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The Political Meltdown That Could Save The Climate

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Anyone with a lit screen knows by now that shell-shocked Republicans are abandoning the Trump ship in droves. As the exodus threatens to become a stampede, with a longtime GOP operative declaring that “The Republican Party is caught in a theater fire; people are just running to different exits as fast as they can,” talk of election “win probabilities” is pivoting from the presidential race to Congress.

A Trump collapse could give Democrats back the House,” reported Vox this weekend, citing analysis that a mere six-point Clinton plurality could swing the 31 needed seats in its wake. While that’s probably over-optimistic, a more decisive margin over Trump might do the trick.

The ramifications for climate could be huge: Democratic control of both the White House and Congress clears a path for a federal carbon tax without having to somehow vault over GOP denialists. Which could make next month’s ballot referendum in Washington state, Initiative 732, even more momentous. Enacting the country’s first carbon tax wouldn’t just produce a template for other states; it could spark national legislation establishing a U.S. tax on carbon emissions, perhaps as early as 2017.

Infographic from Yeson732.org. The revenue-neutral carbon tax design has alienated some Washington-state climate advocates.

Infographic from Yeson732.org. The revenue-neutral carbon tax design has turned off some Washington-state climate advocates.

Let’s be clear: a U.S. carbon tax isn’t just helpful climate policy. It’s the core of any program for shrinking carbon emissions massively, relentlessly and globally. Only a briskly rising carbon tax rewards and thus bends every investment, decision and behavior toward less use of fossil fuels. Only a carbon tax can be replicated so the world’s nations can meet the commitments they made in Paris a year ago and ratified last month. And only a carbon tax produces revenues that can protect low- and middle-income families as fossil fuel prices rise — as they must to blow open the gates to the renewables-and-efficiency revolution at full scale.

The holistic power of carbon taxing is what motivated the grassroots organizers at an upstart group called Carbon Washington to crisscross the state last year and collect the 350,000 signatures that placed “I-732” on the Nov. 8 ballot. It’s also what makes it vexing that many green groups in the state have refrained from supporting I-732. Some are actively opposing it.

The schism has been covered widely (and insightfully) in recent weeks, most recently by Natasha Geiling in Think Progress. “Opposition to Washington’s historic carbon tax initiative is coming from the unlikeliest of sources,” reads her headline, which then asks, “It’s the only carbon tax on the ballot in the country. So why are some environmental groups fighting it?”

The answers are many. Carbon WA drew up I-732 without consulting fully with the entire spectrum of climate advocates. The design of its carbon tax is more attuned to the market than to government, with the carbon revenues “returned” to households (see graphic) rather than invested directly in clean energy and community remediation. And perhaps the in-state green groups are guided more by local and state concerns while Carbon WA set its sights nationally and globally.

Those points can be parsed endlessly. But the central fact for climate, which the Republican implosion is making more salient daily, is that the fissure in Washington state threatens to sink the initiative and botch our chance to put a carbon tax on the national legislative agenda starting months from now. Polling on I-732 suggests that a deficit in August may have flipped into a slight plus, but a fifth of voters are still undecided, and disunity among climate advocates makes it tougher to seal the deal.

There’s no second chance at this in the Evergreen State. Washington’s legislature has shown no appetite for a carbon tax, and a new referendum can’t get on the ballot until 2018. Organizing in other states has fallen short as well. Whether we like it or not – and the economist in me makes me a big fan – I-732 is the only game going.

The U.S. elections will doubtless take further twists in the final four weeks, but the possibility of debating and actually winning a national carbon tax is suddenly, miraculously upon us. The referendum in Washington state is going to function as the first big test. Whatever its imperfections, the climate movement’s greatest imperative must be to come together and pass I-732.

Carbon Tax Can Be a Remedy for Toxic Hot Spots

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Thanks to the environmental justice movement, we know that big carbon emitters like power plants and oil refineries are disproportionately sited in poor and predominantly people of color communities. EJ pioneers like Robert Bullard and the Environmental Justice Resource Network began documenting this painful truth decades ago, and it continues to animate the EJ and climate justice movements.

So it’s not altogether surprising if, from time to time, concern is voiced that polluting companies will respond to carbon taxes by curbing carbon pollution elsewhere rather than in frontline communities like blighted urban neighborhoods, Appalachian hollows, or Native peoples’ lands. The pioneering climate activist Bill McKibben raised that possibility yesterday in a post on Yale Environment 360:

Environmental justice [in carbon taxing] would also require policies to make sure that carbon pricing doesn’t perpetuate toxic “hot spots” in poor communities as companies look for least-cost ways to deal with the new reality [in which carbon emitters now pay to dump into the atmosphere].

Not for the first time, we wrestled with that scenario overnight. And we have to report that we can’t picture any credible circumstance in which a carbon tax would lead to emissions lock-in in certain communities. Our conclusion arises from the fact that a carbon tax, by its nature, exacts a cost for each and every squandered opportunity to curtail carbon emissions. A company that perpetuated toxic hot spots in poor communities would incur costs that would weaken and might even destroy its bottom line.

