A now-familiar argument against carbon taxation goes something like this: assuming that climate change is a real risk, and assuming that it is significantly human-caused, we the United States still should not tax carbon because it is not in our best interest to do so. There is no point in unilaterally pricing carbon because other countries — most notably China, India, Russia, and other major emitters — will not follow our lead (that is of course much less clear now that China has at least started sending very different signals). Economic self-immolation will do nothing to combat climate change, because greenhouse gas emissions must be reduced for all of the world’s significant emitters in order for an emissions reduction effort to be successful. Proponents of this argument can point to projections showing that the real emissions growth over the next several decades comes from developing countries, not developed countries like the U.S. and those in Europe. In fact, an argument can be made that unilateral carbon pricing could do harm, by lowering the demand and therefore the cost of coal, making it easier for developing countries to remain on the coal dole.
There are a number of different responses to this argument. One is to acknowledge that unilateral carbon pricing is a necessary, but not a sufficient condition to a globally-concerted and effective effort to curb emissions.
But there is a second, more effective response: that the co-benefits of reducing greenhouse gas emissions are so great that reducing greenhouse gases passes a cost-benefit test even without considering the climate benefits. Ian Parry and two co-authors have published How Much Carbon Pricing is in Countries’ Own Interests? The Critical Role of Co-Benefits, a working paper setting forth their analysis of how carbon pricing would yield many non-carbon benefits.
What are they? They say they are “conservative” in their assumptions, and they are. Drawing from an earlier IMF study by Parry, they only estimate the costs of mortality risks of air pollution (most prominently from fine particulate matter), road congestion, vehicle accident risk, and road maintenance costs. The data for these costs are quite good, so they provide a solid foundation for quantitative estimates.
Excluded from their list of non-carbon costs of CO2 combustion are health benefits from travel mode shifting (driving less, biking and walking more), environmental damages from extraction, storage and transportation of fossil fuels, energy security, indoor air pollution and terms of trade effects. Also excluded from their analysis are questions of emissions leakage, which seems like a sensible exclusion because while carbon leakage is problematic, fine particulate matter leakage is not; rarely will fine particulate matter emissions exported to other countries result in a fatal repatriation of those emissions across borders (North American borders may be one exception, but Canadian, Mexican and American policy are apt to be the same).
What are the numbers? For the United States, a $30 per ton carbon tax would yield co-benefits of about $37/per ton, in 2010 dollars. The co-benefits for China would be $63, and the average for the top 20 emitters is about $57.