Search Results for: introduction

No U.S. state has a carbon tax. This fall, carbon tax proponents in the state of Washington are seeking to break through with Initiative-1631, a state tax on carbon emissions, which you can read about here. For a deep dive into the factors that defeated Washington’s 2016 carbon-tax ballot initiative I-732, click here.

Washington and 7 other states (including Washington DC, which we refer to here as a state) were deemed “promising” arenas for enacting state carbon taxes, in a comprehensive 2017 report by the Carbon Tax Center.

Another page, The Other 49 States, looks at state carbon tax organizing in a half-dozen other states.

CTC Report Ranks the States on Carbon Tax Potential

The report was written by Yoram Bauman, who spearheaded a Washington state carbon tax effort in 2016, and Carbon Tax Center director Charles Komanoff. It classifies the 51 states into five categories of carbon tax readiness ranging from “promising” to “very challenging.” (See map.)

As the map shows, the eight most promising states are Connecticut, Hawaii, Illinois, Maryland, Massachusetts, New York, Washington and the District of Columbia. (Follow these links for historical perspective and other information on Massachusetts, New York, and Washington that isn’t in the report.) We rate another 17 states as having “potential” for enacting state carbon taxes, with some having relatively clear paths while others appear to face legal or ideological constraints. (Follow these links for additional information on Oregon, Rhode Island, Vermont, and—as a bonus—the city of Boulder, Colorado.)

The rankings are just one aspect of the report. Each state gets an overview, a brief analysis of CO2 emissions, summaries of local climate impacts and current climate policies, a sketch of carbon pricing activism, a brief look at climate ideology and politics, recent polling results, and, where applicable, a summary of ballot measures and proposed legislation.

The report is comprehensive in its coverage but concise in each state’s analysis and ranking. It clocks in at 120 pages but it’s well worth perusing for info on your state and how it stacks up with others. Click here (2 MB pdf) to download. (A higher-res pdf is also available, click here (14 MB).)

Further below is extensive coverage of the Washington state I-732 campaign and its aftermath, along with info on carbon tax organizing in five other states as well as Boulder, CO’s carbon tax on electricity generation. Click on those links and read our introduction for context.

Also see our August 2016 post reporting on the new Brookings Institution report, State-Level Carbon Taxes: Options And Opportunities For Policymakers. It’s essential reading for people seeking to advance carbon taxes at the state level and anyone who wants to understand the nuts and bolts of designing and implementing actual carbon taxes.

State Carbon Taxes: Overview

“It is one of the happy incidents of the federal system that a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.” — Justice Louis D. Brandeis (New State Ice Co. v. Liebmann, dissenting opinion, 1932)

This page covers organizing campaigns for U.S. carbon taxing at the state level, with sections on Washington State, Oregon, New York, Massachusetts, Rhode Island and Vermont.

With a national carbon tax blocked by the denialist Republican majority in Congress and a carbon-besotted White House, a growing number of climate advocates are heeding Justice Brandeis’s advice and are organizing at the state level. “Retail” politics, it is thought, might assuage concerns over outside-the-box ideas like carbon taxing, perhaps as occurred in the successful push for marriage equality (the right to same-sex marriage) which began and spread as state-level campaigns.

Moreover, progressive and popular options for distributing carbon tax revenues can be made more tangible at the state level than the federal. This point was underscored by a Jan. 2015 study by the Institute for Taxation and Economic Policy ranking the 50 states on their tax incidence that established that states are more regressive taxers than the federal government. In particular, sales taxes could be swapped out for carbon taxes, as advocates in Washington State proposed in their I-732 ballot initiative in 2016 (full discussion further below).

Not all states are riven by ideological resistance. While America’s geographical diversity can impede national unity, it has left some states less beholden to fossil fuel interests. Naturally, advocates are focusing on those states. (In March 2016, Resources for the Future posted two superb summaries of proposals in six states to adopt carbon taxes; the first focused on the tax rates (see graphic below), while the second addressed revenue treatment and household “incidence.”)

States have also pushed the envelope on issues like minimum wage and fuel-efficiency standards, moving the national discussion as they did so. In a 2016 op-ed in the New York Times, Georgetown University law professor David Cole ascribed the National Rifle Association’s success at strangling national gun-control regulations to a decades-long campaign that changed state constitutions and laws to protect the right to possess and carry guns. Less far afield is the fact that gasoline taxes first took root in a handful of Western states to fund road construction, before spreading to the rest of the country. State carbon taxes could, it is hoped, create a similar template leading eventually to federal enactment.

The EPA Clean Power Plan may have provided an opening for state carbon taxes through a provision allowing states to submit projected emission reductions from carbon taxes applied to power generation (unfortunately, reductions from carbon-taxing non-electric sectors such as transportation would not receive credit). A June 2015 report from the Niskanen Center concluded that even small state carbon taxes could effectuate the required emissions reductions in most cases, mirroring our own modeling results on the national level.

Still, state carbon taxing raises issues that don’t apply to a federal tax. State policy makers and advocates need to address these concerns:

• Competitiveness: It would be hard for any one state to push its carbon tax too high, due to concerns over competitive advantage and inter-state “leakage” (e.g. driving out-of-state to fill up with untaxed gasoline).

Yet using some carbon tax revenues to reduce business taxes (as was proposed in Washington State) may soften concerns over economic impact. The cross-border issue may be less salient in larger Western states than in smaller East Coast states.

Jeff Renfro, a key member of a team at Northwest Economic Research Center that modeled a possible Oregon carbon tax, said:

We tried [in our modeling] to wreck the economy. We modeled a big tax – $100 a ton – with a relatively short phase-in period, and we assumed the government put the revenues toward non-productive reserves. Even in that scenario, we were surprised by how small the effects on employment were relative to the overall economy. (Interview with CTC researcher Matt Gordon, July 10, 2015)

• Efficiency: Energy policy is largely determined at the federal level. Administrative costs could be disproportionately higher for state taxes, due to greater cross-border movements of electricity and fuels among states than between the U.S. and other nations. In some states, utility sector regulation may complicate efforts to tax fossil fuels sufficiently upstream.

Many states already have taxes on gas and electricity, however, and it shouldn’t be difficult to piggyback a carbon tax on those taxes without significantly increasing administrative burdens. British Columbia’s carbon tax program uses this technique, and reports the administrative burden as negligible.

• Coverage: Only a national carbon tax will enable the U.S. to impose Border Adjustment Taxes to induce China and other countries to adopt their own taxes, which is a key benefit of pursuing carbon taxing. States cannot pursue a similar strategy without violating the commerce clause of the Constitution.

Although states may not tax imported goods, that prohibition shouldn’t be construed to mean they can’t tax imported electricity or fossil fuels that are then used within the state. In fact, some advocates see this as an opportunity for economic development; carbon-taxing out-of-state fossil-based electricity and fuels could stimulate growth in local renewables and energy-efficiency industries.

• Local Policy: Every state has idiosyncracies. In Oregon, the constitution mandates that all revenues from taxing gasoline must be deposited in the Highway Trust Fund. In Washington, state law precluded carbon tax revenues from being used for dividends to the public. Yet this patchwork of state policies may be a motivating factor in driving a national policy. The complications of doing business in jurisdictions with varying policies have even driven some oil companies to demand more unified action on climate change.

That said, the 2016 elections further cemented the Denier (Republican) Party’s hold on state governments, as the New York Times graphic below illustrates.

On the other hand, red states tend to be fossil fuel-dominated states already out of reach of state carbon-tax campaigns. Two states with past or present carbon tax organizing, WA and OR, have Democratic governors and legislatures. Two others, NY and CO, have Democratic governors but divided or uncertain legislatures. Massachusetts and Vermont have Democratic legislatures but Republican governors.

No U.S. state has a carbon tax. An attempt to break through with a tax on carbon emissions in the state of Washington was defeated at the ballot in Nov. 2016, as we recount below. Nevertheless, Washington and 7 other states (including Washington DC, which for linguistic simplicity we are calling a state) are considered “promising” arenas for enacting state carbon taxes, in a comprehensive 2017 report by the Carbon Tax Center.

This page is sprawling, reflecting the intensity and breadth of state carbon tax organizing. These links can help you navigate:

• CTC report on state carbon tax potential
• Introduction to state carbon taxing
• The 2016 Washington state carbon tax referendum: what happened
• Carbon tax organizing in Oregon
• Carbon tax organizing in New York State
• Carbon tax organizing in Massachusetts
• Carbon tax organizing in Rhode Island
• Carbon tax organizing in Vermont

Also of interest: Minnesota state auditor Rebecca Otto has promised that her ambitious proposal for a revenue-neutral carbon fee will be a big issue in the 2018 campaign to succeed Mark Dayton as governor in 2018. Read our post, Minnesota state auditor stakes campaign for governor on carbon dividend.

CTC Report Ranks the States on Carbon Tax Potential

The report was written by Yoram Bauman, who spearheaded the Washington state carbon tax effort, and Carbon Tax Center director Charles Komanoff. It classifies the 51 states into five categories of carbon tax readiness ranging from “promising” to “very challenging.” (See map.)

