Carbon Tax Center

Pricing carbon efficiently and equitably

IPCC: Not just a carbon price, but a really high one

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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.

Not just a price, but a high price, is how The Times summarized the IPCC’s key recommendation. See link + more in text.

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.

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

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.

OECD report: miles to go on carbon pricing 

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Carbon pricing is catching on around the world, but only at “a snail’s pace,” and carbon-pollution prices remain far too low to make much of a dent in emissions, says a new report from the Organization for Economic Cooperation and Development.

Effective Carbon Rates 2018: Pricing Carbon Emissions through Taxes and Emissions Trading reports that the “carbon pricing gap” — the amount that current carbon prices lag an admittedly low benchmark price — shrank from 83% in 2012 to an estimated 76.5% this year. The figures cover 42 countries with advanced economies and account for 80% of all carbon emissions.

A key pillar of globalism, the OECD grew out of the postwar Marshall Plan and is dominated by three dozen “developed” countries in North America and Europe but also includes Turkey, Chile and Japan. Its “effective carbon rate” is defined as the sum of revenues from three types of policies:

  1. taxes on specific fuels
  2. carbon taxes
  3. prices of tradeable emissions permits

We added the pull quote shown above. The OECD report articulates the economic and geopolitical case for carbon pricing even as it documents the hesitant pace of progress.

The report compares that rate to the revenue that would be raised with economy-wide carbon prices at benchmark levels of 30 or 60 euros per metric ton (about $35/$70US at current exchange rates, or $32/$64 per “short” ton). The report didn’t count the impact of fossil fuel subsidies that lower market prices of carbon fuels, though these tend to be fairly low in the 42 countries studied.

For individual countries, the carbon pricing gap — the distance between actual pricing and the €30/tonne benchmark — ranges from 27% to 100% in 2015, the latest year for which complete individual-country data is available. The US, with a gap of 75%, ranked 31st among the 42 countries studied. Top rankings go to Switzerland (27%), Luxembourg (30%), and Norway (34%).

Russia, at the bottom of the list, has no carbon pricing at all. China ranks 39th, with a 90% shortfall from the €30/tonne benchmark, though the report notes that implementation of nationwide carbon-permit trading in China “could lead to a significant drop in the global carbon pricing gap, to 63% in the early 2020s.”

Schematic from OECD report. The bottom category, specific taxes, is most countries’ primary contributor to the effective carbon rate.

The report is upfront about its benchmark’s limitations. The World Bank–affiliated High Level Commission on Carbon Pricing warned last year that carbon prices must range from $40 to $80US per tonne by 2020 and $50-$100/tonne by 2030 to meet the emission targets of the Paris Climate Agreement. (And remember that those goals are almost universally regarded as too low.) Moreover, the 30 euro benchmark falls below even the bottom of the 2020 range. And advanced economies — which most of the countries studied are — should err toward the high end of that range, according to the Commission, to leave room for developing economies to reap at least some of the fruits of industrialization.

Applying a more realistic 60€/tonne benchmark (about $64US per short ton) casts the pricing shortfall into even sharper relief: under that benchmark the 2015 US gap would be 88%.

Perhaps surprisingly, the largest of the three contributors to OECD’s effective carbon rate is neither explicit carbon taxes nor tradeable carbon emssion permits, but taxes on specific fuels, especially in road transport. European countries, especially, began taxing gasoline and diesel fuel at high rates decades ago, not as a climate measure but to reduce car dependence in urban areas, to help rail and other public transit maintain market share, and to fund social programs. Years later, those taxation policies are now, properly, being recognized for their role in protecting climate as well.

“Climate Caucus” greenwashing in full force as midterms approach

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We mentioned here in mid-summer that climate journalists were disdaining the Climate Solutions Caucus as “greenwashing for GOP denialists.” Now a prominent energy-and-climate newsletter is out with a roundup of Republican caucus members’ re-election efforts that adds fuel to that charge.

At least 10 and perhaps many more of the 43 Republican members of the House Climate Solutions Caucus appear likely to be gone when the 116th Congress convenes in January.

The new report in ClimateWire, by Washington-based E&E News reporter Mark K. Matthews, quotes campaign materials by GOP Reps. Mia Love of Utah, Steve Knight of California and Peter Roskam of Illinois that cite their caucus membership as evidence of climate and/or environmental concern.

This is from Rep. Love’s latest mailer to constituents:

Mia Love knows that we need action, not words, on improving our environment. That’s why she regularly engages with her fellow members of the Climate Solutions Caucus to craft and advance policies that promote environmental stewardship.

Similarly, the ClearPath Action Fund, which aims to “elect Republican clean energy champions,” is insisting in Facebook ads that Rep. Knight’s caucus membership demonstrates that he “puts California before party politics.” An aide to Rep. Roskam, meanwhile, recently pointed to his joining the caucus as evidence that he “has always been a friend to the environment,” reports ClimateWire’s Matthews.

Yet neither Love nor Knight nor Roskam is known to have written, sponsored or even endorsed any substantive “green” legislation during their Congressional tenure. “Engaging” with caucus members, it’s fair to say, is basically a smokescreen to cover Republicans’ stonewalling on federal climate action.

