Global Carbon Tax

The failure of markets to price carbon emissions appropriately leads to excessive fuel use and induces global warming. This column suggests a new, back-of-the-envelope rule for calculating the global carbon price. The authors find that fighting global warming requires a price of around $15 per ton of emitted CO2, or $0.13 per gallon of gasoline. The rule also highlights the importance of economic indicators, such as GDP, for climate policy.