As the map shows, the eight most promising states are Connecticut, Hawaii, Illinois, Maryland, Massachusetts, New York, Washington and the District of Columbia. (Follow these links for historical perspective and other information on Massachusetts, New York, and Washington that isn’t in our new report.) We rate another 17 states as having “potential” for enacting state carbon taxes, with some having relatively clear paths while others appear to face legal or ideological constraints. (Follow these links for additional information on Oregon, Rhode Island, Vermont, and—as a bonus—the city of Boulder, Colorado.)

The rankings are just one aspect of the report. Each state gets an overview, a brief analysis of CO2 emissions, summaries of local climate impacts and current climate policies, a sketch of carbon pricing activism, a brief look at climate ideology and politics, recent polling results, and, where applicable, a summary of ballot measures and proposed legislation.

The report is comprehensive in its coverage but concise in each state’s analysis and ranking. It clocks in at 120 pages, making it huge (a 14 MB pdf), but it’s well worth perusing for info on your state and how it stacks up with others. Click here to download. (A reduced-size pdf under 2 MB is available for those with slower connections, click here.)

Further below is extensive coverage of the Washington state I-732 campaign and its aftermath, along with info on carbon tax organizing in five other states as well as Boulder, CO’s carbon tax on electricity generation. Click on those links and read our introduction for context.

Also see our August 2016 post reporting on the new Brookings Institution report, State-Level Carbon Taxes: Options And Opportunities For Policymakers. It’s essential reading for people seeking to advance carbon taxes at the state level and anyone who wants to understand the nuts and bolts of designing and implementing actual carbon taxes.

State Carbon Taxes: An Introduction

“It is one of the happy incidents of the federal system that a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.” — Justice Louis D. Brandeis (New State Ice Co. v. Liebmann, dissenting opinion, 1932)

This page covers organizing campaigns for U.S. carbon taxing at the state level, with sections on Washington State, Oregon, New York, Massachusetts, Rhode Island and Vermont.

With a national carbon tax blocked by the denialist Republican majority in Congress and a carbon-besotted White House, a growing number of climate advocates are heeding Justice Brandeis’s advice and are organizing at the state level. “Retail” politics, it is thought, might assuage concerns over outside-the-box ideas like carbon taxing, perhaps as occurred in the successful push for marriage equality (the right to same-sex marriage) which began and spread as state-level campaigns.

Moreover, progressive and popular options for distributing carbon tax revenues can be made more tangible at the state level than the federal. This point was underscored by a Jan. 2015 study by the Institute for Taxation and Economic Policy ranking the 50 states on their tax incidence that established that states are more regressive taxers than the federal government. In particular, sales taxes could be swapped out for carbon taxes, as advocates in Washington State proposed in their I-732 ballot initiative in 2016 (full discussion further below).

Not all states are riven by ideological resistance. While America’s geographical diversity can impede national unity, it has left some states less beholden to fossil fuel interests. Naturally, advocates are focusing on those states. (In March 2016, Resources for the Future posted two superb summaries of proposals in six states to adopt carbon taxes; the first focused on the tax rates (see graphic below), while the second addressed revenue treatment and household “incidence.”)

States have also pushed the envelope on issues like minimum wage and fuel-efficiency standards, moving the national discussion as they did so. In a 2016 op-ed in the New York Times, Georgetown University law professor David Cole ascribed the National Rifle Association’s success at strangling national gun-control regulations to a decades-long campaign that changed state constitutions and laws to protect the right to possess and carry guns. Less far afield is the fact that gasoline taxes first took root in a handful of Western states to fund road construction, before spreading to the rest of the country. State carbon taxes could, it is hoped, create a similar template leading eventually to federal enactment.

The EPA Clean Power Plan may have provided an opening for state carbon taxes through a provision allowing states to submit projected emission reductions from carbon taxes applied to power generation (unfortunately, reductions from carbon-taxing non-electric sectors such as transportation would not receive credit). A June 2015 report from the Niskanen Center concluded that even small state carbon taxes could effectuate the required emissions reductions in most cases, mirroring our own modeling results on the national level.

Still, state carbon taxing raises issues that don’t apply to a federal tax. State policy makers and advocates need to address these concerns:

• Competitiveness: It would be hard for any one state to push its carbon tax too high, due to concerns over competitive advantage and inter-state “leakage” (e.g. driving out-of-state to fill up with untaxed gasoline).

Yet using some carbon tax revenues to reduce business taxes (as was proposed in Washington State) may soften concerns over economic impact. The cross-border issue may be less salient in larger Western states than in smaller East Coast states.

Jeff Renfro, a key member of a team at Northwest Economic Research Center that modeled a possible Oregon carbon tax, said:

We tried [in our modeling] to wreck the economy. We modeled a big tax – $100 a ton – with a relatively short phase-in period, and we assumed the government put the revenues toward non-productive reserves. Even in that scenario, we were surprised by how small the effects on employment were relative to the overall economy. (Interview with CTC researcher Matt Gordon, July 10, 2015)

• Efficiency: Energy policy is largely determined at the federal level. Administrative costs could be disproportionately higher for state taxes, due to greater cross-border movements of electricity and fuels among states than between the U.S. and other nations. In some states, utility sector regulation may complicate efforts to tax fossil fuels sufficiently upstream.

Many states already have taxes on gas and electricity, however, and it shouldn’t be difficult to piggyback a carbon tax on those taxes without significantly increasing administrative burdens. British Columbia’s carbon tax program uses this technique, and reports the administrative burden as negligible.

• Coverage: Only a national carbon tax will enable the U.S. to impose Border Adjustment Taxes to induce China and other countries to adopt their own taxes, which is a key benefit of pursuing carbon taxing. States cannot pursue a similar strategy without violating the commerce clause of the Constitution.

Although states may not tax imported goods, that prohibition shouldn’t be construed to mean they can’t tax imported electricity or fossil fuels that are then used within the state. In fact, some advocates see this as an opportunity for economic development; carbon-taxing out-of-state fossil-based electricity and fuels could stimulate growth in local renewables and energy-efficiency industries.

• Local Policy: Every state has idiosyncracies. In Oregon, the constitution mandates that all revenues from taxing gasoline must be deposited in the Highway Trust Fund. In Washington, state law precluded carbon tax revenues from being used for dividends to the public. Yet this patchwork of state policies may be a motivating factor in driving a national policy. The complications of doing business in jurisdictions with varying policies have even driven some oil companies to demand more unified action on climate change.

That said, the 2016 elections further cemented the Denier (Republican) Party’s hold on state governments, as the New York Times graphic below illustrates.

On the other hand, red states tend to be fossil fuel-dominated states already out of reach of state carbon-tax campaigns. Two states with past or present carbon tax organizing, WA and OR, have Democratic governors and legislatures. Two others, NY and CO, have Democratic governors but divided or uncertain legislatures. Massachusetts and Vermont have Democratic legislatures but Republican governors.

The 2016 Washington state carbon tax referendum: what happened

In 2015, grassroots advocates in Washington crafted a carbon tax ballot measure that, they hoped, would make theirs the first U.S. state with a carbon tax. Their Initiative 732 would have established a comprehensive statewide carbon tax reaching $25 per metric ton of CO2 in 2018 and rising thereafter at 3.5% faster than the general inflation rate. The initiative was decisively defeated, however, by a vote of 59% to 41%. We discuss I-732 and the divisiveness it spawned, directly below.

Five weeks after that vote, Washington Gov. Jay Inslee proposed a carbon tax whose level — starting in May 2018 at $25 per metric ton of CO2 and increasing thereafter at 3.5% a year faster than inflation — would be identical to that in I-732. The Seattle Times first reported the proposal, which is a key part of the governor’s fiscal plan, on Dec. 13. Inslee’s office has issued an informative 3-page policy brief outlining the intended uses of the carbon tax revenues; unlike I-732, which was designed to be nearly 100 percent revenue-neutral, the governor’s proposal, which requires legislative approval, is intended to patch big holes in the state budget. We hope to report on the progress of Gov. Inslee’s proposal shortly.

On Nov. 12 Carbon Washington, the grassroots advocacy group that gathered 360,000 signatures to put Measure I-732 on the November ballot, and then fought for its passage with a high-energy organizing campaign, issued a statement, Carbon tax friends, be proud of what we’ve accomplished. Here’s the opening paragraph:

Together, we accomplished something historic by putting the nation’s first statewide carbon tax before the voters. We showed that there is a strong desire for common-sense climate action in Washington State, and we influenced the national conversation on climate policy. We ran an honest, transparent, and positive campaign focused on addressing the climate and equity problems facing our society. We did all of that thanks to you.

CarbonWA says it is thinking through next steps and want[s] to hear supporters’ “thoughts on the election and where this movement that you helped build should go next.” The group invites feedback via email. Their terrific Web site, Yes on 732, is still up.