More than fear of a Democratic “blue wave” is making GOP Congressmembers flaunt their caucus badges. Environment again matters these days, a turnaround that the Pew Research Center first reported back in January:

Economic issues — improving the job situation, strengthening the economy and reducing the budget deficit — are viewed as less important policy priorities than they were just a few years ago. Other issues, which had been less prominent public priorities in the past, have grown in importance. The share of Americans saying that protecting the environment should be a top policy priority has increased 18 percentage points since 2010 (from 44% to 62%), and seven points in the past year alone. (emphasis added)

Or, as veteran political journalist Stuart Rothenberg pointed out this week in Roll Call, “It’s NOT the Economy, Stupid. With growth up [and] unemployment down, voters are focusing on other issues,” environment among them. Needless to say, massive climate-charged flooding in the Carolinas and forest conflagrations across California and the West, coupled with the Trump administration’s “climate arson” in gratuitously torching methane-leak rules and other no-brainer regulations, are likely to keep climate and environment on the front burner in the run-up to the November midterms.

How fares the Republican half of the Climate Solutions Caucus in all this? Not well. Our donut chart (above) displays all 43 GOP caucus seats according to their re-election chances, as rated by the widely admired Cook Political Report. Seven members aren’t running for re-election and another three are deemed likely to lose on Nov. 6 or “leaning” that way. Another ten races, including those by Knight and Roskam (mentioned earlier) are considered tossups, making a total of 20 in jeopardy — not counting six rated as leaning toward a win (that group includes Mia Love along with Rep. Carlos Curbelo of Florida) and six likely to win. We singled out Curbelo in July for “blazing a path” with the first Republican carbon-tax bill in a decade.

Only eleven of the 43 races for the GOP Climate Solutions Caucus aren’t “competitive” for Democrats, according to the Cook report, which is why Matthews of ClimateWire headlined his post, “Climate caucus’s GOP ranks could plummet.”

That GOP caucus members are especially vulnerable to a November blue wave isn’t surprising, since it’s their district’s blue or purple tinge that led many of them to declare climate concern in the first place. Regardless, a wave that swamps the caucus’s Republican side could open the floodgates to congressional hearings and, eventually, action, on genuine climate solutions.

Oct. 2 addendum: The Democratic challenger to Rep. Peter Roskam (R-IL), mentioned at the top, is Sean Casten, whom the NY Times today described as “a scientist and clean-energy businessman” in its contrarian article, Floods. Wildfires. Yet Few Candidates Are Running on Climate Change. 

Jerry Brown Is Right. Trump’s Methane-Rule Rollback “Borders on Criminality.”

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Addendum, Sept 19: The Trump administration yesterday formally adopted the proposed rules we wrote about last week, below. The New York Times’ Lisa Friedman reports the details. 

“This is insane – it borders on criminality,” said California Gov. Jerry Brown yesterday about President Trump’s proposed revisions to Obama administration regulations on methane emissions from oil and gas wells.

Brown has authority to speak, and not just because on Monday he signed SB (California Senate Bill) 100, which commits the Golden State to a 100% carbon-free electricity sector by 2045. Brown’s entire 16-year career as governor (1974-1982 & 2008-2016) has been one of breathtaking, broad-based innovation in energy efficiency, renewable energy and environmental protection.

The longest-serving governor of the largest state pulls no punches.

Not just in California but across the U.S., fridges and A/C’s consume less electricity, cars burn less gasoline, and tailpipes pollute less because Brown’s administrations pioneered the required engineering, regulations and politics. If any human being living or dead has done more than Gov. Brown to cut carbon emissions, I’d like to know her name.

The Obama reg’s targeted natural gas leakage, venting and flaring by requiring more frequent inspection of leaks from gas wells and pipelines and expedited repairs. The Trump revisions will cut inspection frequencies at wells and compressor stations and extend repair deadlines, as reported yesterday by Romany Webb, Senior Fellow and Associate Research Scholar at Columbia University’s Sabin Center for Climate Change Law. Watering down the Obama rules will mean more heat-trapping methane released to the atmosphere.

Exactly how much more methane is hard to pinpoint but EPA estimates appear to be around 50,000 excess tons in 2020, rising to just over 100,000 in 2025. (Those are the two years displayed in Table 1.1 of EPA’s Regulatory Impact Analysis; the figure rises over time because the Obama reg’s being watered down apply to new wells only.) We’ll use the approximate 2025 figure, 100,000 tons per year as representative of the next 10-15 years.

“Methane is a highly potent greenhouse gas,” Ms. Webb reminds us in her informative post, “trapping approximately 87 times more heat in the earth’s atmosphere than carbon dioxide in the first 20 years after it is released, on a pound-for-pound basis.” Applying that multiplier, the additional 100,000 tons of methane per year will have the same climate-change impact as 8-10 million tons a year of additional CO2.

Total U.S. emissions of CO2 currently run between 5 and 6 billion tons, while emissions of methane and other GHG’s add the equivalent of another 1 billion or so (all figures are in short tons and are approximate). The Trump/EPA rollback will thus add less than two-tenths of one percent (0.2%, or one part in 500) to America’s climate pollution emissions.

If the rollback’s numerical impact is so small, why is it so odious?

