Climate solutions fall into two categories: (1) specific projects that reduce emissions and (2) carbon pricing that transforms how economic actors make decisions. Specific projects have an immediate payoff in terms of reducing emissions. Carbon pricing, on the other hand, changes our economic paradigm and increases investment to projects that reduce emissions. It has a multiplier effect.
1. Specific projects that reduce emissions.
These are climate solutions you know like solar and wind electricity, electric buildings, public transportation, plant rich diets, etc.
Several frameworks group and rank these solutions. The third Accelerating America’s Pledge report by Bloomberg Philanthropies’ groups them by three principles: renewable electricity, electrifying end uses like buildings and cars, and investing in natural carbon sinks like forests. McKinsey & Company’s famous GHG Abatement Cost Curve sorted them by highest potential per dollar invested (see their 2020 report for an updated analysis). Project Drawdown sorted these solutions as well. CNI's founder analyzed these solutions in Indiana's context as part of Indiana Drawdown. And finally, researchers at Princeton University’s Carbon Mitigation Initiative created The Net-Zero America Project (NZAP). This research informs, “a new National Academies of Science, Engineering and Medicine Committee…”
2. Pricing carbon.
A boring accounting problem created our ecological crisis. It’s simply that we’ve been internalizing profits and externalizing costs. In other words, we've taken short term gains from exploiting the environment, but pushed off the environmental damages to others elsewhere in the world as well as in the future. As is relates to carbon, each ton of CO2e we emit causes $220 in social costs. Pricing carbon enlarges our circle of responsibility and changes the way we make decisions.
Many of the reports cited above encourage not only specific projects that reduce emissions but also carbon pricing and associated carbon markets.
For example, Bloomberg’s Accelerating America’s Pledge report:
"While this chapter highlights critical climate policies within each of the three principles, certain actions transcend these categories and have more cross-cutting implications. The most obvious of these are state efforts to price carbon emissions or set a formal cap on economy-wide emissions...
Carbon pricing has been studied in-depth and is widely seen as a particularly efficient way of reducing emissions in some sectors if not all."
And McKinsey & Company’s 2020 report:
"All of the 1.5°C scenarios would require major business, economic, and societal shifts—each enormous in its own right, and with intricate interdependencies. We identified five critical shifts and determined what it would take for them to occur… [The fifth is ramp] up carbon management and markets… Currently, it is impossible to chart a 1.5-degree pathway that does not remove CO2 to offset ongoing emissions. The math simply does not work."
Carbon pricing is supported by international experts and will become more common. The Financial Times published the following in Jan 2019:
"Four former chairs of the Federal Reserve have joined with leading economists from both major political parties to issue an unprecedented call for a carbon tax in the US, saying 'immediate' action is needed to address the risks of climate change.
Janet Yellen, Ben Bernanke, Alan Greenspan and Paul Volcker proposed an emissions tax that would be used to pay lump-sum cash rebates to US citizens.
The statement signed by 27 Nobel laureates and 15 former chairs of the Council of Economic Advisers described the mechanism as a 'cost-effective lever to reduce carbon emissions' that would correct 'a well-known market failure'."
And Elon Musk, the Leonardo DaVinci of our day, said:
"If you ask any economist they will tell you that is the obvious thing to do, put the correct price on carbon because we currently have an error in the economy which misprices carbon at zero or something closer to zero. It is a fundamental economic error.
To make it neither a left or right issue, we should make it a revenue-neutral carbon tax… If countries agree to an appropriately priced and targeted carbon tax, we could see a transition [to clean energy] that has a 15- to 20-year timeframe as opposed to a 40- or 50-year timeframe.”
2A. Pricing carbon with regulation
Various groups advocate a mandatory carbon price, enforced by the government. Citizens Climate Lobby at the federal level, for example, and Climate Xchange at the state level. Regional experiments like RGGI show it can reduce emissions while also spurring the economy.
2B. Pricing carbon by shifting social norms
CNI — along with the rest of the carbon neutral movement — is changing social norms and making it commonplace to pay a voluntary carbon price. First we are making it normal to be carbon neutral. Once enough people are — i.e taking responsibility for and cleaning up their “carbon trash” — it will be expected of every decent person and business. The reputational costs will be too high, and businesses would lose their social license to operate if they don’t.
In this way, CNI’s approach complements the mandatory approach. One is top down, enforced by legislation. The other is bottom up, enforced by a new social norm. In other words, we don’t need to wait for legislators to start shifting social norms.
CNI increases awareness of social costs of carbon, early adopters take responsibility and show leadership by becoming carbon neutral, and finally we have enough momentum to enact a society wide carbon price. How? We’ll connect the early adopters with politicians willing to lead and achieve what the World Resource Institute calls an “ambition loop.” This is a virtuous cycle in which early adopters provide political cover for politicians to take a risk. Then, those politicians enact legislation that empowers those early adopters.