As of Nov. 13, Washington’s Secretary of State was reporting 1,571,080 No votes vs. 1,091,626 Yes, a nearly 3-to-2 margin. Only King County, the state’s largest, which includes Seattle, voted majority Yes; all other 38 counties voted No to Measure 732.

In the aftermath of the election, the Alliance for Jobs and Clean Energy — the Washington confederation that became the locus of “green” opposition to I-732 — posted a five-page draft clean energy plan intended to fulfill its commitment to fashion an alternative policy to Carbon WA’s revenue-neutral carbon tax. The plan’s carbon tax, just $15 per ton of CO2 and with no increase beyond inflation unless as-yet-unspecified reduction targets are met, would be around half of the tax level specified in I-732; most emission reductions would come from investments in efficiency and renewables outlined but not specified in the draft. Alliance leaders pledged to push their plan to the legislature and vowed to put it on the ballot in 2017, if necessary, the Seattle Times reported on Nov. 12.

Top reads on the ballot battle (newest listed first):

The I-732 referendum received intense national as well as local coverage in the run-up to the election, in part because the split over the measure within the green movement made for a compelling (and disturbing story).

The best post-mortem we’ve seen is Marianne Lavelle’s Nov 9 story, Washington State Voters Reject Nation’s First Carbon Tax, for Inside Climate News. It’s an excellent overview of the competing perspectives of I-732 proponents and opponents (state purview vs. national, social-justice vs. economic, etc.) and has quotes from Washington social-justice advocates (who opposed the measure) and climate luminary James Hansen and CTC director Charles Komanoff, who supported it. Here, for example, is a quote from KC Golden, senior adviser to the Washington State nonprofit Climate Solutions:”

The people who came up with the idea of ‘revenue-neutral’ did it for a good reason, to defuse the partisan bomb that keeps us from getting everywhere on climate. But we can’t find any political ‘there’ there. To tell labor and communities of color, ‘We’re going to change the incentives and benefits are going to flow’ sounds…a lot like ‘trickle-down’ economics. They justifiably don’t trust that story.”

Draw your own conclusions.

Here are half-a-dozen other (pre-election) articles:

• The left’s opposition to a carbon tax shows there’s something deeply wrong with the left, (Washington Post editorial, Oct 27). Strongly supported I-732 and decried left-greens’ stance that “softening the blow for the poor and middle class is not enough; the government must divert the revenue according to the wishes of specific interest groups.”
• Opposition to Washington’s historic carbon tax initiative is coming from the unlikeliest of sources (Natasha Gelling in Think Progress, Oct 6). Sophisticated and concise examination of the green split over I-732.
  
• Initiative 732: A ‘Carbon Tax Swap’ To Address Climate Change (Seattle NPR affiliate KNKX-FM, Oct 3). Excellent account of both sides’ views on I-732.
  
• The environmental groups killing a carbon tax (“The Hill,” Sept 22). Professor of law and economics Shi-Ling Hsu — a signatory to CTC’s Paris letter last fall — dissected the opposition to I-732 from sectarian green groups.
• Tax carbon polluters, not working families  (“Crosscut,” Sept 20). Three veteran organizers explained why the I-732 carbon tax will be just as well as efficient.
• Washington Carbon Tax Ballot Initiative Picks Up Biggest Corroboration Yet (CTC blog, Aug 5). Our quick guide to Sightline Institute’s in-depth analyses backing Carbon-WA’s claims for Measure 732 demonstrating that the carbon tax will be revenue-neutral, income-progressive and climate-effective.
• There’s a cheap, proven fix to the world’s biggest problem (CNN, April 19). Political writer John Sutter interviewed Carbon-WA founder Yoram Bauman and explained why a victory for Yes on 732 could be key to unlocking carbon taxing in the U.S.
  

Our blog posts on I-732 (newest listed first):

The Carbon Tax Center strongly supported Carbon WA’s initiative and organizing campaign. Our blog posts during the few weeks before the election responded vigorously to attacks on Initiative 732. Earlier-dated posts mostly involved straight reportage about the merits of the initiative and the campaign to pass it.

• Naomi Klein Is Wrong On The Policy That Could Change Everything, Nov. 7, 2016. The policy that could do the most to start changing everything is on the ballot in Washington state, but somehow it’s not quite good enough for the author of “This Changes Everything.”
• To The Left-Green Opponents of I-732: How Does It Feel?, Nov. 4, 2016. The Koch brothers just gave $50K to the “No On 732” forces. If you’re on the left, it’s time to ask yourselves, in Bob Dylan’s words, “Are you having a good time?”
• Fighting in the Trenches Doesn’t Excuse Ignorance on Carbon Taxes, Oct. 28, 2016. We skewer criticisms of I-732 from the advocacy group Food & Water Watch, including their nonsensical claim that “carbon taxes help fossil fuel companies, not the environment.”
  
• Washington State’s I-732: A Climate Measure for the Society We Have, Oct. 18, 2016. Invokes mid-century humanist radical Paul Goodman to critique “old-guard” green-establishment’s stance opposing Carbon Washington’s ballot initiative.
• The Political Meltdown That Could Save The Climate, Oct. 8, 2016. Why the GOP-Trump electoral meltdown opens a path for I-732 to become the template for a U.S. carbon tax.
• Carbon Tax Can Be a Remedy for Toxic Hot Spots (Sept. 13, 2016). Rebuts notion — left over from the 2009 Waxman-Markey bill built around cap-and-trade with offsets — that a carbon tax could perpetuate or exacerbate tosic “hot spots” in communities of color.
• Washington Carbon Tax Ballot Initiative Picks Up Biggest Corroboration Yet, Aug. 5, 2016. Reports on masterly rebuttal to WA state government’s objections to I-732, from Pacific NW think tank extraordinaire Sightline Institute.
• Feeling The Heat: A Carbon Tax Gains Grassroots Momentum in Washington State, July 16, 2015. CTC’s Matt Gordon captures the on-the-ground energy of Carbon WA’s petition-gathering for Initiative 732.

I-732 history and details (This pre-Nov 2016) content has not been updated.)

The Evergreen State is blessed with abundant natural beauty — Mt. Rainier, the North Cascades, Puget Sound, the Olympic Peninsula and the Columbia River basin and gorge — with an outdoor culture to match. It was also wracked by drought and forest fires in 2015. In that year, carbon tax advocates under the banner of Carbon Washington began organizing for a ballot initiative mandating a state carbon tax. Measure I-732 would have taxed carbon emissions at an initial rate of $15 per ton of CO2, rising the following year to $25 per ton, and then increasing annually by 3.5% more than the inflation rate.

The tax, gracefully summarized last year by the Christian Science Monitor, would have used the expected $1.7 billion in annual revenue to overhaul Washington’s unusually regressive tax code. Most of the money was earmarked to lower the state sales tax from 6.5% to 5.5%. (While the state sales tax is 6.5%, the average combined local-state sales tax rate is 8.89%, the fifth highest in the country.) The annual increases in the carbon tax would have offset the rising value of the sales tax reduction, ensuring the measure stayed revenue-neutral. Another $200 million a year would have funded the state Working Families Rebate – an extension of the federal Earned Income Tax Credit. The Working Families Rebate was created in 2008 but never funded, and revenue from the carbon tax could have assisted 400,000 low-income working families. These two pieces made I-732 the state’s most progressive tax initiative since groceries were exempted from sales taxes in 1977. The remaining funds would have enabled the state to eliminate the business and occupation tax on manufacturing — a feature designed to win business support.

CTC researcher Matt Gordon visited Washington in June 2015 and met with ballot organizers there. He wrote a blog for us about Measure I-732 last July and another in August about backbiting against Measure I-732 by some veteran state environmental advocates. (The surprising opposition to I-732 was criticized by leading right-of-center economist Greg Mankiw in a New York Times opinion piece in early September, 2015, backing the measure.) Despite the opposition, Carbon Washington collected 360,000 petition signatures — over 100,000 more than the 246,000 required to put Measure I-732 on the November, 2016 ballot for a statewide up-or-down vote.

Keibun Mori, a former economist with the Washington State Energy Office, developed a carbon-tax spreadsheet model to predict revenue generation and CO2 reductions for the state from a carbon tax. Keibun’s model used an elasticity-based approach (as does CTC’s national carbon-tax model), and was used to estimate greenhouse-gas emission reductions for the Oregon study noted above.

The Carbon Washington website has clear and compelling information, arguments and graphics for Measure I-732, including lead organizer Yoram Bauman’s clarion defense of the measure’s provisions to ensure social and economic justice. Yoram’s New Year’s 2016 update was stirring and informative as well. Sign up with Carbon-WA to stay connected and donate.

Carbon tax organizing in Oregon

The Beaver State is the locus of the most detailed examination of a carbon tax for any U.S. state to date.  Oregon’s legislature allocated $200,000 to study the effects of a state-wide carbon tax. The result was Carbon Tax and Shift: How to Make it Work for Oregon’s Economy, by economists at Portland State University’s Northwest Economic Research Center, and released in March 2013. The clearly written and gorgeously designed 36-page report examined a tax based on British Columbia’s carbon tax.

