Focal Areas

Putting a Price on Carbon

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Across the world, there’s been a growing interest in putting a price on carbon. As of August 2015, 39 national and 23 subnational jurisdictions are using a carbon tax or an emissions trading system that taxes polluters based on the amount of greenhouse gases they emit in an effort to reduce emissions.

Work at the Nicholas Institute for Environmental Policy Solutions aided in the design aspects around emissions trading systems for the Northeast’s Regional Greenhouse Gas Initiative (RGGI)—the country’s first regional cap-and-trade program designed to reduce power plant emissions—and California’s cap-and-trade program, the country’s first to cover multiple economic sectors. Both programs use an allowance reserve concept, developed by Duke researchers, to keep emissions allowance prices from rising too high and inflicting excessive hardship on potential buyers.

Nicholas Institute work also examines existing carbon tax schemes, assessing their environmental integrity, cost-effectiveness, distributional equity, and fundamental design. One project partnering researchers at the Nicholas Institute with the University of Ottawa’s Institute of the Environment and Sustainable Prosperity, broadly gauges British Columbia’s revenue-neutral carbon tax performance across four critical dimensions: emissions, economy, equity, and public acceptance.

With partners, the Nicholas Institute researchers are also using energy-economic models to assess emissions, energy, and economic outcomes from a range of U.S. policies to reduce greenhouse gas emissions.

Upcoming projects will assess what national and subnational jurisdictions choose to do with the money raised by carbon taxes.