Pricing our global greenhouse gas emissions isn't the only answer to addressing climate change, but it's a requirement for any serious climate plan. And large parts of the world have stepped up, including most of Europe, big parts of North America and China. 39 countries and 33 sub-national jurisdictions have a carbon price.

Let's look back a bit to a prescient economist, Arthur Pigou of Britain. His insight was that while markets were great at making things efficient and cheaper, transaction costs didn't include everything. His focus was on those externalities. Some externalities are positive, which is why so many airports keep being funded by cities even though they operate at a loss. The city's business and tourism increases are positive externalities.

But a lot of externalities are negative. They have varying degrees of unpleasant impacts on people, society or the environment. Pigou came up with the quintessentially conservative approach to dealing with those impacts, which was to add them to the transaction cost and let the market sort out the rest. Pigouvian taxes have been applied to many different things in our society, including tobacco and alcohol products.

The logic for applying them to the negative externalities of greenhouse gas emissions is clear, aligned with conservative economic principles as well as the market economics of the vast majority of the world and has an excellent history of precedents to draw upon. This is, of course, why the large greenhouse gas emitters tend to fight tooth and nail against pricing carbon. It's also why purportedly economically conservative politicians are bending over backward to pretend that a conservative economic policy is actually not fiscally conservative in many parts of the world.

What's an appropriate price for carbon? That's a difficult question to answer for a few of reasons, but we have a good answer regardless.

The first tough question is where the box gets drawn around the impacts. It's an arguable position to say that only the impacts on the jurisdiction itself should be in the price. It's a bad argument because the impacts are global while the benefits are local, but it's an argument which has allowed those opposed to carbon pricing to delay or prevent one from being adopted.

The appropriate boundaries are global, which is the second part of why this is difficult. How do you calculate the impacts of something which occurs on the other side of the planet to people living on a small island in the Pacific? That's why a very large number of people have spent a lot of time figuring out the social cost of carbon in multiple countries.

What's the social cost of carbon? The generally accepted definition is that it's the future global impact cost assessment of a single ton of carbon dioxide emitted today. Unsurprisingly, it goes up every year in most assessments.

"Generally accepted definition" is the next part of the problem. Most major countries have developed their own definition, including what should be included and exclude and what process and quality controls are applied to the cost. That's changing as countries align their definitions. Canada's current social cost of carbon is US$194. The USA's is currently US$51, but the Environmental Protection Agency and Canada recently aligned their methodologies, so the EPA is proposing raising it to US$190. Australia hasn't adopted a national social cost of carbon, but its national capital territory (roughly equivalent to Washington, DC) has chosen a cost per ton of US$13.

The "carbon" part of the term is also a clue to the challenges. Carbon dioxide is the primary greenhouse gas we've been emitting globally for a long time, but it's far from the only one. Natural gas is mostly methane which is a much more potent but shorter lived greenhouse gas. Most of the refrigerants in our air conditioners, heat pumps and freezers are greenhouse gases, and while they are much lower in absolutely quantities, they are almost all thousands of times more potent and also persist a long time in the atmosphere. Nitrous oxides which form when ammonia fertilizers are used among other sources is also a potent greenhouse gas.

There are other wrinkles. What discounting rate for money should you assume? Which of the heavily lobbied and hence very conservative IPCC warming and impact scenarios should be considered as the baseline? The complexities of drawing the right boundaries and the importance to very rich organizations and individuals in numerous countries of not getting to end of job means that we have spent far too long figuring out what the numbers should be.

Let's return to the actual carbon prices that have been implemented as a comparison to the social cost. Canada has a reasonable carbon pricing program, one which steadily increases and allows its provinces to choose their own approach as long as they match the cost and benefits. The carbon price is currently US$48, and it's a greenhouse gas price, so it includes methane and refrigerants.

Sharp eyes will note that it's about a quarter of the social cost of carbon. By 2030, it will be US$126 but the social cost of carbon will be US$219, still a lot higher. California's cap and trade system, which eleven US states and two Canadian provinces are part of, is only at US$36. China's new cap and trade system is pricing carbon at US$10 per ton, and still excludes more goods and services than more mature systems.

And that's the next problem. Political will to implement carbon pricing is low in the majority of countries in the world, although given California, Europe, China and Canada's involvement as major economies, the World Bank estimates that 23% of greenhouse gas emissions are currently at least covered under a carbon price, if not an adequate one.

The USA's lack of a national carbon price is a clear example. One was brought forward under the current administration as an anti-China carbon border adjustment mechanism that incidentally applied to all domestic economic activities, but it didn't even make it to a vote. Australia had a carbon price, but the right-wing coalition that took power a decade ago campaigned on eliminating it, and proceeded to quickly fulfill that regressive promise.

However, the USA's failure was interesting because of the "border adjustment" part of it. That's a carbon price that applies to imports, in part to ensure that domestic goods and services aren't rendered uncompetitive against high-carbon foreign competitors. While the USA was unable to garner sufficient support even inside the Democratic Party for the measure, the European Union is moving forward with one.

The EU is the third largest economy on the planet. It's a major trading partner with virtually every country in the world. Everyone exporting to it now has to report on the carbon embodied in their products, and in 2026 they are required to pay the same amount as a European firm would under the emissions trading scheme. The ETS is currently pricing carbon at about US$88 per ton and peaked at US$107 this year. It's expected to maintain and increase its price.

The ETS has historically excluded non-carbon greenhouse gases, but it's including methane and nitrous oxide as of 2026 as well. It's one of the most inclusive, highest-priced carbon pricing approaches in the world. And now everyone who exports to the EU will be paying it. That said, the current price is still less than half of the social cost of carbon.

And that's why pricing carbon isn't the only lever we have to pull to deal with climate change. It's an essential broom that will get in a lot of corners, but it's patchy globally, and priced too low and increasing too slowly where it is applied. Aggressively shutting down high-emissions electrical generation while rapidly building renewables as separate policies with separate carrots and sticks while rapidly pricing carbon higher are all on the list of climate actions that will work.

As a reminder, here's the short list:

• Electrify everything
• Overbuild renewable generation
• Build continent-scale electrical grids and markets
• Build pumped hydro and other storage
• Plant a lot of trees
• Change agricultural practices
• Fix concrete, steel and industrial processes
• Price carbon aggressively
• Shut down coal and gas generation aggressively
• Stop financing and subsidies for fossil fuel
• Eliminate HFCs in refrigeration
• Ignore distractions
• Pay attention to motivations