Like BC’s, the carbon tax examined for Oregon would be (largely) revenue-neutral: one scenario applied 70% of the tax revenues to cut corporate taxes, 20% to cut personal income taxes, and 10% to reinvest in industrial energy efficiency programs. The other scenario apportioned 50% of the revenues to cut corporate taxes, 25% to cut personal income taxes, and 25% for industrial and residential energy efficiency and transportation infrastructure.

The Oregon tax, starting at $10/ton of CO2 and rising by $10 per year to $60/ton, or roughly twice the level of BC’s tax, would, by 2025, reduce the state’s greenhouse gas emissions by 12-13% below baseline projections and generate over $2 billion a year in revenue, according to the report. The carbon tax outlined in the study became the basis of HB 3252, a bill aimed at establishing a state-wide carbon tax. The grassroots movement to advance the tax was led by Oregon Climate, which spread awareness via canvassing, tabling and lobbying. Oregon Climate also sought to bridge art with climate advocacy, culminating in “Salmon at the Redd,” a community project in which residents created tiles for a mosaic illustrating what they loved about their state.

Unfortunately, the carbon tax campaign was effectively pre-empted by Senate Bill 1547, which in 2016 established a Renewable Portfolio Standard mandating that Oregon utilities ramp up wind and solar facilities to supplement the state’s considerable hydro-electric supplies. Oregon Climate has shifted its focus to a national effort to help other localities advocate for carbon pricing.

Carbon tax organizing in New York

New York should be a strong venue for pursuing a state carbon tax. In October 2012, Superstorm Sandy made a climate-change believer of Gov. Andrew Cuomo. who declared, “[C]limate change is a reality, extreme weather is a reality, it is a reality that we are vulnerable,” after the tidal surge from the storm inundated coastal communities and brought unprecedented devastation to hundreds of miles of shoreline. Moreover, not just coastal residents but upstate citizens politicized by fracking have rallied around the Jacobson-Delucchi “100% Wind, Water and Sunlight” global scenario for NY State, as Jacobson and co-authors propounded in their compelling journal article in Energy Policy.

Two Carbon Tax Center officers — director Charles Komanoff and board chair Alex Matthiessen — outlined the rationale for and distributional impacts of a potential $20/ton (of CO2) NY State carbon tax in a 2013 op-ed for the Huffington Post (cross-posted here). Our draft brief envisions applying the lion’s share of carbon tax revenues to reduce the statewide sales tax rate by a full percentage point — paralleling the sales tax cut in Carbon Washington’s Measure I-732, discussed above. “Leftover” revenues could help fortify the state’s infrastructure to withstand future storms and/or expedite and incentivize homeowners’ and business owners’ installation of photovoltaic electricity generating capacity. Comments on this concise (6-page) draft document are welcome

A NY State carbon tax bill with a more aggressive design was introduced in Sept. 2015 by two Democratic legislators, Assemblyman Kevin Cahill of Dutchess County and Sen. Kevin Parker of Brooklyn. Their bill, A8372 Cahil / S6037 Parker, starts taxing CO2 emissions from coal, oil, natural gas and biofuels at $35 per ton and increases the rate annually by $15/ton, to a ceiling of $185 per ton. The bill proposes returning 60% of revenues to low- and moderate-income households, with the remaining funds used to prepare for climate change, invest in renewable energy, and build transportation infrastructure.

Environmental advocates from around New York State including CTC director Charles Komanoff met at the SUNY New Paltz campus in September, 2015 to discuss climate campaigning and carbon tax organizing. One of the participants, New York League of Conservation Voters Member Andrew Ratzkin, previously outlined the case for a NY State carbon tax in this compelling op-ed in Crain’s New York Business, in July, 2015. In mid-2016 Ratzkin published a lengthy article in the Columbia Journal of Environmental Law, You Say You Want a REV Solution, critiquing the state’s “Reforming the Energy Vision” blueprint as inferior policy to a statewide carbon tax.

Carbon tax organizing in Massachusetts

The bay state’s Global Warming Solution Act of 2008 mandated a 25% reduction of CO2 emissions below 1990 levels by 2020 and an 80% reduction by 2050. Befitting its “promising” status in CTC’s report, Opportunities for Carbon Taxing at the State Level, Massachusetts is a hotbed of advocacy for a statewide comprehensive carbon tax to meet and surpass those targets.

The most politically popular bill appears to be S.1821, An Act combating climate change, sponsored by State Senator Mike Barrett (D-Lexington). Barrett’s nearly identical 2016 bill S.1747 had 47 co-sponsors, and this year he has 64, nearly one-third of the legislature,

The Barrett bill specifies an initial carbon fee of $10/ton of CO2, increasing in $5/ton annual increments to $40/ton, after which the legislature will consider increases or decreases. The bill establishes a fee-and-rebate system, with 100 percent of carbon revenues collected from fossil fuel providers returned pro rata to state residents and to employers based on the number of employees.

S.1821 will direct additional rebates to households in car-dependent areas and to energy-intensive businesses. As with the similar Citizen Climate Lobby fee-and-dividend proposals at the federal level, the rebate system is intended to be income-progressive (with low- and moderate-income households being net beneficiaries while wealthier households would be net payees) while preserving all households’ incentives to reduce fossil fuel use in order to pay less in fees.

Supporters of Barrett’s prior bill, S.1747, cited broad support from businesses including financial services, healthcare, hospitality, food services, transportation, design and technology companies touting its potential to incentivize innovation and preserve competitiveness. At an Oct. 2015 legislative hearing, Business Leaders for Climate Action released an endorsement letter backing the Barrett bill, signed by over one hundred state businesses and business leaders.

Reports by the Massachusetts Department of Energy Resources and Regional Economic Model Inc concluded that S.1747 would slash emissions while boosting employment and overall economic activity.

On the House side, State Representative Jennifer Benson (D-37th Middlesex) is sponsoring H.1726, “An Act to promote green infrastructure, reduce greenhouse gas emissions, and create jobs.” The Benson bill adheres to the Barrett bill’s carbon-fee-and-rebate model but dedicates 20 percent of revenues to fund green infrastructure directly, such as public transportation, renewable energy, energy efficiency, and protection against the expected impacts of climate change. With 80 percent of revenues applied to rebates rather than 100 percent, the Benson bill would likely have a somewhat less income-progressive outcome than the Barrett bill, though the difference would be attenuated by the green investments.

Two other energy-related bills also include carbon pricing provisions:

• Senator Marc Pacheco (D-Taunton)’s S.479, An Act relative to 2030 and 2040 emissions benchmarks, would authorize the state to “create, expand, or join market-based compliance mechanisms, including but not limited to greenhouse gas emissions trading and carbon pricing programs,” in order to achieve the greenhouse gas emissions reductions required by the Massachusetts Global Warming Solutions Act.
• Solomon Goldstein-Rose (3^rd Hampshire)’s HD.1948, An Act relative to creating energy jobs, would establish a carbon-fee-and-rebate system similar to those in the Barrett and Benson bills as part of a larger initiative to make Massachusetts “the Silicon Valley of the new energy economy.”

Analysis by the Massachusetts Department of Energy Resources suggests that carbon pricing would deliver the greatest CO2 reductions of any policy while enhancing state and local employment. Advocates are using those findings, along with the potential to cut health care costs through reduced air pollution, to convince Governor Charley Baker to support carbon pricing legislation.

In Jan. 2017, Dave Anderson of the Massachusetts-based Energy & Policy Institute posted a  provocative, well-documented piece, Under Rex Tillerson, ExxonMobil Lobbied Against Carbon Tax Bills. In his article Anderson revealed 2016 lobbying disclosures filed with the Secretary of the Commonwealth of Massachusetts indicating that a lobbyist paid by ExxonMobil opposed the revenue-neutral carbon tax bill S.1747, as well as other climate-related bills.

For more information on carbon pricing in Massachusetts, view this short video on carbon pricing by Business Leaders for Climate Action, or contact info@blcama.org.

Carbon tax organizing in Rhode Island

With its coastline-defined topography, the Ocean State is directly exposed to climate change impacts of rising sea levels, flooding and storms. Rhode Island is also home to U.S. Senator Sheldon Whitehouse, whose 100 weekly “Time to Wake Up” speeches on the Senate floor in 2013-2015 established him as Capitol Hill’s most forceful voice for climate action. The Senator’s American Opportunity Carbon Fee Act of 2014 would establish a national carbon tax.

With federal carbon pricing blocked by the GOP, a coalition of RI environmental, faith and business groups formed Energize Rhode Island in 2015 to advocate for state carbon pricing legislation. In January 2016 State Rep. Aaron Regunberg (D-Providence) introduced House Bill 7325, along with 40 co-sponsors. H7325 specifies an initial carbon fee of $15/ton of CO2, increasing in $5/ton annual increments. Seventy percent of the revenue would be refunded via per capita and per employee rebates to Rhode Island families and businesses, with 25% invested in renewable energy and efficiency programs.

