We’re finally catching up with last week’s two big climate-policy stories: the new IPCC report on the dire consequences if global temperatures rise more than 1.5°C above pre-industrial levels, and the awarding of the Nobel Prize in economic science to climate-policy pioneer William Nordhaus of Yale.

A clear thread links the two stories: earth’s climate — and literally human society — faces repeated, widespread, unmanageable disruption unless the world’s nations and peoples begin a sharp and complete U-turn from fossil fuels to carbon-free energy; and this requires not just a “price on carbon” but a high one, as the New York Times spelled out in the headline of perhaps the paper’s key story last week.

Not only that, the price must be considerably higher than Prof. Nordhaus, the dean of climate-damage modeling, has called for throughout his illustrious careeer.

The story, by Times climate-economics reporter Brad Plumer, warrants quoting at length:

More than 40 governments around the world, including the European Union and California, have now put a price on carbon, either through direct taxes on fossil fuels or through cap-and-trade programs. But many of them have found it politically difficult to set a price high enough to spur truly deep reductions in carbon emissions.

The concept of carbon pricing received another implicit endorsement on Monday from the Nobel Prize committee, which awarded Yale’s William D. Nordhaus a share of the 2018 Nobel Memorial Prize in Economic Science for, among other things, making a case that “the most efficient remedy for the problems caused by greenhouse gas emissions would be a global scheme of carbon taxes that are uniformly imposed on all countries.” (emphasis added)

Plumer noted that since the 1970s, Prof. Nordhaus has “argued that companies that burn fossil fuels should be taxed at a rate that reflected the harms they were imposing on the rest of the world.” Needless to say, the companies would pass on most if not all of these carbon taxes in the form of higher prices for fossil-fuel derived electricity, gasoline and diesel fuel prices, etc. — a feature rather than a bug since these price incentives would do more than any other competing policy measures to motivate the companies themselves, along with millions of other decision-makers to change behavior, make investments and pursue innovations to minimize their tax exposure and, thus, shrink national and global use of fossil fuels and resultant carbon emitting.

“Economists have long been enthusiastic about carbon pricing because of the policy’s efficiency,” Plumer wrote in The Times. “Give companies a financial incentive to reduce their fossil-fuel use, and they will find creative and cost-effective ways to do so without the need for heavy-handed government regulations.”

That’s essentially our view at the Carbon Tax Center, except that we don’t necessarily view direct regulations like car-mileage standards as heavy-handed — just less productive than advertised, due to their scattershot, reactive nature; overrated, you might say.

How steep must a carbon tax (or carbon price “delivered” under a cap-and-trade permit system) be to enable the climate catastrophe of 1.5°C or greater temperature rises? As Plumer notes, the IPCC report estimated that the global-average price to emit a ton of CO2 pollution must be at least $135 by 2030, and perhaps as great as — are you ready? — $5,500.

The bottom end of the range, at least, is right in line with what CTC has been advocating since roughly 2010, with a carbon tax starting at $12.50 per ton of CO2 and rising by $10/ton each year. As we never fail to point out, within a decade the tax, passing $100/ton and still rising, would cut U.S. emissions by roughly one-third from today’s levels. While stronger medicine is almost certainly needed, we’ve tended to stick to that trajectory to stay within the lines of political feasibility — a convention we would gladly bend if the carbon tax, once implemented, proved more acceptable to the public and elected officials.

Plumer’s wonderfully informative article hints at that possibility:

Policies that are widely popular with voters, such as mandates for renewable energy, can help reshape the political landscape to make more ambitious climate action feasible. And policies that spur innovation and drive down the cost of cleaner alternatives to fossil fuels, such as electric vehicles, could potentially make higher carbon prices more palatable.

In other words, as the perceptive Vox journalist David Roberts pointed out several years ago, continued advances in (and broadening uptake of) wind power, solar PV, electric cars, etc. could help carbon taxes be seen as a helpful bridge rather than a punishing hand. And, politically, that could make all the difference.

As for Nobel laureate Nordhaus, we haven’t been alone in criticizing him over the years for settling on an adamantly conservative formulation of carbon damages and the resulting “social cost of carbon” — one that arises from both his insistence on a high “discount rate” that shrinks future costs in present terms, and his exclusion from his modeling of the prospect that climate change will erode societies’ ability to generate new wealth by inhibiting the accumulation of technological and intellectual capital, among other losses.

Today, however, we applaud Prof. Nordhaus’s Nobel and share the hope he expressed in an interview this past weekend with The Times’ Coral Davenport, that “if we continue to work on this, the public will get there on the science, and make an exception to the toxicity of taxes.”

“It will help if [the carbon tax is] tied to something popular — if, as a result of the revenue from a carbon tax, you get a check in the mail, or it funds health care,” Prof. Nordhaus added in his interview. We’re all still searching for the right political formula. “I’m hopeful that grown-ups will take over and we will do what is necessary,” he said. “If we don’t, then things will just get worse and worse.”

