Pricing carbon pollution brings out the knives. In 2009, right-wing denialists scuttled the ambitious Waxman-Markey bill by carving up its cap-and-trade centerpiece. In 2016, lefty ideologues like Food and Water Watch butchered what would have been a groundbreaking Washington state carbon tax.

Now comes a new twist: attacks from brainy pro-climate types like activist-scholar Leah Stokes, poli sci professor at the University of California’s Santa Barbara campus and a popular climate commentator on progressive media.

Laying down the gauntlet

Stokes let loose last month with a broadside: The Trouble With Carbon Pricing, an extended essay in Boston Review co-written with her departmental colleague Matto Mildenberger. “Carbon pricing has dominated conversations around climate policy for decades, but it is ineffective,” intoned the subhead. “Only a bold approach that centers politics can meet the problem at its scale.”

Calling carbon taxing ineffectual is odd, when it’s barely been tried, and never at the triple-digit level ($100 or more per ton of carbon dioxide) that could slash emissions by a third or more. As we show below, the Mildenberger-Stokes article holds carbon pricing to a standard — closing down the U.S. and world fossil fuel sectors in a few decades  — that no stand-alone policy could possibly meet. Their article also stereotypes carbon tax proponents as blinded by carbon pricing’s elegance, when what dazzles many of us is its potential to yield deep emission cuts while also neutering the fossil fuel companies.

Nevertheless, Mildenberger and Stokes have thrown down the serious gauntlet of whether carbon pricing should be the centerpiece of climate organizing and legislating. Their article is also useful for assembling so many criticisms of carbon pricing in one place.

To hold their article up to the light, we’ve posted key excerpts, with our responses alongside. (NB: except for the section heads, everything in the left column is quoted verbatim.)