First, the Obama rules being watered down were the opposite of revolutionary; they adhered to the time-honored (and bipartisan) pollution-control paradigm of covering only new or expanded emissions sources, an accommodation that circumvents arguably costlier “retrofitting” of existing sources.

Second, they’re eminently doable. Inspecting and fixing leaky wells and other gas infrastructure is good housekeeping, pure and simple. And they’re easy to follow.

Third, the methane rules bring substantial co-benefits: They create jobs. They cut down on “local” (toxic) pollution. They protect workers. And they’re at least partially cost-offsetting since the saved methane can be delivered and sold.

Fourth, they’re a giveaway to an industry that needs none: the U.S. oil and gas sector. With over a quarter of a trillion dollars a year in profits, and with annual contributions to Congress nearing a third of a billion dollars a year, America’s oil and gas industry is the last segment of our society in want of more federal largesse. (Figures are from Oil Change International; contributions figure includes coal companies.)

Last, as OCI reminds us in its mission statement: The production and consumption of oil, gas, and coal are major sources of global warming, human rights abuses, war, national security concerns, corporate globalization, and increased inequality. Anything that further incentivizes fossil fuel extraction and usage, as the Trump-EPA methane reg rollback will do, only exacerbates that.

In short, the rollback is quintessential Trump: spiteful, short-sighted, ignorant, amoral.

Jerry Brown is right on Trump and right on climate. He’s wrapping up his lifetime of public service on the highest possible notes of policy, leadership and moral clarity. The opposite of what we suffer with the White House.

A middling carbon tax could recoup Trump’s gutting of mpg standards … and then some

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Before you take umbrage at the headline, let me be clear: President Trump’s announcement yesterday proposing to freeze federal car-mileage standards at 2020 levels and revoke California’s longstanding authority to set auto emissions standards tighter than federal standards is contemptible.

The mpg freeze will mean more carbon emissions hastening the plunge into climate chaos not only for Americans but for the seven billion other people with whom we share the planet. The California revocation will bring down the curtain on that state’s half-a-century of innovation in low-emissions regulation and technology.

Both moves are archetypal Trumpian policy-by-pique. Their sole purpose is to stick mud in the eyes of Gov. Jerry Brown, who with his father, Gov. Pat Brown, pioneered green state governance; of President Obama, for whom ramping up auto mpg requirements was a cornerstone measure to combat global warming; and of untold numbers of Americans who care deeply for our environment.

The policy, a gift to oil companies, will accomplish nothing while sowing vast damage. Like Trump himself, it is spiteful, sickening and stupid.

Emission trajectories shown reflect carbon tax that would diminish CO2 from autos as much as Trump’s mpg freeze will raise them. Economy-wide decreases in analysis-year 2035 are eight times as great as auto impacts alone.

But what’s also true is that a mid-range carbon tax could recoup the lost ground. I calculate that a U.S. carbon tax that started next year at a level of $5 per ton of carbon dioxide and increased by $5 a ton each year, with no letup, would, by 2035, be curbing carbon emissions from gasoline use by the same amount that Trump’s cessation of tighter mpg standards will increase them — around 140 million metric tons of CO2 a year.

Moreover, such an economy-wide carbon tax would bring about parallel drops in emissions throughout the economy — in electricity generation, freight-hauling, aviation and industry. I estimate that in 2035, when the hypothetical carbon tax would have reached $85 per ton, those reductions would amount to an additional 980 million metric tons. All told, the carbon tax would suppress carbon dioxide emissions eight times as much as Trump’s mileage freeze will elevate them.

To reflect the hypothetical nature of the carbon tax I express its benefits in the subjunctive (“would”) while employing the definite tense (“will”) for Trump’s intended rollbacks. This is a necessary concession to the arduous and uncertain task of passing a U.S. carbon tax, in contrast to the president’s all-too-real administrative powers — notwithstanding the fierce legal and political challenges that will be mounted against those moves. The point is not to trivialize the White House’s latest destructive act but to highlight the vast potential of a robust carbon tax to cut emissions.

A carbon tax covering gasoline would stand in for higher mpg standards, in part, by nudging consumers to more fuel-efficient vehicles and, thus, incentivizing manufacturers to design and market them. More than that, the higher fuel price could inflect drivers’ day-to-day decisions on how far to travel and, for multi-car families, which car to take, not to mention how aggressively to drive. Vehicle miles traveled (VMT) would shrink somewhat as well, as decision-needles tilt toward car-sharing, trip-chaining, public transit, and walking and biking.

This isn’t to overstate the link between higher fuel prices and lower gasoline use. In our modeling at the Carbon Tax Center we employ a “long-run” gasoline price-elasticity of just 0.35 (discussed and derived here), by which prices at the pump must rise by a third to cut usage by a tenth. It also bears repeating that not all Americans have agency to respond to price rises. But while a binary frame may be useful for viewing individuals’ fuel-use decisions, the aggregate level of fuel use (and the resulting carbon emissions) is the product of literally billions of daily and longer-term decisions.

Moreover, autos (cars and light trucks) make up just one-quarter of U.S. carbon emissions — even when “upstream” oil refining is factored in. The sectors yielding the other three-quarters of U.S. CO2 — electricity, freight, air travel, industry, heating, construction — are more price-elastic, which is why a carbon tax that would recoup the reductions from the higher mpg standards would yield another 7-fold’s worth of reductions.