The Energize Rhode Island Coalition touts a REMI study finding that H7325 will create over a thousand new jobs in the first year alone — a major economic boost for a state whose 2014 population was just 1.055 million — while emission reductions quickly reach double digits. Job growth will continue apace in subsequent years, according to the study, as Rhode Islanders save much of the nearly $4 billion a year they now spend on fossil fuel energy, all of it imported from outside the state.

Carbon tax organizing in Vermont

The conversation among policymakers in Vermont has begun to shift from whether the state should price carbon pollution to how, reports Tom Hughes of VPIRG, in Feb 2016.

The carbon-pricing campaign is led by Energy Independent Vermont, a coalition comprising the state’s top environmental organizations, the renewable-energy leaders who have made Vermont a solar powerhouse, iconic Vermont businesses like Ben & Jerry’s and Seventh Generation, the state’s low-income weatherization agencies, interfaith religious leaders, and academics at U-Vermont’s Gund Center for Ecological Economics. Non-member allies of Energy Independent Vermont include the Vermont Council on Rural Development and a CERES-supported group of industry leaders including Sugarbush Resort, Burton and King Arthur Flour.

The campaign engaged Regional Economic Models, Inc. (REMI) to conduct an analysis of a pollution tax set at $100 per metric ton of CO2, with 90% of revenues recycled as cuts to the state income tax, corporate taxes and a reduction in the sales tax, and the remaining 10% reserved for low-income weatherization and other energy-saving investments. As modeled, the tax would exempt electric generation, since that is already covered with a carbon pricing regime through RGGI, the Regional Greenhouse Gas Initiative. The REMI study concluded that over the first decade this measure would cut carbon emissions from heating and transportation by 31% while generating 2,400 new jobs, raising gross state domestic product by $100 million, and adding more than $150 million a year to real disposable personal income.

Two bills with similar tax rates and revenue treatment were introduced in the Vermont General Assembly in early 2015, according to Hughes. Energy Independent Vermont delivered 25,000 petitions in favor of carbon pricing to Vermont legislators in November 2015, he reports. In January 2016 Gov. Peter Shumlin’s administration called for the state to “investigate and pursue options for market-based greenhouse gas emission policies.” A May 26 piece by Energy Independent Vermont activist Luc Reid in the Williston (VT) Observer, The unsuspected upsides of a carbon pollution tax, did a nice job of laying out the “income progressivity” of EIV’s carbon tax proposal.

The November election win of Republican Lieutenant Governor Phil Scott to the governor’s office will set back efforts to enact a Vermont carbon tax, Seven Days political columnist Terri Hallenbeck reported in early December.

Boulder (Colorado)

The municipality implemented the United States’ first tax on carbon emissions from electricity, on April 1, 2007, at a level of approximately $7 per ton of carbon dioxide. According to the City of Boulder, the tax was costing the average household about $1.30 per month, with households that use renewable energy receiving an offsetting discount. The city expected the tax to generate about $1 million annually until its expiration in 2012, with the revenues used to fund Boulder’s climate action plan to further reduce energy use. In June 2009, the City Council voted unanimously to raise the tax level. Although the new rate was not originally specified, the expected increase in revenues, some $810,000 annually,  suggests that the increase is on the order of 80%, or perhaps $5-$6 per ton of CO2 (on top of the original $7/ton). In 2012, residents voted to continue the tax at the 2009 rate for another five years.

Other States?

Please send us (info@carbontax.org) your reports, or even just ideas, on state-level carbon taxes, so we can post them here.

(coming soon: Utah, drawing on this link and that link)

A pair of exposes in Bloomberg Green in late 2020 and 2021 revealing the sale of “meaningless carbon credits to corporate clients [by] the Nature Conservancy” highlight the fragility of offsets as a carbon-reducing policy. Click here to be directed to our discussion of the Bloomberg story, which appears at the bottom of this (long) page.

A May 2022 NYT Climate story provides a solid overview of carbon offsets’ seductive but mostly false promise, though it has its own clunker. Click here to go straight to our synopsis.

In theory, carbon offsets facilitate low-cost emissions reductions. In practice, they’ve done anything but.

Carbon “offsets,” a feature of most cap-and-trade systems, build on the uncontroversial idea of minimizing the cost to reduce emissions of carbon dioxide and other greenhouse gases. Offsets give CO2 emitters facing carbon caps a cost-minimizing choice: they can reduce their own (domestic) emissions through the usual means: investing in or incentivizing energy efficiency and use of lower-carbon fuels; or they can buy carbon offsets that pay for actions elsewhere — typically in less-developed countries — that reduce or avoid emissions, supposedly achieving the same net reduction.

Ideally, carbon offsets finance low-carbon energy projects (e.g., wind farms and solar arrays) or projects to reduce emissions from deforestation. Reflecting this duality, the United Nations Environment Programme administers two offset programs: the “Clean Development Mechanism” (CDM) and the “Reducing Emissions from Deforestation and Forest Degradation” (REDD) program.

The European Union’s Emissions Trading System, the world’s largest cap-and-trade system, covering about 45% of greenhouse gas emissions from 31 countries, utilizes both CDM and REDD offsets. Similarly, California’s AB-32 carbon cap-and-trade program, which started in 2013, includes offsets from five categories: U.S. Forest Projects,  Livestock Projects, Ozone Depleting Substances Projects, Urban Forest Projects and Mine Methane Capture. Emitters can use offsets to meet up to 8% of their compliance obligations, but since California’s cap declines 2% per year, offsets could represent a large fraction of total emissions reductions under the cap for some time.

Why, and how, offsets have proven hard to evaluate and easy to game.

Offsets were a major feature of the Waxman-Markey cap-and-trade bill that passed the House in 2009, and parallel Senate proposals in 2010. They were packaged into those bills as “cost control” measures to moderate the rise in energy price from steadily tightening the cap on CO2 emission permits. Offsets appealed to both polluters and potential recipients of offset funding, in effect providing political “grease” to smooth passage. But in 2008, a year before Waxman-Markey came to a vote, close analysis suggested that many intended offset projects wouldn’t actually result in emissions reductions. This raised concerns that a large supply of unverifiable offsets would undermine the emissions certainty claimed for cap-and-trade.

Later in 2008, the nonpartisan Government Accountability Office assessed the EU’s offset program under its Emissions Trading System. GAO found that over-allocation of allowances and offsets had resulted in “a price collapse.” As a result, Phase I of the ETS had “uncertain” effects on emissions in the capped countries while funding offsets of doubtful value, though GAO did hold out hope that reforms could make the system work.

Instead, the picture grew darker. GAO’s 2011 follow-up, “Options for Addressing Challenges to Carbon Offset Quality,” reported that in 2009, 81 million tons of offset credits — an estimated 59% of the ETS’s CDM offsets for that year — went to Chinese refrigerant factories to incinerate HFC-23, a chemical byproduct of refrigerant manufacturing whose per-pound greenhouse gas potency is 11,700 times that of CO2. According to GAO, the Chinese had constructed 19 new refrigerant manufacturing plants for the sole purpose of destroying the greenhouse gas byproduct in order to receive offset credits and the associated payments. According to estimates by Stanford professor Michael Wara, whereas installing equipment to capture and destroy HFC-23 at all of the facilities covered by the CDM would have cost just $100 million, these same projects were expected to generate $4.7 billion in CDM offset credits.

In 2011, EU officials finally acted to eliminate this perverse incentive, announcing plans to stop accepting offset credit for HFC-23. The Chinese government responded by threatening to vent HFC-23 straight to the atmosphere.

Similarly, a detailed analysis of offset projects to destroy HFC-23 and SF6 (sulfur hexaflouride) in Russia and the Ukraine published in July 2015 by the Stockholm Environmental Institute concluded:

[A]ll projects abating HFC-23 and SF₆ under the Kyoto Protocol’s Joint Implementation mechanism in Russia increased waste gas generation to unprecedented levels once they could generate credits from producing more waste gas. Our results suggest that perverse incentives can substantially undermine the environmental integrity of project-based mechanisms and that adequate regulatory oversight is crucial. (emphasis added)

Poor information creates vast opportunities for manipulation.

While the HFC-23 sagas seem almost comical and are probably the most costly and egregious example of abuse of offsets, they illustrate a problem common to offsets — asymmetric information. Purveyors of offset projects know a good deal more about their “products” than do far-away “buyers.” And unlike the highly leveraged mortgages that were sliced and repackaged into intangible derivatives that helped crash global financial markets in 2008, offsets start out as intangibles.

GAO and other analysts of carbon offset markets group these information deficiencies into three categories: Additionality, Measurement, and Verification. They also raise concerns about the permanence of sequestration projects like forests that can later be burned as fuel, relinquishing the climate benefits that were bought with offset credits.

Additionality is the issue of what would have happened if offset payments hadn’t funded the project? GAO identified many projects that got a boost from offsets, but with no clear sense as to whether they would have been built anyway without the added incentive of offset credits. Asking “What is the baseline” is inherently counterfactual, and thus untestable and unanswerable. It’s been a challenge for the UN and EU ETS to even write rules about how to review projects (which vary widely in concept, location, quality and cost), while the offset “industry” and large purveyors of offsets, particularly China, have clamored for ever more streamlined UN approvals.