The trouble with carbon pricing By Matto Mildenberger & Leah C. Stokes, Boston Review 1. Carbon pricing isn’t working in California. Over a decade ago, California put a price on carbon pollution. At first glance the policy appears to be a success: since it began in 2013, emissions have declined by more than 8 percent. Today the program manages 85 percent of the state’s carbon pollution: the widest coverage of any policy in the world… But while the policy looks good on paper, in practice it has proven weak. Since 2013 the annual supply of pollution permits has been consistently higher than overall pollution. As a result, the price to pollute is low, and likely to remain that way for another decade… This is not a surprise. Though legislators aimed to tighten the law in 2017, oil and gas lobbyists thwarted their efforts. One powerful labor union initially supported ending free permits for big polluters, but reversed its position after Chevron  offered it a union contract to retrofit refineries. The final legislation prohibited enacting new regulations on California’s fossil fuel industry — regulations that could have done more than the state’s weak carbon price. CTC director Charles Komanoff was lead author of this report lauded by M+S. Rather than carbon pricing, other regulations — clean electricity standards, clean car programs, and aggressive energy efficiency — deserve much of the credit for the state’s progress.	Why carbon taxes still matter By Charles Komanoff, Carbon Tax Center 1. California carbon pricing is off to a fine start. While CTC would have preferred California price its carbon pollution directly with a carbon tax, we’re glad to see Mildenberger & Stokes report that the state’s carbon emissions have fallen more than 8 percent since cap-and-trade started up. That decline exceeds by at least half the 5.4 percent drop for the U.S. as a whole in 2013-2019 (calculated from national emissions data in the BP Statistical Review of World Energy, 2020), even as California’s economy was booming relative to the rest of the country. It’s regrettable that industry hardball watered down the program. But the authors present no evidence that emission reductions from unspecified “new regulations on California’s fossil fuels industry” would have surpassed those from carbon pricing. (The ProPublica story they linked to is silent on that score.) We’ve studied and applauded the state’s clean electricity standards and aggressive energy efficiency for more than four decades. M+S even cited our 2019 report documenting and quantifying these policies’ accomplishments, California Stars: Lighting the Way to a Clean Energy Future, shown at left. (They linked to it at “regulations,” in the last paragraph.) But much of energy demand and the resultant use of fossil fuels falls into huge pockets that even the best-crafted standards can’t touch, as we’ve discussed many times, at length (e.g., here and here). Unlike M+S, we don’t shy from touting the synergies between carbon pricing and energy standards. And there’s this benefit, too: Carbon pricing has already narrowed California’s “environmental justice gap,” as we documented in a new post earlier this week.
2. Carbon pricing enrages right-wing populists. California is one of only twelve U.S. states to have adopted any carbon price — the idea has simply proven difficult to enact. When Oregon attempted to vote on a carbon pricing bill in 2019, Republican legislators fled the state and hid in Idaho to prevent the quorum necessary to pass the law. And this isn’t just happening in the United States — the policy is politically unpopular around the world. When Australia passed a modest carbon tax in 2011, things got ugly quickly: right-wing radio hosts hurled misogynistic invectives against Prime Minister Julia Gillard; angry protesters descended on the parliament building in Canberra; and climate-denying opposition leader Tony Abbott crisscrossed the country, accusing the government of “economic vandalism.” When he took office three years later, Abbott quickly repealed the policy. In France a proposed carbon tax fueled the country’s yellow vest movement, triggering the worst domestic riots since 1968. The proposal was soon abandoned.	2. Win over populists with wealth taxes.  As M+S surely know, the U.S. right is in open revolt against all climate action (even light-bulb efficiency standards!), not just carbon pricing. Ditto Australia. Journalist Chris Ketcham on the Champs Elysee. March 2019 photo by Agnes Dherbeys. France’s “yellow vesters” weren’t protesting climate action, they were rising up against the yawning gap separating them from the super-rich, a gap that President Macron cruelly widened when he dialed back wealth taxes just before he pushed through a modest carbon levy that exempted aviation fuel. (See Christopher Ketcham’s vivid, on-the-ground reporting for Harper’s on the gilet jaunes, which we summarized last year.) The climate movement can harness the growing fury at the ever-expanding wealth gap with a program to tax both extreme wealth *and* carbon emissions and invest the proceeds into the Green New Deal, as we’ve written here.
3. “Carbon pricing lets markets do the job.” Part of [carbon pricing’s] enduring appeal is that it provides an elegant response to a complex problem. Carbon pollution is everywhere. So, economists argue, increase the cost of releasing it into the atmosphere, and let markets take care of the rest. [emphasis added]	3. Repeat: carbon pricing is not a market measure. Taxing carbon emissions has nothing to do with “markets” and everything to do with fixing the enormous market failure that allows fossil fuel companies and monster-truck drivers and frequent flyers pay zero for climate pollution. Please, can we all retire the “lets markets do the job” nonsense?
4. Good on paper, poor in practice. As climate change research grew more prominent in the 1980s, economists described pollution as a “negative externality” — polluters kept the profits from selling fossil fuels while society at large picked up the tab for the harm they caused. (emphasis added) If problems such as acid rain were “market failures,” then pricing forced polluters to “internalize” the costs. Anyone who released carbon pollution into the atmosphere would have to pay for the harm they caused. Policymakers have consistently pushed this idea at every level since the 1990s. And many economists remain attached to it: over 3,500 U.S. economists, including twenty-seven Nobel laureates, have signed a letter supporting carbon pricing… The idea developed into two main forms: a carbon tax and cap and trade. Carbon taxes impose a price on every unit of carbon pollution released. Cap and trade — also called emissions trading — limits the quantity of carbon pollution that can be released, with polluters trading permits to cover their emissions. Both methods promise the same theoretical result: a reduction in pollution. Like the roots of a tree branching out in search of water, a carbon price would find carbon wherever it was released. Goods made with fossil fuels would rise in cost. In response, people would make a million tiny decisions to get off carbon: buying the electric-powered lawn mower rather than the gas guzzler, jumping on a bicycle for the last mile rather than calling an Uber, switching to an induction stovetop and ditching the fossil gas. And it wouldn’t just be the public changing its ways; industries would also find places to cut back on carbon as their cost of doing business rose. Policymakers dreamed of sending these signals out across the economy to coordinate distant actors wherever the messages found them. The government could not possibly regulate all the myriad ways that carbon was emitted, but the power of the market could solve the problem — at least in theory. The problem with carbon pricing is not the idea on paper—it is its application in practice. According to economists, an effective carbon price must be high enough to make polluters pay for the externalities they generate. It must also cover all economy-wide sources of carbon pollution.	4. Don’t let the perfect be the enemy of the good. First, a shoutout to Mildenberger & Stokes for elegantly articulating the rationale for carbon pricing in their third paragraph at left (“Like the roots of a tree branching out in search of water …”). Bravo! Nevertheless, their formulation betrays a significant fallacy: The vast externalities from burning fossil fuels aren’t pocketed by the companies that extract and sell them, despite what M+S imply (“polluters kept the profits from selling fossil fuels”). Rather, so long as there’s a modicum of competition — as there is in the oil business — the monetary difference between the market price and the true social cost accrues to consumers. Absent carbon pricing, everyone who flips a switch, operates a vehicle or buys a manufactured product pays less than full price for the fossil fuels that enable the activity. Worldwide, the richest 1% of consumers cause double the carbon emissions of the poorest 50%, notes Oxfam in new research reported by The Guardian. In other words, the lion’s share of the multi-trillion dollar fossil fuels externality is pocketed by the global rich. The class disparity in U.S. emissions, though rising, is less stark, but here too, an outsize share of the carbon subsidy accrues to those who drive the oversized vehicles, jet around the globe, heat and cool their multiple dwellings, and so forth. If any fact deserves to be “centered” in progressive discourse about climate change and carbon pricing, it’s this one. Lately, though, the idea of human participation in fossil fuel use has been discarded. Current dogma pins all climate responsibility on the fossil fuel industry, even though the industry’s lifeblood is the gas pump and the light switch. The fossil fuel purveyors have plenty to account for. But centering them in policy seems to have lulled Mildenberger & Stokes into a binary view of carbon pricing, e.g., “an effective carbon price must be high enough to make polluters pay for the externalities they generate.” Actually, no. Any carbon price will set off a cascade of actions (as captured in that marvelous M+S third paragraph) causing cuts in carbon emissions. The higher the price, the greater the cascade. There is no single carbon price threshold or tipping point. The task before us is to win the highest carbon prices possible.
5. Anyway, carbon prices are too low. Carbon prices now exist in 46 countries, covering about 22 percent of the carbon pollution that humans release each year. But these policies are riddled with loopholes… Big carbon polluters — fossil fuel companies, electric utilities, automakers, petrochemical companies, and other heavy industries — have used their structural power to receive policy exemptions, handcuffing the invisible hand of carbon pricing. The result is that carbon pricing passes in the places that already have little pollution. For example, all U.S. states with [some] carbon pricing already had below average per capita energy-related carbon pollution in 2006, before these policies came into effect… Even when prices do exist, they are quite low. According to the World Bank, countries need policies between $40 to $80 per tonne to meet the Paris Agreement targets. Yet half of the world’s carbon prices are less than $10 per tonne, while only five countries — Sweden, Norway, Liechtenstein, Switzerland and France — are in the target range. Even the prices in these countries are probably too low. Estimates for the social cost of carbon — a measure of the societal harm carbon pollution causes—range from a couple dozen to several hundred dollars per tonne of CO2. University of California San Diego climate scientist Kate Ricke and colleagues estimate this social cost could be a staggering $417 per tonne. No carbon price in the world comes close to that number.	5. The stall in carbon prices isn’t immutable. It’s true that carbon pricing has stalled throughout the world. Too few countries have it, too few sectors are covered, and prices are far too low. This wasn’t pre-ordained. A promising moment for carbon pricing in 2008, sparked by British Columbia’s successful carbon tax launch, was snuffed out when the Great Recession unleashed a storm of right-wing nationalism. A second window — the 2014 U.S.-China bilateral agreement and the ensuing 2015 Paris climate accord — slammed shut a year later when Trump took power in Washington. We don’t wave away these facts, and we acknowledge how easily carbon pricing becomes kindling for climate resistance. This knowledge informed our decision to refrain from protesting the downplaying of carbon pricing in the Democratic Party’s 2020 platform. Likewise our decision in late 2019 to expand CTC’s mission to include taxing extreme wealth along with carbon emissions (see Point 2). Nevertheless, the fact that CO2 taxes of four hundred dollars a ton aren’t on the horizon doesn’t invalidate the ability of robust carbon taxes to propel large-scale reductions in emissions (see Point 6). We don’t have to “center” carbon taxing in climate policy, it just needs to be in the mix. And by making the carbon tax income-progressive, we can ensure that the mix is progressive as well.
