Published on Friday, May 7, 2021

U.S. | The road to carbon neutrality

President Biden set ambitious goals for the U.S. to cut carbon emissions. Yet, high uncertainties in carbon pricing will be a critical challenge for the policymaker.

Key points

  • Key points:
  • The U.S. pledged to cut carbon emissions by 50-52% by 2030 compared to 2005
  • Nordhaus's DICE model projects a carbon price of $82 per ton for 2020
  • However, optimal carbon taxes are sensitive to the choice of equilibrium temperature increase, discount rate, and industry-level carbon pricing
  • Emission trade system and consideration of green premium will be helpful compliments for policymaking

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