So yes, Bill McKibben is spot-on to call the mileage freeze Trump’s “stupidest decision yet in his endless attempt to roll back environmental protections.” And yes, a carbon tax of any stripe, let alone one that could rise to $85 per ton by 2035 as in our modeling exercise here, remains nowhere in sight so long as Republican extractionism and malice rule Congress and the White House.

But that’s not cause to ignore or abandon the long-term campaign for a robust U.S. carbon tax. Quite the opposite.

Our Numbers Explained: We used the Rhodium Group’s May 2018 analysis, Sizing Up a Potential Fuel Economy Standards Freeze. For 2035, Rhodium projected a 114 million metric ton fallback in CO2 reductions if oil prices are low, and 32 million tons if prices are high. (The high-price fallback projection is smaller because expensive gasoline would do some of the work of mpg standards in engendering fuel efficiency while also dampening the amount of driving.) We conservatively used the higher figure and added 20 to 25 percent to capture upstream (refinery) emissions, yielding a target of 140 million metric tons. Through trial-and-error, we found that CTC’s carbon-tax model (downloadable as an Excel spreadsheeet) also projects a 140 million metric ton reduction from gasoline use, with a hypothetical carbon tax that would start next year at $5/ton and rise by $5/ton annually, in constant-2017 dollars. The economy-wide (all sectors) reduction is 1,122 million metric tons.

Agreed: Carbon Pricing Isn’t Working. Now What?

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A headline like “Why Carbon Pricing Isn’t Working” isn’t the kind of news carbon tax advocates like to see. But Jeffrey Ball, writing in the July/August Foreign Affairs, has a point:

[E]xisting carbon-pricing schemes tend to squeeze only certain sectors of the economy, leaving others essentially free to pollute. And even in those sectors in which carbon pricing might have a significant effect, policymakers have lacked the spine to impose a high enough price. The result is that a policy prescription widely billed as a panacea is acting as a narcotic. It’s giving politicians and the public the warm feeling that they’re fighting climate change even as the problem continues to grow. (emphasis added)

To be clear, Ball, a scholar-in-residence at Stanford and nonresident senior fellow at the Brookings Institution, likes and wants carbon pricing. His quarrel isn’t with the concept but with the political execution — or lack of it:

If governments proved willing to impose carbon prices that were sufficiently high and affected a broad enough swath of the economy, those prices could make a real environmental difference. But political concerns have kept governments from doing so, resulting in carbon prices that are too low and too narrowly applied to meaningfully curb emissions.

Ball is discussing both carbon taxes and cap-and-trade here. Cap-and-trade regimes have been limited to a few economic sectors — most typically, electricity generation. And the caps set so far have been too high (i.e., loose) to generate the robust carbon prices that can really impact these sectors. Though reforms are in the works in both Europe and the U.S., Ball is rightly skeptical about how far they will go.

I-95, Miami. A robust carbon tax can help un-jam highways while also cutting carbon emissions.

The news for carbon taxes isn’t much better, so far. A commission of economists convened by the Carbon Pricing Leadership Coalition last year recommended a tax in the $40-80/ton range by 2020. Only six countries — Sweden, Switzerland, Liechtenstein, Finland, Norway, and France — have carbon taxes that high, according to the World Bank.

Ball’s alternative is what he calls “more targeted moves,” but his reasoning seems muddled. He argues that politically feasible levels of carbon taxation won’t change how much or which vehicles people drive, but then endorses higher gasoline taxes to motivate those very changes. (For the record, we estimate the price-elasticity of gasoline to be negative -0.35, meaning that the price of gas has to rise by one-third to reduce usage by one-tenth.) He also contends that carbon taxes give builders no incentive to erect energy-efficient buildings, yet there is abundant evidence that buyers and tenants are willing to pay premiums for efficiency-certified properties (see here and here) — a preference that will only grow if energy prices rise.

Ball urges carbon tax proponents to redirect their efforts to more conventional approaches — basically, regulating the bad stuff and subsidizing the good stuff:

[P]ursuing these measures directly offers a politically realistic path to significant environmental benefit. . . . To the extent that the carbon-pricing experiment lets policymakers and the public delude themselves that they are meaningfully addressing global warming, it’s not just ineffectual; it’s counterproductive.

There’s a double standard here, however. The regulations and subsidies that U.S. environmental and climate advocates have won over the years have a mixed record. Production-tax credits and renewable portfolio standards helped jump-start the meteoric rise in wind and solar, but those gains, while impressive, accounted for a mere one-fifth of the 25 percent drop in carbon emissions from U.S. power generation since 2005 (energy efficiency and the rise in fracked gas each accounted for two-fifths). In transportation, cheap gasoline is a key reason that U.S. drivers are burning more gasoline now than a dozen years ago.

Moreover, directing massive subsidies to carbon capture and sequestration — another remedy Ball endorses — doesn’t look much more politically realistic than serious carbon pricing. And as a general proposition, subsidizing alternatives to carbon-burning fuels is at best only half as effective at cutting emissions as raising the prices of those fuels, as CTC demonstrated in its groundbreaking comments to the Senate Finance Committee four years ago.