6. Carbon pricing won’t deliver the goods anyway. In Norway, which has one of the highest carbon prices in the world, emissions in the oil sector rose by 78 percent between 1990 and 2017. One reason emissions didn’t fall is because of a problem economists call “demand inelasticity”: if an economic activity is extremely profitable, or if there are no easy alternatives, people and companies may not demand less even as prices increase… The evidence is mixed, however, on whether carbon prices can drive innovation and provide more of these cheaper substitutes we need. In her study of the national U.S. cap-and-trade program for sulfur dioxide, Margaret Taylor found that innovation actually declined after the system went into effect. As Tobias Schmidt has shown, cap-and-trade systems tend to produce incremental improvements in polluting technologies rather than driving new, clean alternatives. Other research suggests limited innovation. In their study of the EU’s carbon market, economists Raphael Calel and Antoine Dechezleprêtre estimate that patenting increased by 9 percent for regulated firms. However, given how few companies fell under the carbon price, overall low carbon technology patenting increased by less than 1 percent. Carbon price-induced patenting in the UK may have been considerably higher. Still, we lack strong evidence that carbon pricing has rapidly induced the innovation we need in new, cleaner technologies. By focusing on the low-hanging fruit—the “cheapest” ways to cut carbon pollution —we fail to build the ladder necessary to curb the more difficult emissions to reduce. And that shouldn’t surprise us. Consider this scenario: if the United States managed to implement a $50 per tonne carbon price, gasoline prices would increase by $0.44 per gallon. That means Americans’ monthly driving costs would increase by about $25, enough to put a dent in many families’ budgets. Some people might drive a bit less; a few might set up a carpool. But corporations will not innovate new technology because of minor tweaks in the price of energy. The prices of oil already fluctuate greatly year to year, and that hasn’t exactly produced the climate technology we need.	6. Really? Look again.  Norway’s oil and gas extraction sector makes for a strange anti-pricing example, insofar as the sector’s carbon emissions have risen no faster than its growth in output (see calculations at end of section). Moreover, because Norway’s carbon tax hasn’t changed since the early 1990’s, it wouldn’t be expected to be driving cuts in emissions today. What the tax may have done is contribute to Norway’s oil and gas sector’s superior emissions intensity, nearly 60 percent less than the world average, according to research by Denis Hoffman, a chemical engineer working in Canada’s petrochemical industry, resulting partly from removing CO2 from natural gas and injecting it into undersea caverns — precisely the kind of innovation that M+S insist isn’t driven by carbon prices. The deeper truth is that while alternatives to buying and burning fuels may be easy or hard, depending on circumstance, they are almost always more available than most folks imagine or than M+S imply. Our own statistical analysis of U.S. gasoline usage since 1960 points to a price-elasticity of around (minus) 0.35, which translates to at least a 20 percent reduction in use from doubling the price. How would the reduction happen? Through daily behavior changes (trip-chaining, choosing closer destinations, more walk-bike-bus-train, less lead-footed driving) and, over time, changes in capital stocks (fewer guzzlers, more investment in and purchase of EV’s, greater infill development, and so forth). If we don’t see much give in gas use due to price swings, it’s because of the swings themselves. A carbon tax with a highly transparent annual ramp-up in the tax level would have less noise and more signal, spurring greater reductions. Our Norway calculations, unpacked: Per BP, Norway extracted 0.91 exajoules of fossil gas in 1990 along with 1,716,000 bbl/day of crude oil in 1990, and 4.12 EJ of gas in 2019 and 1,731,000 bbl/day of oil in 2019. Using 1 Btu = 1055 J and ascribing 5.8 million Btu to each barrel of crude oil, we have 1990 extraction of 0.863 quadrillion Btu’s (“Q”) of gas and 3.633 Q of oil totaling 4.496 Q, and, for 2019, 3.905 Q of gas and 3.665 Q of oil totaling 7.570 Q. The 1990-2019 increase in quads is 68.4 percent. We thank Prof. Mildenberger for updating his emissions figure to a 70 percent rise to 2019 and for clarifying that the figure covers oil and gas extraction.
7. The emission reductions are too small. If it hasn’t driven the necessary innovation, perhaps carbon pricing has delivered emission cuts? One model suggests Norway’s carbon tax reduced carbon pollution by about 2 percent in its first decade. Similarly the EU cap-and-trade system likely reduced emissions by about 4 percent between 2008 and 2016. In British Columbia, Canada, the carbon tax may have been more successful, reducing emissions by 5–15 percent between 2008 and 2015. But these reductions, while laudable, are nothing compared to what needs to be done — we need annual cuts of almost 8 percent a year until 2030 to limit warming to 1.5 degrees Celsius. Evidence suggests carbon pricing won’t drive emissions reductions quickly enough. It is like bringing a stick to a knife fight. The policy might help for a little while, but it’s unlikely to secure a victory without other weapons to attack the problem. Economists have tried to sharpen the stick, pushing for better policy design, higher prices, and broader coverage. But their efforts have largely failed.	7. Solid evidence, wrong conclusion. The percentage figures from M+S at left seem right to us, especially for British Columbia, which we examined in depth in 2015, finding that per-capita emissions there fell 3-4 times faster than in non-taxing Canadian provinces during the first five years of BC’s carbon tax. That tax started in 2008 at $10 per ton of CO2 and topped out in 2012 at $30 — close to the limit of what a lone province or state can bear without huge gaming or leakage. If a $30 tax can cut emissions by 5-15 percent, imagine what triple-digit carbon taxes could accomplish. Rather than demonstrating that carbon pricing can’t drive emissions reductions quickly, BC’s success points to robustly rising carbon taxes’ vast potential. Mildenberger & Stokes are absolutely right that carbon pricing needs complementary policies. Few proponents of carbon pricing disagree. Economists haven’t failed, it’s the political system that hasn’t delivered. Criticism by climate hawks like M+S isn’t helping.
8. Carbon dividends: just another try. Carbon pricing … makes it easy for fossil fuel companies to rally opposition. Presenting themselves as champions of the little guy, these companies highlight how the policy would increase gasoline and electricity costs for the public. Polluters have even helped school boards and local governments estimate impacts from a carbon tax on their budgets. It’s not difficult to draw attention to these costs when everywhere we drive, giant signs declare the price of gasoline. If that number rises, people notice. There are no roadside signs displaying the devastating costs of climate change: wildfires, stronger hurricanes, rising sea levels, and new infectious diseases like COVID-19. What if we could make the benefits of carbon pricing more visible? This is the logic behind the price-and-dividend approach. Canada and Switzerland are the only two countries that have adopted this policy, though it is also part of proposed legislation in Congress. Like traditional cap and trade, this policy would cap emissions and require that companies buy pollution permits. Then U.S. residents with Social Security numbers would receive money back from the program, gathered from polluting firms. According to political scientist Theda Skocpol, a dividend would give the public a tangible benefit to organize around, thus contesting the power that entrenched polluters have over U.S. policymaking. Give the public a green check every month, the thinking goes, and it might just embrace climate policies. This is especially true for low-income households. Recent models by economists Anders Fremstad and Mark Paul show that a U.S. carbon tax, without compensation, would impose the greatest burdens on low-income households. A dividend could be designed to disproportionately return revenues to poor households. Carbon price and dividend gives greater attention to the politics of climate policy than earlier approaches, but it still struggles to make the benefits more salient than the costs. In the two countries with a price and dividend, the benefits are buried in income tax or health insurance forms. In our own research, we find these policies do not substantively increase public support for climate policy. This shouldn’t surprise us. Dividends are, at best, a band-aid solution to carbon pricing’s political woes. They create a debate over whether people want a check to cover their increased energy costs. Yes, some would rather have the check, but most would still prefer cheap energy.	8. Do M+S know the policy they’re critiquing? We’ve already noted (in Point 5) how easily carbon pricing is made a flash point. And we appreciate the authors’ relative openness to the “dividend” approach for distributing the revenues from carbon pricing. Alas, their treatment is muddled. We’ve rarely if ever seen reference to “price-and-dividend.” Rather, the guiding idea, popularized since 2009 by Citizens Climate Lobby as “fee and dividend,” is a straight-up levy (which CCL labels a fee) on the carbon content of fossil fuels, with the proceeds distributed to U.S. households in equal amounts (“dividends” or “green checks”). M+S aptly write, “Give the public a green check every month, the thinking goes, and it might just embrace climate policies.” Not just that, increase the size of the green check each year, and the public will buy in further. The expanding check could give lawmakers cover to ramp up the carbon tax rate, allowing it to start gradually at just $15 or $20 per ton but reach triple digits — a level that every economic model predicts will set off big (30-40 percent) emission reductions within a half-dozen years. And the promise of the ramp-up will spur households, planners and entrepreneurs to raise their decarbonization sights, unleashing waves of products and actions — infill development, higher product efficiencies, zero-energy buildings — locking in even larger cuts in fossil fuel use. Contrary to M+S, there’s no need to tailor carbon dividends to benefit poorer households; the policy’s very design does that automatically, by virtue of the pronounced tendency of poorer families to spend less on energy and fuels and richer families to spend more. We’ve lost track of the number of studies documenting that fee-and-dividend would be income-progressive in the aggregate, with few actual households losing ground. Again contrary to the authors, neither Canada nor Switzerland nor any other country has a carbon price with dividend. And why the straw man of burying the green check in other pots of money, when electronic benefit transfers could keep the dividend separate and make it manifest? Last, why the defeatism that most Americans would take cheap energy over the dividend check especially when most households’ green checks would outpace their higher energy expenses? (More on that score here.) And we ask Mildenberger and Stokes to bear in mind: the longer we keep energy cheap, the more time it will take to phase out fossil fuels and the greater the climate damage while we’re doing it.

