Geoscience Reference
In-Depth Information
What is the impact of carbon prices on overall expenditures of the
statistically average American family? Table 9 shows some examples for
sharply, while those of carbon-light goods rise much less. The largest
increase would come in electricity prices, because so much electricity
generation in the United States comes from CO
2
-intensive coal. A
typical year's motor fuels would cost 8 percent more. The percentage
increase for an airline ticket would be slightly less. The prices of phone
or banking services would rise hardly at all because they use so little
CO
2
. The cost of all consumption for the average U.S. household, from
abacuses to zwieback, would rise slightly less than 1 percent.
Table 9 shows one of the important ways that putting a price on
emissions can slow global warming. The prices of carbon-intensive
goods go up relative to those of low-carbon goods. This will lead to
behavioral responses in which consumers will buy more of the low-
carbon and less of the high-carbon items. The higher the carbon price,
the more CO
2
emissions will be reduced. This “law of downward-sloping
demand”—meaning that quantity demanded goes down as price goes
up—is one of the universally confi rmed fi ndings in all of economics.
Table 9.
Impacts of a $25 per ton CO
2
price.
Increase in
spending due to
$25 CO
2
price
Increase in
spending (%)
Example
Tons of CO
2
Year's electricity use
9.34
$233.40
19.45
Year's driving
4.68
$116.90
7.79
Economy class
transcontinental fl ight
0.67
$16.80
5.61
One year's household
communication services
0.01
$0.36
0.04
One year's household
fi nancial services
0.02
$0.41
0.04
One year's household
consumption
29.48
$737.00
0.92