If arresting global warming were politically easy, we would have done it already. But it’s not, and discounting perhaps the most potent arrow in our quiver when every other alternative is far more limited in scope doesn’t make much sense. Addressing the climate crisis is hard work; we might as well expend that effort on a policy that could actually do the job.

Unicorn or Harbinger? A Republican Carbon Tax Is Readied for Debut.

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“House Republican will introduce $23 climate fee next week.” That’s the headline of an article today in E&E News reporting that Rep. Carlos Curbelo, a two-term Republican representing Florida’s 26th Congressional District, is finalizing a bill that would impose a carbon-emissions fee on most U.S. fossil fuel-burning sectors and also eliminate or at least pause some federal regulations on climate change.

(Update: The Curbelo bill was introduced on July 23 as H.R. 6463, the Market Choice Act.)

E&E calls Curbelo’s pending bill “a rare effort by a Republican to address global temperature increases by reducing greenhouse gases.” That’s an understatement. To the best of our recollection, the bill would be the first carbon tax proposed by a sitting G.O.P. Congressmember or Senator in roughly a decade.

Any needle-moving from the Curbelo carbon tax would be in the political realm, not in direct emission cuts.

Politically, then, the appearance of Curbelo’s bill will be a big deal. In terms of straight-up carbon reductions, however, the bill is underwhelming. Our quick take from inputting the bill’s key elements into CTC’s carbon-tax spreadsheet model is that in 2020, U.S. CO2 emissions would be 22% below 2005 levels. To put that in perspective, actual U.S. emissions a year ago were 14% less than in 2005; thus, the 2020 bump from the Curbelo bill is at most 8 percentage points — less, actually, given the ongoing decarbonization of our electricity sector. (The Congressman’s draft fact sheet for the bill optimistically pegs the 2020 reduction at 24%.)

By 2032, the emissions drop from 2005 would reach 30% (per Curbelo) or 29% (per our modeling). But seeing as nearly half of that decrease was already in place without a carbon tax in 2017 — a year that is closer to the 2005 base year than to 2032 — the Curbelo proposal has to be seen as fairly thin on actual climate deliverables. Which is what one would expect from a carbon price that barely exceeds $20 per ton (the bill’s $23 starting price is per metric ton) and rises by only 2% a year above general inflation, although the bill contains a provision to ratchet up the increase if reductions fall short of specified targets.

Nevertheless, there’s a bigger picture to consider. Just yesterday we put up a post bemoaning the possibility that the anti-carbon-tax Scalise Resolution would pass, as it did in 2016, without a single Republican dissent. Now it looks like Rep. Curbelo is set to dissent in spades by shattering the decade-long G.O.P. prohibition against sponsoring or endorsing — let alone introducing — a carbon-tax bill.

If any D.C. Republican was going to take such a step, it was likely to be Carlos Curbelo. His 26th CD, extending from southwest Miami to the Everglades and covering the Florida peninsula’s entire southern tip, is a climate ground-zero twice over — sea-level rise plus hurricanes — and a classic swing district (it went blue by double-digits in the last two presidential races). A year after taking his seat in January 2015, Curbelo co-founded the bipartisan Climate Solutions Caucus with fellow Floridian Ted Deutch, a Democrat representing the 22nd CD. Whether by conscience or calculation or a combination of the two, Curbelo clearly read the handwriting and elected to break ranks with his party’s denialist orthodoxy.

The Curbelo bill itself is full of political calculation, which isn’t necessarily a bad thing. It would clear the books of the long-standing federal highway excise taxes — 18.4 cents per gallon of gasoline, 24.4 cents for diesel. The carbon tax, with its built-in annual increases, would more than make up the difference, though at the cost of a percentage point or two of economy-wide carbon reductions due to the diluting effect of the swap. The Highway Trust Fund would be a big net winner, receiving 70 percent of the entire revenue take. Whether that’s bad or good depends on whether the increased revenue is allocated to highway expansions or “fix-it-first” infrastructure repairs.

G.O.P. carbon-tax trailblazer Carlos Curbelo. Pic credit: Miami Herald.

The bill stands no chance of passage this year, of course, or in almost any imaginable Republican-controlled Congress. Indeed, under the G.O.P.’s Hastert Rule, Rep. Curbelo would need 117 Republican co-sponsors simply to clear the “majority of the majority” threshold and get the bill to the House floor.

If Rep. Curbelo were a Democrat, we would be measuring his bill against Democratic carbon-tax proposals such as Rep. John Larson’s America Wins Act (HR 4209), whose carbon price starts at $49/ton and which devotes $1 trillion to infrastructure (plus transition assistance for coal country and a relatively small “dividend” for households), and which has a few dozen Democratic co-sponsors. And while the Larson bill’s 2%-plus-inflation price increase trajectory has the same slope as Curbelo’s, it operates on a much higher base and thus packs more punch.

But that comparison runs the risk of missing the point: that a “long national nightmare” of Republican silence and inaction on climate may be starting to end. Whether other G.O.P. lawmakers will stand with Curbelo remains to be seen. He is at least blazing a path, and for that he deserves our thanks.

CTC supporter and volunteer Bob Narus contributed research and ideas to this post.

Last Chance to Believe In a Republican-Assisted Carbon Tax?