This takes us two-thirds of the way through the Mildenberger-Stokes article. The remainder mostly treads the same territory with the same strawmen: The gusher of renewables we need “cannot be achieved through carbon pricing alone.” “The objective should not be getting ‘the prices right.’” “Economists and climate policymakers must ask themselves: is insistence on theoretical efficiency more important than delivering climate stability?”

What are they talking about? Who are they talking to? Maybe because I’m not in academia, I don’t know a soul whose ardor for a carbon tax is driven by its theoretical efficiency. We want to tax carbon emissions because we believe doing so can deliver huge emission reductions fast — and equitably.

Where we do agree is in “breaking fossil fuel companies’ stranglehold on our political system.” And we appreciate the Mildenberger-Stokes argument that “large-scale industrial policy” including establishing and meeting clean energy targets, is the way to do that. That’s the Green New Deal, which CTC has backed from the git-go. But getting the GND rolling to the point where it muscles in on the fossil fuel companies won’t happen overnight — same as carbon pricing.

That carbon pricing doesn’t have the visceral appeal of a program centered on standards, investment and justice doesn’t warrant throwing it overboard. The carbon tax silver bullet may be a dead letter, but carbon taxing needs to live on. Even with millions of us in the streets and majorities in Congress, the Green New Deal will be a huge mountain to climb. Without pricing the climate damage from fossil fuels, getting to the net-zero mountaintop will take an awful lot longer.

The Carbon Tax Center has had qualms since day one about campaigns to compel institutions to divest from their fossil fuel holdings. The morality is great, but impact is lacking.

“Divestment can’t loosen the fossil fuel stranglehold without a carbon tax,” we wrote in a photo caption in our first stand-alone post on divestment four years ago.