A 2016 report prepared for the EU Directorate-General for Climate Action, How Additional is the Clean Development Mechanism, concluded that “the vast majority of ‘clean development’ projects [financed by carbon credits] likely fail to actually reduce emissions,” as Inside Climate News summarized in an April 2017 story. “Given the inherent shortcomings of crediting mechanisms, we recommend focusing climate mitigation efforts on forms of carbon pricing that do not rely extensively on credits,” the report said.

Measurement is the accounting problem of determining how much CO2 was avoided by this project or process or by preserving this forest. GAO found measurements of offset efficacy to be neither consistent nor transparent, even after a decade of effort by the UN.

Verification concerns the actors who check on offset projects’ completion, operation and maintenance. GAO reported that “Project developers and offset buyers may have few incentives to report information accurately or to investigate offset quality.” Everyone in the offset business — from project developers to offset sellers and buyers — wants offset values set as high as possible. GAO argues that strong, independent oversight is needed, but its report raises serious doubts about whether oversight can ever be sufficient, especially given administrative costs.

The 2011 GAO report confirmed critics’ fears that the global offset system places new hurdles in the path of energy-efficiency and other decarbonizing measures, in the form of perverse incentives under the CDM program:

[A]n offset program may create disincentives for policies that reduce emissions. For example, under an offset program that allows international projects, U.S. firms might pay for energy efficiency upgrades to coal-fired power plants in other nations. According to our previous work [GAO’s 2008 report on the EU ETS], this may create disincentives for these nations to implement their own energy efficiency standards or similar policies, since doing so would cut off the revenue stream created by the offset program.

For example, some wind and hydroelectric power projects established in China were reviewed and subsequently rejected by the CDM’s administrative board amid concerns that China intentionally lowered its wind power subsidies so that these projects would qualify for CDM funding. In addition, our review of the literature suggests that in some cases an offset program may unintentionally provide incentives for firms to maintain or increase emissions so that they may later generate offsets by decreasing them. This potential problem is illustrated by the CDM’s experience with industrial gas projects involving the waste gas HFC-23, a byproduct of refrigerant production. Because destroying HFC-23 can be worth several times the value of the refrigerant, plants may have had an incentive to increase or maintain production in order to earn offsets for destroying the resulting emissions. (emphasis added)

Acknowledging that even the best oversight and management can’t assure high offset quality, GAO suggested limiting the fraction of CO2 reductions that offsets would be permitted to provide under national cap-and-trade programs:

[T]he emissions reduction program would ensure that only a fixed percentage of the emissions permits could be affected by any problems with offset quality. All existing emissions reduction programs we reviewed use this option. In the EU ETS, regulated entities are able to use CDM credits for 12 percent of their emissions cap, on average, through 2012. In contrast, a draft Senate bill [the “American Power Act”] would have allowed a greater number of offsets into the program—approximately 42 percent of the emissions cap during the first year of the program. These percentages are based on the total emissions cap, not the required emissions reduction. As a result, such limits could mean that regulated entities could use offsets for all of their required emissions reductions, assuming a sufficient supply of offsets was available.

In other words, offsets could have overwhelmed the Waxman-Markey bill’s cap (which only declined a few percentage points each year) for decades — precisely what Prof. Wara predicted before the bill passed the House in 2009.

Proponents of AB-32, California’s cap-trade-offset program, assure us that offsets won’t overwhelm its emissions cap. Yet the intrinsic problems of offset quality will require extensive and aggressive oversight.

Conclusion

There’s no doubt that funding is needed for low-carbon energy and good forest practices in developing countries. Unfortunately, real-world experience makes offset markets a questionable funding source at best. Offsets drive down allowance prices in carbon markets, weakening incentives for decarbonization, while their uncertain quality undermines the certainty of emissions caps. A price floor, such as the $10/ton floor specified in California’s AB-32 program, can prevent a total collapse of allowance prices. Yet a simple, direct carbon tax offers an even clearer and more predictable price signals to CO2 emitters while creating far fewer opportunities for manipulation, fraud and crime.

The Nature Conservancy’s Offsets Program, Unmasked

Bloomberg Green’s Ben Elgin tore the mask off the Nature Conservancy’s offsets program with a December 2020 story documenting how the conservancy “became a dealer of meaningless carbon offsets.” Here are the opening paragraphs:

At first glance, big corporations appear to be protecting great swaths of U.S. forests in the fight against climate change.

JPMorgan Chase & Co. has paid almost $1 million to preserve forestland in eastern Pennsylvania.

Forty miles away, Walt Disney Co. has spent hundreds of thousands to keep the city of Bethlehem, Pa., from aggressively harvesting a forest that surrounds its reservoirs.

Across the state line in New York, investment giant BlackRock Inc. has paid thousands to the city of Albany to refrain from cutting trees around its reservoirs.

JPMorgan, Disney, and BlackRock tout these projects as an important mechanism for slashing their own large carbon footprints. By funding the preservation of carbon-absorbing forests, the companies say, they’re offsetting the carbon-producing impact of their global operations. But in all of those cases, the land was never threatened; the trees were already part of well-preserved forests.

Rather than dramatically change their operations — JPMorgan executives continue to jet around the globe, Disney’s cruise ships still burn oil, and BlackRock’s office buildings gobble up electricity — the corporations are working with the Nature Conservancy, the world’s largest environmental group, to employ far-fetched logic to help absolve them of their climate sins. By taking credit for saving well-protected land, these companies are reducing nowhere near the pollution that they claim.

In an April 2021 follow-up, Elgin and Bloomberg reported that the Nature Conservancy is conducting an internal review of its portfolio of carbon-offset projects, which includes more than 20 such projects on forested lands mostly in the U.S.

As both articles reported, the purchasers of offsets obtain carbon credits which they use to claim reductions in their publicly reported emissions, while the conservancy receives income from the sales. Yet the trees that are “preserved” under these arrangements are “in no danger of destruction.”

In its follow-up, Bloomberg noted that “Selling credits for well-protected trees potentially undermines the sustainability efforts of some of the world’s biggest companies. Each carbon offset is supposed to represent the reduction of one ton of planet-warming emissions that would have otherwise spewed into the atmosphere without intervention. Around the world, a wide variety of offset projects do everything from protect mangrove forests to destroy heat-trapping gases from landfills and coal mines. But offset payments channeled to already safe ecosystems don’t fundamentally change the amount of carbon dioxide in the atmosphere.” (emphasis added)

While the conservancy didn’t provide specific answers to Bloomberg’s questions, it said in a statement that it aims to meet the highest standards with its carbon projects and that its internal review will be led by scientists and a “team of experts with deep project knowledge.”

A solid though flawed look at carbon offsets by the New York Times’ climate desk

“Climate Offsets Make You Feel Good, but Do They Do Good?” was the headline of a New York Times May 18, 2022 explainer on carbon offsets. (That was the print-edition headline; the digital edition was titled “Do Airline Climate Offsets Really Work? Here’s the Good News, and the Bad.”)

The article’s subhead telegraphs its answer, “Carbon credits could eventually play an important role in fighting climate change, but right now a few dollars’ worth won’t change much.” That’s pretty much our position, though we’re somewhat less sanguine on the “eventually” part. The reasons — “additionality,” fragility and outright scams — are well summarized in the Times story. Ditto the larger problem of distraction, as Times climate reporter Maggie Astor wrote:

Part of the appeal of carbon offsets is the notion that it’s possible to meaningfully combat climate change while living our lives and structuring our society in the same way we always have. For that reason, some experts see carbon offsets as actively damaging, inasmuch as they give people cover to avoid reducing emissions at the source.

We couldn’t say it better, ourselves. Which made doubly shocking what Astor added, just two paragraphs down:

While individual activities do have environmental costs, and flying is one of the costliest, climate change is overwhelmingly driven by the actions of the fossil fuel industry.

That statement is false and unfortunate. It’s false because the main driver of climate change is demand for the energy services provided by fossil fuels — air travel, driving (these days in ever more monstrous trucks), operating supersized homes in spread-out suburbs, and so forth — and not the activities of the fossil fuel companies, whose direct emissions pale in comparison to emissions caused by using the products they manufacture and sell.

And the statement is unfortunate because it contributes to the comforting but strategically unwise choice — by now, an article of (misplaced) faith in the climate movement — to target the fossil fuel industry rather than do the hard work for carbon taxes and allied policies that go straight at the demand for fossil fuels in the first place.

This page features a selection of articles, video clips and books from a variety of perspectives making the case for taxing climate pollution.

• Articles
• Presentations, Visuals, etc
• Books

Articles

Let this be the year when we put a proper price on carbon

Lawrence Summers, who has served as Treasury Secretary, President of Harvard University and Chief Economist of the World Bank, trenchantly articulated the compelling reasons and auspicious timing for a carbon tax in an op-ed in both the Financial Times and the Washington Post (January 5, 2015). We offer some excerpts:

The case for carbon taxes has long been compelling. With the recent steep fall in oil prices and associated declines in other energy prices it is overwhelming. There is room for debate about the size of the tax and about how the proceeds should be deployed. But there should be no doubt that starting from the current zero tax rate on carbon, increased taxation would be desirable.