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The biennial “Scalise Resolution” condemning carbon taxing is up for a vote in the House this week, according to a report on The Hill news site.

The text of H.Con.Res.119 — “Expressing the sense of Congress that a carbon tax would be detrimental to the United States economy” — may be viewed here. It says, inter alia, that “a carbon tax will fall hardest on the poor, the elderly, and those on fixed incomes,” and that “a carbon tax would reduce America’s global competitiveness.”

The first assertion ignores the possibility of carbon-dividend proposals that would benefit most low-income households by returning more carbon revenues in monthly payouts than they would take away in higher fuel prices. The second ignores the need of U.S. industry to heed the accelerating transformation of global energy markets to low- and no-carbon tech like wind turbines, solar cells and efficient vehicles and appliances.

The resolutions’s other thirteen “whereas’s” are equally vapid, and in fact the Scalise Resolution is just the Republican Party trying to use carbon taxing to beat up Democrats. Nevertheless, the upcoming vote can be seen as a crucial test not just for the Climate Solutions Caucus but for the very idea of a Republican-backed or -assisted carbon tax.

The caucus now has 43 House Republican members. By joining, each took a pledge to “explore policy options that address the impacts, causes, and challenges of our changing climate,” according to the page devoted to the caucus on the Web site of its sponsoring organization, Citizens’ Climate Lobby. It also has 43 Democratic members, per its “Noah’s Ark” approach to climate bipartisanship. We single out Republicans because in 2016, when a similar resolution passed by 237-163, not a single Republican voted No. Sixteen abstained, while six Democrats joined the 231 Republicans to vote in favor.

In the past, House G.O.P. members and their apologists have cited “primary anxiety” — fear of being ousted in a party primary by even harder-right insurgents — as reason to toe their party’s denialist line on virtually anything bearing on climate. But this year’s primaries are now in the rear-view mirror. Any Republican member’s vote against the Scalise Resolution this week would appear to carry no political cost until at least 2020. And by then, climate denial could have become untenable in most House districts, even red ones.

Climate Solutions Caucus member Mark Sanford (R-SC) lost his primary last month. A vote against Scalise could give him a climate “profile in courage.” Pic credit: Getty Images.

Even less peril awaits the ten Republican caucus members whose current term in Congress is their last. Nine have announced their retirement: Bud Shuster (PA), Charlie Dent (PA), Darrell Issa (CA), Dave Reichert (WA), David Trott (MI), Ed Royce (CA), Ilenaa Ros-Lehtinen (FL), Lynn Jenkins (KS), Ryan Costello (PA). A tenth, Mark Sanford (SC) lost his primary last month.

Just a single vote opposing Scalise would end the carbon-tax embargo by which no sitting Republican congressmember or senator has ever endorsed carbon pricing, even just in principle, since 2010. It could signal, in some small way, that at some not-far-off time, a critical mass of Republicans might vote for a carbon tax. Which in turn could validate organizing for revenue-neutral carbon taxing like the Citizens’ Climate Lobby’s fee-and-dividend proposal.

CCL is rallying its membership to defeat the Scalise Resolution. But my sources say that CCL leadership aren’t focusing their organizing to target Republican caucus-members. That might have been understandable two years ago, when the caucus was in its infancy. But it’s now midway through its third year. It’s fair to demand that Republican members of the Climate Solutions Caucus to stand up and oppose the Scalise Resolution. If they won’t, why should anyone believe that any Republican will ever stand for a carbon price?

Prominent climate journalists including David Roberts and Kate Aronoff have dismissed the caucus as greenwash for denialists. It may be too much to ask all 43 of its G.O.P. members to form a No bloc on Scalise. But the ten who are retiring at year’s end could take a stand, and perhaps pull in a few Republican holdovers.

As we suggested last month, that could provide political validation for carbon fee-and-dividend and its close cousin, the Climate Leadership Council’s carbon dividends plan. We at CTC aren’t holding our breath. But we’d love to be proven wrong.

July 19 addendum: Four G.O.P. caucus members — Ros-Lehtinen, Fitzpatrick, Love and Curbelo, whose carbon-tax bill is expected to drop next week — voted against the resolution today, as Inside Climate News reported. Two non-caucus Republicans joined them, for a total of six.

Another Carbon-Dividend Group. Will It Matter?

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Carbon-dividend proponents continue, as ever, to push for national “fee and dividend” legislation. Today the Washington, DC-based Climate Leadership Council announced formation of a lobbying arm, Americans for Carbon Dividends, headlined by former Senate Republican majority leader Trent Lott, former Senator John Breaux (D-LA) and former Federal Reserve chair Janet Yellen. This follows the news last month that the Climate Solutions Caucus — a project spearheaded by the grassroots Citizens Climate Lobby — has enrolled four new Republican House members, bringing total membership to 78 — 39 R’s and 39 Dem’s (with each new Republican, a Democrat is brought in from a waiting list).