Today, with a broadened outlook, we would write that divestment can’t loosen the fossil fuel stranglehold without a Green New Deal-level massive investment in decarbonization, with a robust carbon tax playing a major contributory role — a position we outlined in a post earlier this year, Carbon Tax Advocates Should Embrace a Green New Deal.

Our 2015 post outlined why fossil fuel divestment is a dead end:

Divestment by socially responsible investors, universities and even governments won’t starve capital flows to fossil fuel corporations anytime soon. That’s because in a global market, every share of stock we activists dutifully unload will be snatched up in milliseconds by some trader who can bank on humanity’s continued dependence on fossil fuels to continue generating profits. (emphasis added)

Why bring this up now? Because we just stumbled across an illuminating 2018 interview with U-Mass economist Robert Pollin, a prominent climate academic-activist and co-author of a detailed financial analysis of fossil fuel divestment impacts. The interview, posted at Truth Out in May 2018, is entitled, Are Fossil Fuel Divestment Campaigns Working? A Conversation With Economist Robert Pollin. Sadly but unsurprisingly, Pollin concluded in his analysis, also from 2018, that they aren’t.

Here’s the key excerpt. The questioner is C.J. Polychroniou, a Truth Out contributor and political economist-scientist. We added boldfaced type, for emphasis.

Q: One approach that has become quite popular in recent years is the strategy of divestment. However, the recent study you coauthored with Tyler Hansen questions the effectiveness of the strategy of divestment in reducing carbon emissions. How did your study come to that conclusion?

A: In this new research paper, Tyler Hansen and I concluded that divestment campaigns have not been especially effective as a means of significantly reducing CO2 emissions, and they are not likely to become more effective over time. Our study includes both an analysis of the available data on global divestment patterns as well as a formal statistical modeling exercise that evaluates the impact of divestment events — such as when the New York City pension fund decided last January to sell off all of their fossil fuel company holdings — on the stock market prices of fossil fuel companies.

We found two basic things from this research. First, to date, we found the total level of divestment commitments to be at about 0.7 percent of total global private fossil fuel assets (assets committed to divestment are at about $36 billion while total global private fossil fuel assets are at $4.9 trillion). Second, we found no evidence that any divestment actions, including the recent New York City pension fund decision, has [sic] had any significant negative effect on the stock prices of fossil fuel companies.

The basic problem with the strategy is straightforward. Ethically motivated owners of fossil fuel stocks and bonds — such as the New York City Council — do certainly have the power to sell these assets as a statement of principle and act of protest. But this act of protest will have no direct impact on the operations of the fossil fuel companies as long as investors who are profit-seekers, as opposed to being motivated ethically, are willing to purchase the stocks and bonds that ethically motivated investors have put up for sale. Indeed, the core divestment strategy of selling fossil fuel assets is, at best, incomplete until one addresses this question: Is there somebody out there still willing to purchase these fossil fuel assets, and if so, and at what price? The answer is, yes, there are plenty of people ready to purchase shares of fossil fuel companies as long as they can profit by owning these shares.

In addition, the profit opportunities from owning oil, gas and coal company stocks are not diminished through the divestment-led sales per se. This is because divestment per se does not affect either how much it costs to produce fossil fuel energy or how much consumers are willing to buy. In theory, divestments might be capable of pushing down stock market prices of fossil fuel companies. But it is also likely that any such impact on stock prices is going to remain negligible as long as profit-seeking investors continue to make money. And they will continue to make money unless we succeed in either raising costs of producing fossil fuels or limiting how much fossil fuel energy consumers can buy.

Pollin hastens to add, as we did in 2015, that he and his co-author Tyler Hansen “greatly respect the accomplishments of the divestment movement”:

[Divestment campaigns] enable activists to fight for goals that can be clearly articulated and achieved within the institutions and communities in which they work and live, as opposed to attempting to influence public policies where the decision-making process is more remote. Divestment campaigns also have a demonstrated record of success in raising consciousness as to the urgency of dramatic action on climate change, and the need to confront the power of the fossil fuel industry as the single greatest barrier to advancing a viable climate stabilization project.

Despite these substantial accomplishments, we nevertheless conclude, based on the findings we present here, that most efforts now devoted to divestment campaigns would be better spent on more direct efforts to drive down fossil fuel consumption and CO2 emissions. We simply don’t have time to lose in pushing as effectively as possible on the fundamental goal which we cannot lose sight of — which is to drive CO2 and other greenhouse gas emissions down to zero as quickly as possible. We need to remember that, at best, divestment is a means to an end, with the end itself being eliminating emissions.

There’s a wealth of supporting analysis in the Pollin-Hansen paper (here’s link, again). But the takeaway remains that divestment is primarily a tool for movement-building rather than carbon-busting. Climate laggards like New York City Mayor Bill de Blasio who wrap themselves in the mantle of fossil-fuel divestment are just green-washing.

On Monday, The Nation magazine posted “Congestion Pricing Is New York’s Green New Deal,” a piece I co-authored with fellow transit advocate Jeff Blum, casting congestion pricing in New York City as an initial foray of the Green New Deal. Following is the text of the piece, with an addendum instructing Carbon Tax Center subscribers and allies what they can do between now and March 31 — congestion pricing’s legislative deadline — to push the proposal across the finish line in Albany. — C.K.

While the Green New Deal basks in the national spotlight, a different but parallel policy idea is advancing in New York. That is Gov. Andrew M. Cuomo’s plan for congestion pricing, which will charge motorists to drive in the most car-jammed (and transit-rich) part of the city, Manhattan south of 60^th Street.

At first glance the two appear more opposite than related. The Green New Deal is national, congestion pricing is New York-specific. One is expansive, a solar and wind energy-based revitalization of our society and economy. The other seems punitive, making drivers pay for what is now free.

As posted in The Nation. See link at top of this post.

But we believe the two have a great deal in common, both practically and philosophically. Moreover, congestion pricing faces a March 31 legislative deadline to allow initial appropriations for the tolling apparatus to be included in the New York State budget due on that date.

