What Is The Best Approach To Putting A Price On Carbon Emissions In The US?

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Forward by Kurt Lowder

My friend and mentor, Bill Hurly, now retired, has found a fulfilling mission in fighting for climate change. He has been heavily involved with Citizens’ Climate Lobby (CCL) in San Antonio, Texas. I have attended a number of his presentations on the topic of climate change and what the CCL is recommending and asked him to summarize the carbon pricing mechanisms being put forward.

A few years back, Bill and I marched with 350.org and many others into the Texas State Capital building to fight for climate change action. The experience really increased our environmental advocacy. Apart from making a public display covered by media and heard by politicians, the experience was very motivating. The power of our numbers was exhilarating and so was seeing the million plus people protesting around the globe that day.

If you have not joined an organization like 350.org or Citizens’ Climate Lobby, I encourage you to do so. Without any further ado, here is Billy Hurly’s summary of his advocacy for carbon pricing with CCL.

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In the effort to mitigate the effect greenhouse gas (GHG) emissions have on the natural balance of the world’s climate, there has been a significant divisions about how best to attack the problem. At the 30,000 foot level, one of the primary debates has centered around whether it is better to attempt to stem the tide of GHG emissions through regulations or by implementing a carbon tax.

Many say the impact to the consumer is the same either way. How much the government grows or how industry reacts in either scenario seems to be the primary difference. Of course, you could do both. To see how and if the two approaches could work well in tandem takes some understanding of the details.

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More regulations on how fossil fuel products are created and used will mean the companies involved will have to spend and/or hire more, leading to an increase in prices. That’s what a lot of industry folks have said for years and while it may not be as bad as they predict (witness innovations after the “catalytic converter” and *1), they are right. Increasing regulations will raise the cost of doing business, depending on how innovation trends pan out.

At the same time, you hear others of like mind say that these efforts are “job killers.” Beyond the obvious reaching for sound bites, and pointing out that this is what many said when we went from steam to coal, this article is not meant to address them. It’s simply for those who understand the urgency of the climate crisis.

Granted, regulations will mean the companies will pay more for their administration and the government bureaucracy will obviously grow. On the other hand, a carbon tax scheme may negatively affect companies initially because of the price increase. Implementing a carbon tax is not a problem for the government as it already touches the cost of extraction of fossil fuel sources thru long held taxes or fees. Whether existing taxes go up or down does little to impact the administrative cost.

To get where we want to go, there’s one main question: where is the bureaucracy?  One option is to leave the innovations of the “how” to the free market. There are currently about 6 proposals before congress in both the House of Representatives and the Senate. Here’s the run down of the two with the most backing:

Carbon taxes have always been perceived as a pragmatic way of achieving the goals of the Green New Deal. As of November 2019, 44 percent of Americans say they support a policy to reduce greenhouse gas emissions by taxing carbon-based fuels. Just 29 percent said they were opposed, and 25 percent were neutral.

A survey of registered voters by the Yale Program on Climate Change Communication with George Mason University discovered that 58 percent of those surveyed would favor a Republican proposal for a carbon tax if it also returned all revenue to households as a monthly rebate check.

No one would argue that Trump has created a void when it comes to climate action, and many people are working to fill that gap. This includes energy companies that are faced with 50 or more new regulations governing greenhouse gas emissions in the United States.

This is a powerful incentive for them to seek one uniform, predictable, national approach. Many oil companies, including ExxonMobil and ConocoPhillips, are backing a campaign to get their preferred version of a carbon tax implemented. Of course they are only pushing for a carbon tax in the hopes it can also protect them from future regulations and lawsuits.

Unsurprisingly, there are differences between the carbon tax proposals backed by Big Oil and the approaches backed by environmentalists. There is no doubt the carbon tax would help put the US on track to zero emissions by mid-century – which is the chief objective. But “help” is a key word here.

Experts in the space often issue warnings about the unintended consequences of a poorly designed plan noting that it could be too weak to get the job done. On the other hand, what can you get passed? If history is any guide, you should ask for the minimum first and expand the program after it has been proven successful at a smaller scale.

The two economy-wide carbon tax proposals are as follows:

• The Americans for Carbon Dividends (ACD) plan was designed by former Republican Secretaries of State James Baker and George Shultz. It is largely perceived to be the plan backed by the oil industry.
• The Energy Innovation and Carbon Dividend Act proposes new legislation backed by the grassroots environmental group, Citizens’ Climate Lobby (CCL).

