A carbon tax will benefit companies and increase competitiveness

3. Boost the global, long-term competitiveness of American companies

The lack of a carbon price has created uncertainty for U.S. companies. Without knowing if or when the U.S. will institute carbon pricing, companies cannot accurately plan future investment decisions. Some companies have tried to rectify this issue by instituting , where business units incorporate a predetermined price on carbon emissions into their present and future budgets. Yet without guidance from the federal government on what this price should be, companies might set their price too low. A  finds that most firms set their internal carbon price below the minimum price of . These prices : while the median internal carbon price set by energy companies is $25, the median price set by financial services companies is $6 per ton. Instituting a federal carbon price would allow firms to  plan their long-term investment decisions better.

Imposing carbon pricing in the U.S. might also ensure continued access for American companies to markets abroad. Recently, the EU announced that it was planning to impose a  on carbon-intensive imports. Importers can avoid this tax if they can prove that “a carbon price has already been paid during the production of the imported goods.” If the U.S. continues to delay carbon pricing, then imports from the U.S. will be subject to this tax from the EU, one of the United States’ most important trading partners. As more countries choose to enact carbon pricing, the risk of this happening elsewhere grows stronger. A robust carbon price in the U.S. would ensure that American firms can continue to access international markets without frictions.

Finally, instituting a carbon price in the U.S. can prepare American firms for global technological transitions, strengthening their competitiveness in the future. A carbon price will force companies to reevaluate their long-term investment decisions, shifting away from emissions-intensive production toward low-carbon technologies. Globally, a shift toward low-carbon production is inevitable, and the sooner U.S. companies can begin this transition, the more competitive they will be. A U.S. carbon price will help to ensure that U.S. companies can lead the new industries centered on low-carbon technologies that will become the lynchpin of the global economy in the coming decades.