[T]hose who use carbon-based fuels or products do not bear all the costs of their actions. When we drive our cars, heat our homes or use fossil fuels in more indirect ways, all of us create these costs without paying for them. It follows that we overuse these fuels. While the recent decline in energy prices is a good thing in that it has, on balance, raised the incomes of Americans, it has also exacerbated the problem of energy overuse. The benefit of imposing carbon taxes is therefore enhanced.

[A] well-designed tax would be levied on the carbon content of all imports coming from countries that did not impose their own carbon levies. The United States can make the case that such a tax is compatible with World Trade Organization rules. Such an approach would have the virtue of encouraging countries who wished to avoid the U.S. tax to impose carbon taxes of their own, thereby further supporting efforts to reduce global climate change.

A U.S. carbon tax would… be a hugely important symbolic step ahead of the global climate summit in Paris late this year. It would shift the debate toward harmonized measures to raise the price of carbon use and away from the complex cap-and-trade-type systems that have proved more difficult to operate than expected in the European Union and elsewhere.

My preference would be for the funds to be split between investments in infrastructure and pro-work tax credits. An additional $50 billion a year in infrastructure spending would be a significant contribution to closing America’s investment gap in that area. The same sum devoted to pro-work tax credits could finance a huge increase in the earned-income tax credit, a meaningful reduction in the payroll tax or some combination of the two.

Progressives who are most concerned about climate change should rally to a carbon tax. Conservatives who believe in the power of markets should favor carbon taxes on market principles. And Americans who want to see their country lead on the energy and climate issues that are crucial to the world this century should want to be in the vanguard on carbon taxes. Now is the time.

Bigger, Cleaner, and More Efficient: A Carbon-Corporate Tax Swap

Donald Marron served as economic adviser to President G.W. Bush, acting director of the non-partisan Congressional Budget Office and executive director of the Joint Committee on Taxation. Marron now co-directs the Urban-Brookings Tax Policy Center. In a 2013 paper, he and Eric Toder analyzed the climate and macro-economic benefits of a carbon tax “shift” to reduce top corporate income tax rates. In the Cato Online Forum (November 2014) Marron outlined the conservative principles behind his proposal to combine effective climate policy with pro-growth economic policy:

Four recurring lessons from tax and environmental policy…

First, taxing bads is better than taxing goods. When the government levies a tax, people and businesses are less likely to do the taxed activity…

Second, putting a price on carbon is the most efficient way to reduce carbon emissions. In the absence of a national carbon price, as from a carbon tax or a cap-and-trade system, policymakers will likely continue to pursue piecemeal regulations and subsidies. Indeed, we see that today in heightened fuel economy standards and state-by-state electric power plant regulations. These regulatory efforts can reduce emissions, but at greater cost per ton than a national carbon price.

Third, the corporate income tax is especially distortionary… it discourages business investment and weakens economic growth… [T]he Organization for Economic Cooperation and Development identified corporate income taxes as having “a particularly negative impact on GDP per capita,” especially through their effect on “dynamic and innovative” businesses.

Fourth, America’s corporate income tax is especially problematic. The statutory tax rate is the highest in the world at more than 39 percent (including federal and state taxes) and the U.S. is one of only a few nations that taxes resident corporations on their worldwide income. At the same time, our corporate system includes many tax breaks that dramatically lower the effective rate some businesses really pay. This toxic mix benefits lawyers and accountants but has made the United States an unattractive place for many firms to maintain their legal residence. One symptom has been the recent increase in tax-driven inversions.

[A] carbon-corporate tax swap, paired with appropriate relief for low-income families, would make our economy bigger, cleaner, and more efficient.

A Carbon Tax Is Our Only Hope

In the edgy “Gawker” magazine (May 27, 2014), Hamilton Nolan trenchantly explained why, if we’re serious about tackling global warming, we need a stiff carbon tax to climate polluters:

Why does a pack of cigarettes cost fifteen… dollars in New York City? Because New York City uses taxes to add the future costs of smoking to the cost of smoking today. We know that smokers end up costing society a lot of money for health care years down the road; with cigarette taxes, smokers in the city pay those costs up front. The realization of the true cost of a negative behavior is quite an effective way to not only pay those costs, but also to change the behavior.

This is the basic rationale for a carbon tax. We know that carbon emissions are causing global warming, which will impose a disastrous cost on all of humanity in the years to come. So make those who emit carbon pay those costs up front, by taxing them…

There is no other tactic that will have as big an impact on carbon emissions within our 15-year window of opportunity for action. Forces that operate solely out of self interest will continue to oppose any and all sacrifices right up until the sea swallows their vacation homes. Forget them. The activists and political leaders who have genuine concern about this issue must all unite around some form of carbon tax as a solution. Fighting polluters on a piecemeal basis will not be enough. Public education campaigns will not be enough. Global warming must be made too expensive to be viable. Tax the hell out of it. It’s not unfair pricing. On the contrary, it is the only way to make carbon emissions exactly as expensive as they deserve to.

Science Is Unequivocal, Policy Is Obvious: Tax CO2 Pollution

New Yorker science writer and author of “Field Notes From a Catastrophe,” Elizabeth Kolbert linked the overwhelming climate science consensus to ith the equally robust climate economics consensus (April 14, 2014):

[T]he Intergovernmental Panel on Climate Change released its latest update on the looming crisis that is global warming. Only this time it isn’t just looming. The signs are that “both coral reef and Arctic systems are already experiencing irreversible regime shifts,” the panel noted… The I.P.C.C.’s list of potential warming-induced disasters—from ecological collapse to famine, flooding, and pestilence—reads like a riff on the ten plagues. Matching the terror is the collective shame of it. “Why should the world pay attention to this report?” the chairman of the I.P.C.C., Rajendra Pachauri, asked the day the update was released. Because “nobody on this planet is going to be untouched by the impacts of climate change.”

Economists on both sides of the political spectrum agree that the most efficient way to reduce emissions is to impose a carbon tax. “If you want less of something, every economist will tell you to do the same thing: make it more expensive,” former Mayor Michael Bloomberg observed, in a speech announcing his support for such a tax. In the United States, a carbon tax could replace other levies—for example, the payroll tax—or, alternatively, the money could be used to reduce the deficit. Within a decade, according to a recent study by the Congressional Budget Office, a relatively modest tax of twenty-five dollars per metric ton of carbon would reduce affected emissions by about ten per cent, while increasing federal revenues by a trillion dollars. If other countries failed to follow suit, the U.S. could, in effect, extend its own tax by levying it on goods imported from those countries.

All You Need to Know About British Columbia’s Carbon Tax Shift in Five Charts

Alan Durning and Yoram Bauman, of the Seattle-based Sightline Institute, graphically illustrated the economic and climate success of their northern neighbor British Columbia’s simple, revenue-neutral carbon tax (March 11, 2014):

BC’s carbon pricing system is the best in North America and probably the world. The province has finished the nitty-gritty work of drafting statutes and regulations to implement the system. Oregon and Washington could do worse than to copy them, word for word, into their tax codes, then make adjustments needed to match circumstances.

Economists Have A One-Page Solution to Climate Change

National Public Radio reporter David Kestenbaum neatly distilled why economists are virtually unanimous in concluding that well-designed carbon taxes offer a win-win for the climate and the economy that no other policy can beat (June 28, 2013):

This is why economists love a carbon tax: One change to the tax code and the entire economy shifts to reduce carbon emissions. No complicated regulations. No rules for what kind of gas mileage cars have to get or what specific fraction of electricity has to come from wind or solar or renewables. That’s by and large the way we do it now.

[MIT economist John] Reilly says the current web of rules is a more complicated and more expensive way of getting the same outcome as a carbon tax. The current system “pretty much is one of the worst ways we could do it,” he says.

… Reilly brings up what is perhaps the most surprising thing about a carbon tax: If you do it right, he says, carbon tax can be nearly painless for the economy as a whole.

Besides reducing carbon emissions, a carbon tax brings in a bunch of money — it’s a tax after all. So, Reilly says, you can reduce, say, income tax to balance out the new taxes people are paying for carbon emissions. People pay more for gas, but they get to keep more of their income.

Laura D’Andrea Tyson: The Myriad Benefits of a Carbon Tax

A Bill Clinton Council of Economic Advisers chair urged carbon taxes as more cost- and climate-effective than regulations and subsidies (New York Times, June 28, 2013)

Without a [carbon] tax, the government has to rely on second-best regulations to limit carbon emissions. Facing Congressional inaction and staunch opposition to a carbon tax, this week President Obama proposed regulations on carbon pollution standards for new and existing power plants using his executive authority under the Clean Air Act.

A carbon tax is also a cheaper and often more efficient way to reduce carbon emissions than subsidies for alternative fuels. Generous subsidies for biofuels have cost billions of dollars; by reducing the price of gasoline they may have perversely increased rather than decreased carbon emissions.

