Indonesia is proposing a carbon tax of about $5 per ton of emissions in a bid to raise state revenues and meet climate goals. That’s less than a tenth of the current price of carbon permits in the European Union’s Emissions Trading System. And yet it has faced criticism from industry that it will slow down economic growth.
To reach net-zero emissions by 2050, the International Energy Agency estimates that advanced economies will have to pay an effective carbon price of about $75 per ton by 2025, and up to $250 per ton by mid-century. For some emerging markets, the IEA sees prices starting as low as $3 per ton, rising to $55 per ton by 2050.
Those might seem like large numbers, but a high carbon price does not mean a huge increase in everyday expenses. Taking into account all the costs for making zero-carbon cement, steel and plastic, for example, only boosts the price of a house by 3%, a car by 1% and a soda bottle by 1%, according to the Energy Transitions Commission.
As the world gets serious about cutting emissions, many countries will turn to pricing carbon dioxide as a policy tool. The benefits are backed by years of research. And yet, whenever there’s a conversation about a new carbon tax, political and industrial backlash is guaranteed.
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