And so we invite Green New Deal adherents — from Massachusetts Sen. Ed Markey and New York Congresswoman Alexandria Ocasio-Cortez to the legions of determined climate justice activists who have put the Green New Deal on the political map — to make congestion pricing in New York a stepping stone to the national fight.

To begin, any program to save the climate depends on having cities thrive. Urban residents use only a fraction as much fossil fuels as suburbanites or rural dwellers, not because they are virtuous but because cities, due to their compactness, are inherently lower-carbon. City residents drive less not just because they can take transit but because destinations are close by. Density also dictates that homes and offices use less power and heat. For cities to thrive and grow, automobile traffic must be tamed and restrained, which congestion pricing does with marvelous efficiency.

Congestion pricing shares DNA with the New Deal through emphasis on public investment. Federal spending in the 1930s strung electric wire and conserved the soil, and federally driven investment going forward can decarbonize our economy. In the same way, the congestion toll revenues in New York can pay to modernize the city’s buses and subways — as happened after London adopted congestion pricing in 2003. Thanks to massive transit investment and reappropriation of street space there, nearly 25% more people now enter the center of London daily, mostly on trains, buses and bikes, while car travel speeds have remained stable.

There’s more. Congestion pricing rests upon the Rooseveltian idea to care for the commons — rivers and forests and farmland. Streets and transit are cities’ commons, which America has allowed cars to plunder for a century.

After years of temporizing, transit advocates in New York have finally resolved that the antidote to broken subways and too many automobiles must include charging vehicles to drive in city centers. Both major transit coalitions, the more business-oriented Fix Our Transit and Fix the Subways, led by the impressive grassroots organizing group Riders Alliance, have put congestion pricing at the top of their political agendas. Before long, we predict, Green New Deal supporters will similarly acknowledge that fully unleashing green energy requires a robust carbon tax, not just as a source of funds but to re-set societal defaults, to re-orient incentives and to unlock innovation.

The Markey–Ocasio-Cortez Green New Deal resolution is adamant about labor rights and economic justice. So too is the movement for congestion pricing. New York City’s most venerable anti-poverty advocate, the Community Service Society, examined congestion pricing and found that for each low-wage New Yorker who regularly drives into Manhattan, nearly 40 will benefit from better trains and buses paid for with the congestion-toll revenues. In the same vein, the right-of-center Manhattan Institute concluded last year that extending New York’s decade-long jobs boom depends on massive and effective investment in mass transit to allow immigrant and other workers to access jobs.

These considerations appear to have finally pushed New York’s Mayor Bill de Blasio off the political fence last month to proclaim support for congestion pricing.

The iconic New York progressive centrist Daniel Patrick Moynihan understood this thirty years ago. As a powerful Senate Committee chairman, he found a way to use a portion of federal gas taxes to decouple urban mobility from automobiles, spurring a rise in transit and bicycling and making cities cleaner and more dynamic.

There is this difference, however. Unlike the Green New Deal, which is open-sourced by design, congestion pricing for New York is being finalized by the state’s governor, who seems intent on keeping the toll levels and other key plan details under wraps till the last minute.

Attempts to toll the entrances to Manhattan’s central core have come up short so many times that any leader worth his Machiavelli might rightly presume that iron-fisted control is the only way to get it done. But that approach is out of step with both the current political era and the enormous momentum to pass congestion pricing in the state budget this month and finally cure the dysfunction of the city’s streets and subways that daily afflicts millions.

A fifth of the way into our new century, awareness is spreading of the folly of giving away for free a finite resource, whether it’s the atmosphere’s capacity to remain temperate or Broadway’s five travel lanes through Times Square.

A Green New Deal, like its illustrious antecedent, can start in New York. Today, congestion pricing can revitalize and unsnarl New York’s subways and streets. Tomorrow, a nationwide mobilization can turn our carbon economy green.

Komanoff, an energy and transportation economist, was “re-founder” of the bicycle advocacy group Transportation Alternatives. Blum was founding executive director of USAction and leader of multiple state and national pro-transit campaigns.

Whether you live in NY State or somewhere else, please visit the Fix The Subway campaign to find out how you can donate time, money or both to pass congestion pricing for New York City now. Or, text DELAY to 52886. Remember, the vote for the budget bill that will include initial allocations for congestion pricing is expected between Friday March 29 and Sunday March 31. Thank you.

Most carbon tax proposals are standalone initiatives. They outline the level at which the tax starts, how fast it rises over time, how the revenue will be used — and not much else. Simplicity has its virtues, for both policy and political reasons. But in the United States, at least, this approach has been unsuccessful.

Carbon tax bills introduced in Congress have gotten as many as a few dozen sponsors — recently even a couple of Republicans — but nary a hearing, let alone serious consideration in committee, even when Democrats controlled one or both houses. Washington State voters turned down carbon tax initiatives in 2016 and 2018 (demonstrating in the process that use of the revenues doesn’t greatly affect political viability). For those who imagined the Climate Solutions Caucus could be the route to bipartisan support for a carbon tax, the cleaning-out of its GOP wing in the 2018 midterms was a body blow.

It was never a surprise that taxes, carbon or otherwise, revenue-neutral or not, would be a tough sell with voters and potentially toxic to politicians. But more than that, a carbon tax by itself, even a robust one, is no longer enough.

Rep. Ocasio-Cortez and Sen. Markey introducing their Green New Deal resolution in Feb. 2019. Photo Saul Loeb AFP/Getty Images, w/ thanks to Politico.

Last fall’s IPCC report on the impacts of a 1.5ᵒC warmer world found that the rate of carbon dioxide emissions must fall 40 to 60 percent from 2010 levels by 2030 to even come close to keeping the temperature rise that low.

If the U.S. had passed a robust carbon tax — one rising at say $10 per tonne per year — a decade ago, we would be on a path to approach that level today. But passing such a tax in 2021 and implementing it in 2022 — which is the earliest that could happen — might not get us much more than halfway to the 2030 goal. And passage even in 2021 is probably a long shot.

