Cap-and-Trade Carbon Pricing in Utah: Challenges and Potential Impact Katherine Michaels1, Kendall Becker, Ph.D.1, Alexi Lamm, Ph.D.2, and Scott Hotaling, Ph.D.1 1Utah State University (USU) Climate Resiliency Extension 2City of Moab
Burning fossil fuels emits both harmful air pollutants and carbon-based greenhouse gases, contributing to two major concerns for Utahns: poor air quality and warming due to climate change. To address these issues, there is a need to reduce Utah’s emissions through programs that increase clean energy capacity and carbon capture efforts. Reducing emissions requires approaches that target different sectors of the economy. One potentially effective approach is carbon pricing. Carbon pricing puts a price on carbon emissions to account for the impact of the emissions. By making it more expensive to emit, carbon pricing can incentivize companies to emit less. Poor air quality and climate warming are concerns for Utahns. Cap-andtrade carbon pricing is one tool that could help address both issues.
Cap-and-trade programs are a market-based form of carbon pricing that allows companies to trade with each other using carbon credits. Carbon credits function as permission slips to emit a certain amount of carbon. The “cap” establishes the number of carbon credits an industry or region has available for trading. Companies are incentivized to emit less because they can sell their excess carbon credits to other companies. Several cap-and-trade programs exist in the United States, and these programs are effectively reducing carbon emissions while creating net economic benefits for their regions. A cap-and-trade program could help Utah reduce carbon emissions in the state while also improving air quality.
What Is Carbon Pricing? Carbon emissions come at a cost, whether through the impacts of climate change like heatwaves and droughts or the health problems caused by the other pollutants emitted with carbon (Jay et al., 2023). However, the companies that benefit from the economic activities that generate carbon emissions generally do not have to pay for the damage to property, loss of crops, medical bills, higher insurance premiums, higher utility bills, or other costs that carbon emissions cause (Marino et al., 2023). To ensure that companies include their emissions in their production costs, governments can implement carbon pricing policies that assign a price to emitted carbon either through a tax or through the trading of carbon credits on the market (World Bank Group [WBG], 2024). 1