Disclaimer: As noted in the introduction and in his bio at the bottom, Billy has been heavily involved with Citizens’ Climate Lobby (CCL) in San Antonio, Texas.

Let’s look at a breakdown of how the two plans stack up against each other in a few key areas.

What emissions are taxed?

ACD: CO2 only

EICDA: All fossil fuel emissions including methane.

 

How high are the proposed carbon taxes under each plan?

ACD: The plan is still being finalized, but the framework laid out by the Climate Leadership Council includes a coalition of industry and environmental groups that support the Baker-Shultz proposal. It would start a carbon tax at ~$40 per ton, increasing 2 to 5 percent per year, reaching as high as $65 per ton by 2030.

EICDA: Proposes a carbon tax starting at $15 per ton, increasing $10 per year until it reaches $115 per ton by 2030.

While the Baker-Shultz starts out with a higher price per ton, it increases less per year and ends up cheaper by $50 per ton. The CCL’s EICDA averages out to a 24 percent annual increase through 2030.

Why?

Cutting carbon emissions rapidly and deeply will be costly but necessary if the world aims to keep the global temperature increase to no more than 1.5C degrees.

Technological advances are imperative in how we think about a carbon tax. After all, no one knows how high the carbon price will have to be to meet our targets. Perhaps more importantly, no one knows what technological innovations may arise. Just the same, the objective is still to encourage investors and consumers to choose clean energy.

In a recent report on the challenge of the 1.5 degree target, the Intergovernmental Panel on Climate Change (IPCC) closely studied the economic calculations and determined that taxing would be part of the answer, but probably wouldn’t solve the problem alone. Energy efficiency standards and other similar regulations are also needed. “There is no silver bullet for this deep decarbonization,” the report said. But there is silver buckshot.

How much regulatory rollback?

ACD: Streamlining regulations and curbing state authority over climate policy are among the goals of this industry-backed plan. Its managing director, Ryan Costello, says the group has not yet decided on how broad of a regulatory rollback it would seek. Exxon, in backing the proposal, said existing carbon regulations would be made “superfluous” by a carbon tax.

EICDA: This bill would eliminate the need for the Environmental Protection Agency to regulate greenhouse gas emissions under the Clean Air Act because it’s being duplicated, in effect.

But after 10 years, If national climate goals remain unmet at that point, the EPA’s authority would be restored. The bill would leave in place limits on emissions from vehicles, including California’s more stringent emission standards. It also explains that it will not override other state laws or regulations (of which there are many.)

Why?

A rollback of the EPA’s authority to regulate greenhouse gases means stopping the dormant Clean Power Plan, but economists agree that either of the carbon tax plans would drive down the use of coal for electricity anyway.

Some think that we should be adding tools to the tool box of laws and policies. The result could be a watered down token carbon tax that in turn, guts all of the existing regulations. Then again, eliminating some regulations would likely be the key to gaining Republican and industry support for a carbon tax. We must work to ensure the perfect does not become the enemy of the possible. At least, not yet.

Who gets all the cash?

Both the ACD and the EICDA would return all of the tax revenue to citizens of America households in the form of rebate checks. For most, the rebates would be greater than the increased costs they would pay for fuel.

The ACD proposes to pay quarterly while the EICDA plan will pay at the start of each month.

Why?

Washington state recently rejected a carbon tax that would have spent the revenue on clean energy adaptation. In France, massive protests forced President Emmanuel Macron to back away from a fuel tax that would have used all the revenue to reduce the national budget deficit.

So where the money goes is an important issue with the public. What will win? A recent Yale-GMU survey found that 63 percent of Trump supporters favor a carbon dividend more strongly than any other political grouping. There’s a good argument that this energy transition and the kind of strong government action the IPCC said is needed has the support it needs to move forward.

If you have any questions or comments please leave them below or email Bill directly billhurley33@gmail.com. As always, such responses often lead to future articles.

Bill Hurley’s Bio

Bill Hurley retired in 2017 after 40+ years as a computer programmer. His passion has always been the environment and most recently, the climate crisis. He co-leads Citizens’ Climate Lobby of San Antonio and has served on the boards of many local environmental groups in the past.

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