Other subsidies, like the production tax credit, have been successful at ramping up research, development and deployment of alternative energy technologies in recent years. Such subsidies would be even more effective in combination with a carbon tax that would make fossil fuels less price-competitive and would stimulate research on renewable and energy-saving technologies.

The Congressional Budget Office estimates that even a modest carbon tax could reduce both greenhouse emissions and the federal budget deficit. A tax of $20 per ton of carbon dioxide, which would translate to about 15 cents per gallon of gasoline, would reduce emissions by 8 percent and generate up to $1.2 trillion in tax revenues over 10 years.

“[A] Carbon tax…would make polluters pay for their own pollution”

As EPA began rolling out its proposed regulations on power plants, the Washington Post Editorial Board suggested a better way (May 7, 2013):

[A] carbon tax, an elegant policy Congress could immediately take off the shelf… would make polluters pay for their own pollution, which is the best way to encourage greener thinking. It would cut emissions without overspending national wealth on grandiose central planning or command-and-control regulation. And it would raise revenue, which lawmakers could use for debt reduction, lowering other taxes, improving the social safety net or some combination. The carbon tax is one of the best ideas in Washington almost no one in Congress will talk about.

Conservative icons George Schultz and Gary Becker on why they support a Carbon Tax

Nobel-winning economist Gary Becker and Reagan-Nixon cabinet secretary George Shultz proposed to replace costly clean energy subsidies  with a far more effective revenue-neutral carbon tax. (Wall St. Journal, April 7, 2013):

[W]e should seek out the many forms of subsidy that run through the entire energy enterprise and eliminate them. In their place we propose a measure that could go a long way toward leveling the playing field: a revenue-neutral tax on carbon, a major pollutant. A carbon tax would encourage producers and consumers to shift toward energy sources that emit less carbon—such as toward gas-fired power plants and away from coal-fired plants—and generate greater demand for electric and flex-fuel cars and lesser demand for conventional gasoline-powered cars.

We argue for revenue neutrality on the grounds that this tax should be exclusively for the purpose of leveling the playing field, not for financing some other government programs or for expanding the government sector. And revenue neutrality means that it will not have fiscal drag on economic growth.

The Market and Mother Nature

Economist and columnist Thomas Friedman urged climate hawks and deficit hawks to find common cause in support of a deficit-reducing carbon tax. (New York Times, January 8, 2013):

I am struck by how many liberals insist on reducing carbon emissions immediately, but, on the deficit, say there is no urgency because no interest rates rises are in sight. And I am struck by how many conservatives insist we must reduce the deficit immediately, but, on climate, say there is no urgency because, so far, temperature rise has been slight…  A carbon tax would reinforce and make both strategies easier.

In Defense of a Carbon Tax

Responding to Dave Roberts’ lament that a carbon tax can’t tackle the climate menace, the Carbon Tax Center’s James Handley and Charles Komanoff articulated the importance of an aggressively-rising tax on carbon pollution to meet the challenge. (Grist, Dec. 4, 2012; also presented as a side-by-side rebuttal of Roberts’ 10 points on CTC’s blog):

Assuming 3 percent annual inflation, a [carbon] tax rising 4 percent a year faster than inflation would take a decade to double in nominal terms, and almost two decades to double in real terms. That’s way too slow a ramp-up, considering that a carbon price of $40/ton of CO2 would add a mere 36 cents to a gallon of gasoline and 1.5 cents/kWh to the average U.S. retail electricity price.

We need a carbon tax that quickly gets to much higher rates than that. It doesn’t have to start like gangbusters; indeed, it shouldn’t, since families, businesses, and institutions all need (and deserve) time to adapt to the new reality of higher fuel and energy prices. A steady and steep ramp-up rate is far more important and beneficial than a high starting point.

These considerations make the ideal carbon tax close to that embodied in legislation introduced in 2009 by Rep. John Larson (D-Conn.). Larson’s carbon tax starts at $15/ton and rises each year by $10-$15, with the actual increment depending on whether emissions are being driven down fast enough. In the 10th year of a carbon tax, the CO2 price would be between $100 and $145 per ton of CO2 under the Larson bill…  the market pull (including long-term price expectations) should suffice to elicit cleantech innovation and revolution.

An Emissions Plan Conservatives Could Warm To

Former Representative Bob Inglis and former economic adviser to President Reagan, Arthur Laffer framed the conservative values supporting a carbon tax (New York Times, December 27, 2008):

We need to impose a tax on the thing we want less of (carbon dioxide) and reduce taxes on the things we want more of (income and jobs). A carbon tax would attach the national security and environmental costs to carbon-based fuels like oil, causing the market to recognize the price of these negative externalities.

The market-driven innovation that brought us the Internet and the personal computer could quickly bring us new, cleaner fuels. A carbon tax that was fully offset (with payroll or income taxes cut by a dollar amount equal to the revenues generated by the new tax) would be as bold as the threat that we face.

Conservatives do not have to agree that humans are causing climate change to recognize a sensible energy solution. All we need to assume is that burning less fossil fuels would be a good thing. Based on the current scientific consensus and the potential environmental benefits, it’s prudent to do what we can to reduce global carbon emissions. When you add the national security concerns, reducing our reliance on fossil fuels becomes a no-brainer.

Presentations, Videos, etc

• The Big Picture: Make Polluters Pay (Robert Reich, MoveOn.org). How a carbon tax can slow global warming and improve the economy. (June 2015.)
  
• Senator Bill Nelson (D-FL) floor remarks (YouTube video) on Pope Francis’ encyclical on climate change. Nelson articulates the climate and economic benefits of revenue-neutral carbon taxes. (June 2015.)
• The Economic Consequences of Delays in U.S. Climate Policy (Brookings, June 2013). (Audio, comments by CTC’s James Handley 1:12 – 1:20).
• Federal Financial Support for Fuels and Energy Technologies (Testimony of Terry Dinan, Senior Advisor, Congressional Budget Office, to House Subcommittee on Energy, March 2013).
• The Decarbonization Revenue Calculator, by CTC’s Charles Komanoff (May 2013).
• Comprehensive Tax Reform and U.S. Energy Policy (Harvard econ prof. Dale Jorgenson testifies to Sen. Finance Committee, June 13, 2012, recommending environmental tax on fossil fuel as part of broad fiscal and tax reform.
• CTC Director Charles Komanoff debates EDF at The New School (NYC), April 2010
• What’s Wrong With the Social Cost of Carbon? (Frank Ackerman, Stockholm Climate Institute, Webinar, 2010)
• Cap and Trade Won’t Cut It (James Handley, interviewed on Real News, 2009)
• Dan Rosenblum on PBS News Hour, April 2007
• An Inconvenient Truth, Al Gore’s consciousness-raising, Oscar-winning (2006) movie
• Stern Review on the Economics of Climate Change High-level UK report on the costs of not addressing climate change
• David Suzuki video on climate/carbon tax
• “The Story of Cap & Trade” (Animated, by Annie Leonard)
• Laurie Williams & Alan Zabel’s “Huge Mistake” video

From the Price Carbon Campaign – Carbon Tax Center “Pricing Carbon Conference” at Wesleyan Univ., Nov. 2010

• Dr James Hansen Presentation on Climate Science
• Dr Gary Yohe Presentation on Economic Rationale for Carbon Pricing
• Climate Policy Debate [Komanoff/Barnes/Lashof]
• Introduction to Pricing Carbon Conference (CTC’s James Handley, 2010)
• From Wesleyan: An Energized Call to Price Carbon (our blog post summarizing the Wesleyan conference)

Books

Implementing a U.S. Carbon Tax — Challenges and Debates, Ian Parry, Adele Morris, Roberton C. Williams III,  (IMF, Routledge Explorations in Environmental Economics, 2015)

The Case for a Carbon Tax, Shi-Ling Hsu (law professor & economist), 2011.  Reviewed here.

Fuel Taxes and the Poor  (The Distributional Effects of Gasoline Taxation and Their Implications for Climate Policy), Thomas Sterner, (economist, editor), 2012

Global Carbon Pricing: We Will If You Will (2015). E-book compiling eight papers by David J. C. MacKay, Richard Cooper, Joseph Stiglitz, William Nordhaus, Martin L. Weitzman, Christian Gollier & Jean Tirole, Stéphane Dion & Éloi Laurent, Peter Cramton, Axel Ockenfels & Steven Stoft. The authors, from a variety of viewpoints and disciplines, conclude that negotiating an explicit global price on carbon pollution would unlock global climate negotiations by aligning national self-interest with the global goal of rapidly reducing greenhouse gas emissions.

Fiscal Policy to Mitigate Climate Change, Ian Parry, Ruud de Mootj, Michale Keen (economists, editors, IMF, 2012)

Plan B 4.0 (A realistic path to a sustainable future), Lester Brown, 2009

The Reality of Carbon Taxes in the 21^st Century, Janet Milne (law professor), 2008

Storms of My Grandchildren, James Hansen (climate scientist), 2010