If tenacity trumped reality, CLC and CCL would now be refining their fee-and-dividend proposals into Congressional bills and shepherding them through hearings, markup and, ultimately, legislation. Within a decade of enactment, the money-saving and profit-driven replacement of carbon-belching coal, petroleum and natural gas by low- and zero-carbon fuels, technologies and cultural norms would have pushed U.S. carbon emissions 27 percent below current levels and 36 percent below 2005, the standard baseline year in climate analysis, easily fulfilling our country’s Paris climate pledge. (Figures are based on our modeling of U.S. energy, assuming CLC’s recommended starting CO2 price of $40 per ton, followed by annual rate increases of $5/ton; details here.)

So much for the premise of bipartisanship built into the political strategy for carbon fee-and-dividend.

Alas, reality doesn’t bend so easily. Especially when it comes in the guise of a Congress ruled by, as it is often said, Earth’s only major political party (among democratically run countries) that has sworn itself to disbelieve in human-caused climate change and to disavow the necessity or possibility of public policy to combat it. At this writing, 17 months into the Trump administration and 28 months since the Climate Solutions Caucus was founded, not a single Republican member has uttered a word of support for carbon fee-and-dividend legislation, much less written or co-sponsored a CFD-themed bill — even though, from the outset, the political strategy behind CFD has been built on bipartisanship.

By the same token, the impressive list of Republican luminaries standing with CLC/ACD consists entirely of former office-holders: former Sen. Lott, former Reagan and Bush-41 cabinet secretaries James Baker and George Shultz (the latter’s cabinet service actually extends back to the Nixon presidency), and others whose glittering credentials are shown on the CLC and ACD web sites.

This isn’t meant to disparage these organizations or individuals (excepting current GOP office-holders). We have written glowingly of the fee and dividend concept for a decade, including last year in articles in The Nation and the Washington Spectator. Both pieces praised the Climate Leadership Council’s advocacy, as have our numerous blogs (here, here, and here, inter alia). We were honored to gain George Shultz’s signature on our 2015 Call to Paris Climate Negotiators: Tax Carbon, and are stirred that, in his 98th year, Secretary Shultz continues to devote himself to climate sustainability on behalf of both CLC and Citizens Climate Lobby. We have also worked closely with CCL since its formation in 2009, fielding hundreds of queries from CCL activists on tax incidence, energy modeling and other “technical” matters and gratefully accepting financial contributions from CCL members as well.

So it’s with a measure of sadness that we share here our sense that the time for carbon dividend proposals has probably passed. The center to which Baker-Shultz (CLC) and fee-and-dividend (CCL) were designed to appeal barely exists. It’s not just that no sitting Republican has endorsed Baker-Shultz or indeed fee-and-dividend in any form. It’s also that the Democratic majority that will be needed to pass a carbon tax bill appears unlikely to rally around a revenue-neutral carbon tax, whether it’s organized as fee-and-dividend or some form of tax swap.

To be sure, the Democratic majority’s carbon tax — if and when there is one — may include a degree of “dividending,” but only of a portion of the revenues. That’s because a Democratic carbon tax bill will also insist on directly investing much of the carbon revenues: in renewables, energy-efficiency, mass transit, worker resettlement and retraining, and damage mitigation — rather than relying on the price pull from the tax. (A textbook example of such a “just transition” bill is the state carbon tax proposal developed by NY Renews, the energetic left-leaning grassroots coalition in New York State.)

There’s nothing wrong with that, provided such a carbon tax can pass and that its tax level rises quickly enough over time to overcome the lesser price-sensitivities (“elasticities”) that govern driving, freight, air travel and the like, which make it harder for carbon-pricing to drive down emissions in the economy’s non-electric sectors. But of course a good deal of the intended appeal of carbon dividend plans was that households, with politicians following in their wake, might support raising the carbon tax because the size of their dividend checks would rise in tandem. Diluting the dividends weakens the appeal.

And revenue-neutrality isn’t the only flashpoint lurking in the CLC-ACD proposal. Another element of the deal — one that has won a measure of oil-industry support — would immunize fossil fuel companies against litigation seeking to hold them accountable for climate damage caused by their products. Earlier today, a leading strategist and backer of such litigation, Lee Wasserman of the Rockefeller Family Fund, told the NY Times that “We categorically oppose any deal that shoves trillions in costs down the throats of innocent taxpayers and lets the companies skip away to profit and deceive another day.”

While sentiments like Wasserman’s help rouse the climate base, they don’t point to a policy solution. Like the polar icecaps themselves, the center that would support a revenue-neutral carbon tax or other carbon-tax-based “grand bargain” continues to shrink. As the horrors of the Trump administration and its Congressional Republican enablers continue to mount, there’s no apparent middle ground, whether in climate and carbon-taxing or in any consequential policy-making.

We can commend the ACD initiative — which former Senators Lott and Breaux have detailed in a New York Times op-ed — while bemoaning its lack of political currency. The political struggle to contain climate change has moved to the courts and to the state and local levels. If and when a semblance of sanity returns to Congress and the White House, that state and local mobilization will be critical to enacting the carbon tax and complementary policies necessary to achieve deep cuts in emissions.

Note: A month after we published this post, Rep. Carlos Curbelo (FL-26), introduced a carbon-tax bill — the first from a Republican member of Congress in a decade — as we reported here.

A meeting of minds on carbon taxes

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The rifts over carbon pricing that have engulfed the climate movement in recent years and helped sink the 2016 Washington state carbon tax referendum softened noticeably at a public forum in New York’s Westchester County on Monday evening. Lines of convergence outweighed points of contention, perhaps signaling that proponents of transparent and robust carbon pricing can surmount our ideological differences and move forward together.

