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What would a price on carbon get us?

The discussions about a carbon tax, or a cap-and-trade system, tend to revolve around “putting a price on carbon,” which is to say, charging polluters money for dumping carbon into the atmosphere. But how should that money be used? Here’s a graph from Vattenfall, the Swedish power company, showing which solutions become cost-effective at a price of €40 per ton of carbon dioxide.

VattenfallAbatementPotential

The yellow section has improvements that pay for themselves, since they’re generally based around not burning fuel to begin with. The green section has the improvements that will be cost-effective at the €40 price, and the blue section has the more expensive solutions.

I haven’t verified any data that went into this graph, which is based on McKinsey’s greenhouse gas abatement cost curves, so I can’t comment on how realistic the numbers are. But from an energy literacy point of view, it gives a nice graphical depiction of how a price on carbon would make certain options more economically feasible.

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1 comment to What would a price on carbon get us?

  • I have a friend who manages a traditional brick-making factory in Hungary. They normally use granulated coal to fire the furnace but, in 2006, when the cost of emitting a tonne of CO2 under the EU ETS (Emission Trading System) was in the 20-29 euro range, it paid them to fire it with non-food-quality durum wheat. However, when grain prices rose in 2007, they reverted to using coal, as the CO2 price was under 20 euros and the cost of grain had risen significantly. However, if the CO2 price were around 40 euros, it would be a “no brainer”…!

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