The takeaway is that any U.S. carbon tax today must be part of a broader set of policies to address all significant sources of greenhouse gas emissions. A solid roadmap for these policies is the new book by energy analyst Hal Harvey, Designing Climate Solutions: A Policy Guide for Low-Carbon Energy. Harvey and his team outline a suite of policies that “create a powerful symbiosis that can drive deeper carbon emission reductions than policies in isolation while increasing cost effectiveness,” including:

• Performance standards, regulations setting standards for energy efficiency, emissions reductions, and other goals
• Economic signals, including both carbon pricing and subsidies for renewables and efficiency investments
• Support for research and development, both basic research and government collaborations with private-sector R&D

In an interview last fall with David Roberts at Vox, Harvey explained that carbon pricing is most effective in sectors like power generation where clean alternatives exist, but less so where the price signals tend to be swamped by other costs ( e.g., automobiles) or where they don’t necessarily reach the parties that can do something about emissions (think renters who pay the utility bills but don’t design, construct, or maintain the building):

The thing about carbon pricing is, it’s helpful, but it’s not dispositive. There are a number of sectors that are impervious to a carbon price, or close to impervious. A carbon price works when it’s part of a package that includes R&D and performance standards. It does not work in isolation. It helps, but it doesn’t do nearly as much as is required.

(Designing Climate Solutions is a rich lode of energy policy wonkery in the best sense. It notes that only 20 countries are responsible for 80 percent of carbon emissions and attacking emissions in a handful of sectors in those 20 countries can deliver a substantial down payment on the overall reductions we need. For more, see both the Roberts-Harvey interview and an extensive summary of the book. There’s also an online Policy Simulator that lets you indulge your inner energy czar.)

There’s also a powerful political argument for joining carbon pricing to a broader climate strategy: In the same way you can hide your dog’s pill in a morsel of meat, wrapping a carbon tax in a package of more popular initiatives — renewables, job-creating infrastructure investments, etc. — can help make the medicine go down. Fortunately, such a package is in the works.

The Green New Deal means many things to many people, but the unifying concept is to position climate change mitigation as a retooling of the U.S. economy, particularly our infrastructure, with massive green investment and millions of green jobs. The closest thing to an official statement of purpose is H. Res. 109, introduced by Rep. Alexandria Ocasio-Cortez (D-NY) with 90 cosponsors and counting. Senator Edward Markey (D-MA) introduced a companion resolution in the Senate.

The resolution sees a Green New Deal as “a historic opportunity . . . to create millions of good, high-wage jobs in the United States” by investing in new infrastructure to replace our fossil fuel-based systems and industries. At a moment when economic inequality and economic anxiety have reached political critical mass on both left and right, Green New Deal proponents argue that addressing climate change can also address issues that voters care about more (while — at least for the moment — eliding the awkward question of where the money for all this infrastructure is going to come from).

There’s a surge of grassroots energy behind the idea, most of which appears open to a carbon tax as part of the whole. The Sunrise Movement and its partners are likely to be a much more valuable ally to carbon tax advocates than a colloquium of center-right economists.

And the synergy works both ways. A Green New Deal can make a carbon tax more digestible, and a carbon tax can make a Green New Deal more effective. I’ll have more on the latter point in a follow-up post.

On Wednesday, Rep. Ted Deutch (D-FL) and a small bipartisan group of cosponsors introduced the strongest carbon pricing bill dropped into the Congressional hopper in years. H.R. 7173 closely follows the fee-and-dividend proposal long championed by Citizens’ Climate Lobby, employing not just the dividend template but the robust price trajectory.

The Deutch bill sets an initial tax rate of $15/metric ton, rising by $10/tonne annually thereafter. The increase rate would rise to $15/tonne if annual emissions targets are not met. All of the revenue, net of expenses, would go toward equalized dividends to all American households, based on household size, making the overall proposal revenue-neutral.

H.R. 7173 includes a border adjustment for both imports and exports, to protect the competitiveness of American manufacturing. And it restricts the government’s powers to regulate greenhouse gas emissions, at least for their impact on global warming — a limitation that may be more symbolic than substantive, given the modest emissions impact of President Obama’s signature Clean Power Plan, especially when compared to likely reductions from the new bill’s steep price trajectory.

The Deutch fee-and-dividend bill would surpass the most aggressive recent Democratic carbon tax after five years and would have twice the impact soon after.

The buzz thus far has focused on the bill’s initial cosponsors, two of whom are Republicans: Brian Fitzpatrick (R-PA) and Francis Rooney (R-FL). This is not their first trip to the rodeo. Both also cosponsored a much weaker carbon tax bill introduced in July by Carlos Curbelo, who lost his bid for reelection. A third Republican, Dave Trott (R-MI), has since signed on. The two Democratic cosponsors are Charlie Crist (D-FL) and John Delaney (D-MD).

It’s important not to make too much of the bipartisanship on display here. Fitzpatrick, Rooney, and Trott represent an underwhelming 1.5% of the incoming Republican caucus in the House. More particularly, they constitute a mere one-seventh of the surviving Republican members of the all-too-quiescent Climate Solutions Caucus, which is losing most of its GOP contingent to defeat or retirement. Deutch and Curbelo were the founding chairs of the Caucus.

The larger substantive story here is the long-term impact of the Deutch proposal. His $15/tonne starting tax rate is lower than other bills introduced in this session, which range from $24/tonne (Curbelo) to $49/tonne (two Democratic proposals, S. 1639 and H.R. 4209). But the rates in those bills would generally rise by only 2% above inflation annually. Deutch’s proposal, though it starts from a lower base, would outstrip them in impact after just five years, with the differential only widening over time.

According to the Carbon Tax Center spreadsheet model, Deutch’s bill would reduce U.S. CO2 emissions below 2017 levels by 35% in a decade. The best of the Democratic proposals would see a smaller reduction of 25%.