The forum, Carbon Tax: Solution to the Climate Crisis, was organized by local climate activist Andrew Ratzkin and held at Pace Law School, whose affiliate, the Pace Energy and Climate Center, has for decades been a bulwark of policy and legal analysis for energy efficiency, renewable energy and environmental taxation. While the four panelists — I was one — hale from different disciplines and generations, we were conversant with climate science, economics and organizing and respectful of each other’s endeavors.

The younger panelists, Dan Sherrell and Shiva Prakash, outlined the ambitious New York State carbon tax proposal developed by NY Renews that has attracted wide support — with sign-on from 143 organizations — through its pledges to apply the carbon revenues to protect low-income families, invest in sustainable energy technology, help workers transit out of fossil-fuel jobs, and remediate “front-line” communities disproportionately damaged by fossil fuel processing and combustion.

While there’s room to question whether spreading the revenues so broadly can achieve all four objectives, NY Renews rests its optimistic projections — which include, by 2030, a halving of New York CO2 emissions and creation of 150,000 net new jobs — on a detailed study by the U-Mass Political Economy Research Institute. The group also formulated its carbon-tax proposal through extensive consultation with advocates from labor, environment, low-income and environmental-justice communities — a far more holistic process than Carbon Washington followed in fashioning its doomed I-732 referendum, and one that should augur well for the eventual legislative effort.

You may have noticed that my description led with the proposed use of the revenues, not the level of the tax. One reason is that the carbon tax amount in any state proposal tends to be constrained by “leakage” concerns over cross-border business flight as well as the political difficulty of getting too far out front of neighboring states; for the record, the NY Renews carbon tax would start at $35 per ton of CO2 and increase indefinitely at 5 percent a year.

The other, weightier reason for emphasizing revenue use is that it has become the boulder on which carbon tax advocacy has splintered. Revenue-investment proponents like NY Renews, who tend toward the political left, want the carbon revenues applied to the “Green New Deal” elements outlined above (and shown in the graphic below) which collectively constitute what they call “the just transition” from coal, oil and gas to renewables.

An opposing revenue-neutral camp tends to be less overtly political, as exemplified by Citizens Climate Lobby, whose 60,000 national members insist on equal return of carbon “dividends” to households as a way of skirting left vs. right fights and building constituencies of support for raising the carbon tax or fee level (since the dividend checks rise at the same rate). The revenue-neutral camp also places greater trust in the ability of the carbon-price signal to motivate pervasive changes in investment, behavior, technology and societal values that will effectuate the flight from fossil fuels, whereas revenue-investors tend to disdain “market forces” and to eye carbon taxes primarily as a revenue source to pay for socially driven and governed wind, solar, weatherization, public transit and electrification.

While these categories are a gross simplification, a synthesis of sorts appeared to come into view on Pace at Monday, along these lines:

  • Taxing carbon emissions is so essential AND politically difficult that establishing a U.S. beachhead is more important than demanding a perfect version.
  • The impossibility of enacting a carbon tax at the federal level till at least 2021 leaves states as the locus for that beachhead for several years or more.
  • Several factors render revenue-neutrality less imperative in state than federal carbon-taxing:
    • The lower tax rates in most state proposals imply lesser need to dedicate revenues to dividends or other income-support;
    • Greater political and cultural cohesion within states allows tailoring carbon-revenue investment to be more politically palatable;
    • Greater role of coalition politics makes some revenue investment necessary to pass state legislation.

While it’s possible or even likely that initial state carbon taxes that are heavy on revenue investment might repel red-state members of Congress as “Christmas-tree” packages, that specter seems less salient than the need to get some carbon-tax boots on the ground — not to mention the need to overturn the G.O.P. majorities and shrink climate-denialist representation in Congress, period.

NY Renews’ proposed state carbon tax allocations.

These bullet points sharpen somewhat the long-established position of the Carbon Tax Center to support virtually any carbon tax formulation that doesn’t demonstrably worsen economic inequality. Still problematic for CTC, however, is the insistence of many revenue-investment adherents that their Just Transition include substantial allocations — as much as one-third, in the NY Renews proposal — to offset and remediate disproportionate fossil-fuel impacts on front-line communities.

Our position, which co-panelist Michael Gerrard also voiced, is that the fastest and surest way to reduce and eliminate those environmental injustices is to enact and ramp up the highest carbon tax that’s politically imaginable. Both Michael and CTC premise this on our conviction that the price signal itself is the salient policy tool within the carbon tax, and that a robust carbon charge will create powerful and ultimately irresistible incentives to reduce and eliminate fossil fuel use — and, thus, emissions and other impacts — across-the-board, not just in selected (wealthy and white) communities. It follows, then, that all communities, including but not limited to environmental-justice communities, will be better protected from both climate damage and “traditional” environmental insults if carbon tax proposals are free from what some lawmakers may consider special dispensations and can be legislated as high as possible.

We at CTC took a first stab at articulating this position in a 2016 blog post. We hope to elaborate on it soon and to elicit responses from NY Renews and other climate activists who carry the environmental-justice carbon-tax banner.