EIA Analysis Projects Carbon Fees Would Decrease U.S. Carbon Dioxide Emissions through 2050

(U.S. Energy Information Administration) Carbon fees as high as $35 per metric ton could decrease U.S. energy-related carbon dioxide (CO2) emissions by as much as 19% compared to 2020 levels, according to analysis from the U.S. Energy Information Administration (EIA). In its Analysis of Carbon Fee Runs Using the Annual Energy Outlook 2021, EIA projects that U.S. energy-related CO2 emissions would decrease the most in the first 5–10 years but decrease at a significantly slower rate beyond that period.

A carbon fee is a tax implemented on the sale of fossil fuels based on the amount of CO2 emissions those fuels generate. EIA considered three levels of carbon fees for its analysis, starting in 2023 at about $15, $25, and $35 per metric ton of CO2. The fees would grow by 5% each year through 2050.

“In all the cases we considered, carbon fees would have a significant initial impact on CO2 emissions, though we do not see significant additional reductions after the first decade,” said EIA Acting Administrator Steve Nalley.

EIA projected in its Annual Energy Outlook 2021 that following the pandemic, U.S. energy-related CO2 emissions would decrease through 2035 before leveling off and then increasing 5% over 2020 levels by 2050. EIA projects that with about a $15 carbon fee (which would increase to more than $56 in 2050), U.S. energy-related CO2 emissions would decrease 13% by 2050 over 2020 levels. About a $25 carbon fee (more than $94 in 2050) would create a 17% decrease, and an approximate $35 carbon fee (almost $132 in 2050) would create a 19% decrease over the same period.

EIA’s analysis finds carbon fees would have downstream effects on the energy sector beyond emissions. For example, existing U.S. nuclear power capacity would be less likely to retire, while renewable energy capacity would increase more rapidly.

“The U.S. electric power sector is most responsive to the carbon fees in our projections, as coal would lose market share to less carbon-intensive options such as natural gas and renewables,” Nalley said. “We project that 280 gigawatts of additional renewable energy capacity would come online by 2050 with a carbon fee compared to our baseline projections.”

The full Analysis of Carbon Fee Runs Using the Annual Energy Outlook 2021 and the Annual Energy Outlook 2021 are available on the EIA website. READ MORE

Excerpt from The Guardian: US district judge James Cain of the western district of Louisiana sided with Republican attorneys general from energy producing states who said the administration’s action to raise the cost estimate of carbon emissions threatened to drive up energy costs while decreasing state revenues from energy production.

The judge issued an injunction that bars the Biden administration from using the higher cost estimate, which puts a dollar value on damages caused by every additional ton of greenhouse gases emitted into the atmosphere.

The estimate would be used to shape future rules for oil and gas drilling, automobiles and other industries. Using a higher cost estimate would help justify reductions in planet-warming emissions, by making the benefits more likely to outweigh the expenses of complying with new rules.

Known as the social cost of carbon, the damage figure uses economic models to capture impacts from rising sea levels, recurring droughts and other consequences of climate change.

The carbon cost estimate had not yet been used very much under Biden, but is being considered in a pending environmental review of oil and gas lease sales in western states.

Economist Michael Greenstone, who helped establish the social cost of carbon while working in the Obama administration, said if the ruling stands, it would signal the US is again unwilling to confront the climate crisis.

“The social cost of carbon guides the stringency of climate policy,” said the University of Chicago professor. “Setting it to near-zero Trump administration levels effectively removes all the teeth from climate regulations.” READ MORE