Critics say a carbon price sounds simple but can cause real harm: it raises the price of energy, which touches nearly everything people buy, like gas, food, and electricity. The Cato Institute argues that even a revenue-neutral carbon tax "will probably reduce conventional GDP growth." Critics also warn that lawmakers may spend the money on other programs -- and if that happens, the promised tax cuts or rebates may never arrive. Critics also worry about competition: the United States might charge for carbon while other countries do not, so some companies may just move their factories overseas. This problem is called "leakage." The Tax Foundation says this means "activity simply shifting to a different jurisdiction" -- jobs and pollution move abroad instead of going away. Some critics also ask whether the price is ever set at the right level.
Sources
The two sides appear only when both are sourced, and every explainer is reviewed by a person before it goes live. We summarize what each side argues; we never tell you how to vote.