The chances of any carbon tax bill passing in the next Congressional session are close to nil. It is hard to imagine such a proposal getting a floor vote in a chamber led by Sen. Mitchell McConnell (R-Coal Country, aka Kentucky). Even if it did, the veto pen of Donald Trump awaits. Nevertheless, the next two years will allow a debate within the Democratic Party over what its position will be on climate change in the 2020 campaign and, assuming that election goes well for them, in the 2021-22 Congressional session.

The Deutch bill is clearly a contender in that debate. And the more Republican cosponsors Deutch and CCL can recruit this session, the more likely it can become that a robust carbon tax, with revenues going back to American households, will be at least part of the answer.

The other major contender for a Democratic climate program right now is the as-yet-unspecified Green New Deal with major green infrastructure investments possibly funded by a carbon tax. Interestingly, the carbon tax bill with the most support in the House at present, with 21 cosponsors, would also devote most of the revenue to infrastructure, though not specifically green infrastructure. That’s H.R. 4209, the America Wins Act sponsored by longtime carbon tax champion Rep. John Larson (D-CT).

The important thing for carbon tax advocates to remember is that the best bill is the one that can pass. So may the best bill win.

We’re finally catching up with last week’s two big climate-policy stories: the new IPCC report on the dire consequences if global temperatures rise more than 1.5°C above pre-industrial levels, and the awarding of the Nobel Prize in economic science to climate-policy pioneer William Nordhaus of Yale.

Nobel Laureate Nordhaus, in New Haven last week. Photo by Monica Jorge, courtesy NY Times.

A clear thread links the two stories: earth’s climate — and literally human society — faces repeated, widespread, unmanageable disruption unless the world’s nations and peoples begin a sharp and complete U-turn from fossil fuels to carbon-free energy; and this requires not just a “price on carbon” but a high one, as the New York Times spelled out in the headline of perhaps the paper’s key story last week.

Not only that, the price must be considerably higher than Prof. Nordhaus, the dean of climate-damage modeling, has called for throughout his illustrious careeer.

The story, by Times climate-economics reporter Brad Plumer, warrants quoting at length:

More than 40 governments around the world, including the European Union and California, have now put a price on carbon, either through direct taxes on fossil fuels or through cap-and-trade programs. But many of them have found it politically difficult to set a price high enough to spur truly deep reductions in carbon emissions.

The concept of carbon pricing received another implicit endorsement on Monday from the Nobel Prize committee, which awarded Yale’s William D. Nordhaus a share of the 2018 Nobel Memorial Prize in Economic Science for, among other things, making a case that “the most efficient remedy for the problems caused by greenhouse gas emissions would be a global scheme of carbon taxes that are uniformly imposed on all countries.” (emphasis added)

Plumer noted that since the 1970s, Prof. Nordhaus has “argued that companies that burn fossil fuels should be taxed at a rate that reflected the harms they were imposing on the rest of the world.” Needless to say, the companies would pass on most if not all of these carbon taxes in the form of higher prices for fossil-fuel derived electricity, gasoline and diesel fuel prices, etc. — a feature rather than a bug since these price incentives would do more than any other competing policy measures to motivate the companies themselves, along with millions of other decision-makers to change behavior, make investments and pursue innovations to minimize their tax exposure and, thus, shrink national and global use of fossil fuels and resultant carbon emitting.

“Economists have long been enthusiastic about carbon pricing because of the policy’s efficiency,” Plumer wrote in The Times. “Give companies a financial incentive to reduce their fossil-fuel use, and they will find creative and cost-effective ways to do so without the need for heavy-handed government regulations.”

That’s essentially our view at the Carbon Tax Center, except that we don’t necessarily view direct regulations like car-mileage standards as heavy-handed — just less productive than advertised, due to their scattershot, reactive nature; overrated, you might say.

How steep must a carbon tax (or carbon price “delivered” under a cap-and-trade permit system) be to enable the climate catastrophe of 1.5°C or greater temperature rises? As Plumer notes, the IPCC report estimated that the global-average price to emit a ton of CO2 pollution must be at least $135 by 2030, and perhaps as great as — are you ready? — $5,500.

The bottom end of the range, at least, is right in line with what CTC has been advocating since roughly 2010, with a carbon tax starting at $12.50 per ton of CO2 and rising by $10/ton each year. As we never fail to point out, within a decade the tax, passing $100/ton and still rising, would cut U.S. emissions by roughly one-third from today’s levels. While stronger medicine is almost certainly needed, we’ve tended to stick to that trajectory to stay within the lines of political feasibility — a convention we would gladly bend if the carbon tax, once implemented, proved more acceptable to the public and elected officials.

Plumer’s wonderfully informative article hints at that possibility:

Policies that are widely popular with voters, such as mandates for renewable energy, can help reshape the political landscape to make more ambitious climate action feasible. And policies that spur innovation and drive down the cost of cleaner alternatives to fossil fuels, such as electric vehicles, could potentially make higher carbon prices more palatable.

In other words, as the perceptive Vox journalist David Roberts pointed out several years ago, continued advances in (and broadening uptake of) wind power, solar PV, electric cars, etc. could help carbon taxes be seen as a helpful bridge rather than a punishing hand. And, politically, that could make all the difference.

As for Nobel laureate Nordhaus, we haven’t been alone in criticizing him over the years for settling on an adamantly conservative formulation of carbon damages and the resulting “social cost of carbon” — one that arises from both his insistence on a high “discount rate” that shrinks future costs in present terms, and his exclusion from his modeling of the prospect that climate change will erode societies’ ability to generate new wealth by inhibiting the accumulation of technological and intellectual capital, among other losses.

Today, however, we applaud Prof. Nordhaus’s Nobel and share the hope he expressed in an interview this past weekend with The Times’ Coral Davenport, that “if we continue to work on this, the public will get there on the science, and make an exception to the toxicity of taxes.”

“It will help if [the carbon tax is] tied to something popular — if, as a result of the revenue from a carbon tax, you get a check in the mail, or it funds health care,” Prof. Nordhaus added in his interview. We’re all still searching for the right political formula. “I’m hopeful that grown-ups will take over and we will do what is necessary,” he said. “If we don’t, then things will just get worse and worse.”

CTC policy associate Bob Narus contributed information and ideas to this post.