CTC policy associate Bob Narus contributed information and ideas to this post.

Before you take umbrage at the headline, let me be clear: President Trump’s announcement yesterday proposing to freeze federal car-mileage standards at 2020 levels and revoke California’s longstanding authority to set auto emissions standards tighter than federal standards is contemptible.

The mpg freeze will mean more carbon emissions hastening the plunge into climate chaos not only for Americans but for the seven billion other people with whom we share the planet. The California revocation will bring down the curtain on that state’s half-a-century of innovation in low-emissions regulation and technology.

Both moves are archetypal Trumpian policy-by-pique. Their sole purpose is to stick mud in the eyes of Gov. Jerry Brown, who with his father, Gov. Pat Brown, pioneered green state governance; of President Obama, for whom ramping up auto mpg requirements was a cornerstone measure to combat global warming; and of untold numbers of Americans who care deeply for our environment.

The policy, a gift to oil companies, will accomplish nothing while sowing vast damage. Like Trump himself, it is spiteful, sickening and stupid.

But what’s also true is that a mid-range carbon tax could recoup the lost ground. I calculate that a U.S. carbon tax that started next year at a level of $5 per ton of carbon dioxide and increased by $5 a ton each year, with no letup, would, by 2035, be curbing carbon emissions from gasoline use by the same amount that Trump’s cessation of tighter mpg standards will increase them — around 140 million metric tons of CO2 a year.

Moreover, such an economy-wide carbon tax would bring about parallel drops in emissions throughout the economy — in electricity generation, freight-hauling, aviation and industry. I estimate that in 2035, when the hypothetical carbon tax would have reached $85 per ton, those reductions would amount to an additional 980 million metric tons. All told, the carbon tax would suppress carbon dioxide emissions eight times as much as Trump’s mileage freeze will elevate them.

To reflect the hypothetical nature of the carbon tax I express its benefits in the subjunctive (“would”) while employing the definite tense (“will”) for Trump’s intended rollbacks. This is a necessary concession to the arduous and uncertain task of passing a U.S. carbon tax, in contrast to the president’s all-too-real administrative powers — notwithstanding the fierce legal and political challenges that will be mounted against those moves. The point is not to trivialize the White House’s latest destructive act but to highlight the vast potential of a robust carbon tax to cut emissions.

A carbon tax covering gasoline would stand in for higher mpg standards, in part, by nudging consumers to more fuel-efficient vehicles and, thus, incentivizing manufacturers to design and market them. More than that, the higher fuel price could inflect drivers’ day-to-day decisions on how far to travel and, for multi-car families, which car to take, not to mention how aggressively to drive. Vehicle miles traveled (VMT) would shrink somewhat as well, as decision-needles tilt toward car-sharing, trip-chaining, public transit, and walking and biking.

This isn’t to overstate the link between higher fuel prices and lower gasoline use. In our modeling at the Carbon Tax Center we employ a “long-run” gasoline price-elasticity of just 0.35 (discussed and derived here), by which prices at the pump must rise by a third to cut usage by a tenth. It also bears repeating that not all Americans have agency to respond to price rises. But while a binary frame may be useful for viewing individuals’ fuel-use decisions, the aggregate level of fuel use (and the resulting carbon emissions) is the product of literally billions of daily and longer-term decisions.

Moreover, autos (cars and light trucks) make up just one-quarter of U.S. carbon emissions — even when “upstream” oil refining is factored in. The sectors yielding the other three-quarters of U.S. CO2 — electricity, freight, air travel, industry, heating, construction — are more price-elastic, which is why a carbon tax that would recoup the reductions from the higher mpg standards would yield another 7-fold’s worth of reductions.

So yes, Bill McKibben is spot-on to call the mileage freeze Trump’s “stupidest decision yet in his endless attempt to roll back environmental protections.” And yes, a carbon tax of any stripe, let alone one that could rise to $85 per ton by 2035 as in our modeling exercise here, remains nowhere in sight so long as Republican extractionism and malice rule Congress and the White House.

But that’s not cause to ignore or abandon the long-term campaign for a robust U.S. carbon tax. Quite the opposite.

Our Numbers Explained: We used the Rhodium Group’s May 2018 analysis, Sizing Up a Potential Fuel Economy Standards Freeze. For 2035, Rhodium projected a 114 million metric ton fallback in CO2 reductions if oil prices are low, and 32 million tons if prices are high. (The high-price fallback projection is smaller because expensive gasoline would do some of the work of mpg standards in engendering fuel efficiency while also dampening the amount of driving.) We conservatively used the higher figure and added 20 to 25 percent to capture upstream (refinery) emissions, yielding a target of 140 million metric tons. Through trial-and-error, we found that CTC’s carbon-tax model (downloadable as an Excel spreadsheeet) also projects a 140 million metric ton reduction from gasoline use, with a hypothetical carbon tax that would start next year at $5/ton and rise by $5/ton annually, in constant-2017 dollars. The economy-wide (all sectors) reduction is 1,122 million metric tons.