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Climate models show a relationship between atmospheric carbon dioxide (CO2) concentration and our world’s climate. Glacial ice core data shows climate for the last 800,000 years. An article in the journal Science, “Toward a Cenozoic history of atmospheric CO2,” estimated CO2 levels for the last 66 million years.
In the late 1700s, atmospheric CO2 levels were about 280 parts per million (ppm). CO2 levels are now about 50% higher at 420 ppm. However, CO2 levels have fallen for the last 51 million years, from about 1,600 ppm to less than 270 ppm before the Industrial Revolution.
The last time world CO2 levels consistently exceeded today’s 420 ppm was about 14 million years ago during the middle Miocene, after which the Earth slowly cooled toward a series of ice ages. Before that, CO2 levels and temperatures were much higher than today.
Nevertheless, greenhouse gases hold heat in the Earth’s atmosphere. These include CO2, methane, nitrous oxide and fluorinated gases. CO2 creates nearly 80% of new greenhouse gas emissions. CO2 emissions come from burning fossil fuels, solid waste, wood and other biological materials. Given the warming climate, most people see a need to reduce CO2 emissions. But how do we accomplish this task? Some policies that may reduce carbon use are non-fossil-fuel energy sources and carbon taxes, which charge users for carbon emissions.
Most economists view carbon taxes as an economically efficient way to reduce CO2 levels and a meaningful way to mitigate global warming. Carbon taxes can motivate producers, governments and consumers to reduce CO2 levels. Carbon taxes also help businesses have more certainty about future abatement costs than a cap-and-trade program, where the price of trading emission allowances can fluctuate. They are preferable to technological mandates that impose one-size-fits-all standards on all carbon emitters. However, carbon taxes raise energy prices, which is politically unpopular and can make a country’s exports less competitive.
The benefits of a carbon tax depend on the tax rate, the collection of the tax, and the use of the revenue. Some economies have implemented carbon taxes, though many economists think the rates are lower than optimal. In using the carbon tax revenue, those looking to increase economic efficiency suggest reducing taxes on capital, and those looking for increased economic equity suggest transferring the money equally to all residents. Nevertheless, most agree with our late colleague Thad Godish: It is in our best interest to reduce emissions in low-cost ways.•
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Bohanon and Horowitz are professors of economics at Ball State University. Send comments to ibjedit@ibj.com.
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