South Bronx vista. The 10 newest New York Power Authority turbines are all in EJ neighborhoods. Photo: Doug Goodman.

South Bronx vista. The 10 newest New York Power Authority turbines are all in EJ neighborhoods. Photo: Doug Goodman.

Consider an oil company that owns and operates 5 refineries in poor and/or minority communities and 5 in other locales. Under a carbon tax, any change in equipment or procedures that reduces carbon emissions at any of the 10 refineries reduces the company’s carbon tax bill. That makes it virtually certain that all 10 refineries will undergo some change leading to lower emissions.

Without knowing details on the 10 refineries, we can’t predict which changes the tax will stimulate at each, and how much each refinery’s emissions will go down vis-à-vis the others. It’s possible that logistical considerations would push the company to concentrate its reduction effort at its 5 “other” sites. But we can say with virtual certainty that no refinery will add to its emissions on account of the carbon tax.

Think of it this way: Each facility now has an array of potential capital and operating opportunities for reducing emissions. Some don’t “pencil out” today but will as the carbon tax kicks in. But why would emissions-increasing measures be taken up due to the tax, when all of the tax incentive goes in the opposite (emissions-reducing) direction?

Carbon taxing isn’t a zero-sum game. Charging for emissions opens up opportunities to cut emissions everywhere, simultaneously. The choice facing headquarters isn’t to pit potential reductions from Refineries 1-5 against reductions from Refineries 6-10, but to max out on the new opportunities to cut costs presented by the carbon tax by modifying (and possibly shrinking, as demand drops) Refineries 1 through 10.

To repeat: under a carbon tax, every pound or ton of CO2 eliminated from the waste stream yields equal savings. With no cap to game by manipulating emissions, every reduction is rewarded immediately and equally.

The vigilance by environmental-climate justice campaigners against policies that could lock in toxic hot spots can be traced in part to mainstream environmentalists’ push for carbon cap-and-trade legislation a decade ago. The Waxman-Markey bill that passed the House before dying in the Senate would have allowed U.S. polluters “to offshore” some emission cuts (e.g., by booking CO2 reductions from planting tropical tree plantations) instead of cutting their domestic emissions. That loophole was appalling and it tarnished the bill; but offsets have never been included in proposed carbon tax legislation.

For the record, other concerns raised in McKibben’s post weigh heavily here at CTC, including whether and how a carbon fee-and-dividend system would return revenues to “the estimated nearly 12 million undocumented Americans who contribute to the economy.” We agree that undocumented workers should receive a fair share of the revenue proceeds from carbon-taxing, and it’s incumbent on us carbon-tax proponents to come up with an ironclad way to ensure that.

Let’s also acknowledge that the frontline communities that have suffered historically and disproportionately from toxic emissions that invariably “co-pollute” with CO2 deserve to be compensated beyond the universal fee-and-dividend monthly check. But what if a revenue-neutral carbon tax like fee-and-dividend is the only approach with political legs to actually pass Congress sometime down the road? Given that fee-and-dividend is income-progressive (poor households get more in dividend checks than they spend for costlier energy) and will cut emissions across the board, including in frontline communities, doesn’t it merit support from EJ advocates, despite its limitations?

In short, we agree with Bill that “most of the damage from both climate change and air pollution has fallen on poor people, people of color, and Native nations, both in our country and around our world.” But it’s a stretch too far to say that the potential remedy of carbon dividends “come[s] with [an] obvious moral and intellectual flaw.”

To sum up: the carbon-tax “flaw” of locking in carbon hot spots isn’t well-founded. But the flaw of excluding undocumented Americans from the carbon dividends can and should be addressed and fixed.

It may be that the surest way to do that is for members of frontline communities to assume leadership positions in the carbon tax effort. What are the best ways to encourage and make that leadership possible?

Berkeley’s soda tax works. Here’s why that matters.

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A tax on sugary soft drinks in Berkeley, CA is cutting soda consumption, according to a new study. Should climate advocates care?

Absolutely. The study offers powerful real-world support for the economic principles underlying the idea that carbon taxes can and will cut use of carbon-based fossil fuels.

This framing helped pass Berkeley's soda tax.

This framing helped pass Berkeley’s soda tax (on the 2014 ballot as Initiative D).

The soda study was conducted by five health specialists at the University of California’s Berkeley campus and a biostatistician-epidemiologist at U-C San Francisco. The study team distilled their findings in an article in the American Journal of Public Health this month, and last week the New York Times’ “Upshot” column reported on it under the headline, “More Evidence That Soda Taxes Cut Soda Drinking.”

Here’s the Times’ lede:

It may seem obvious that taxing sugary drinks causes people to drink less of them. But that’s actually controversial. Now a new study out of Berkeley, Calif., adds to the evidence that our intuition is right.

Berkeley’s fee on sugary soft drinks, the first in the U.S., was approved in a November 2014 referendum and took effect in March 2015. It charges distributors a penny per ounce of drink on so-called sugar-sweetened beverages (SSBs). Thus, a 12-oz. soda can or bottle is taxed 12 cents, though not all of the fee is passed along in the retail price. In earlier research the study team estimated that for sodas, 69% of the penny-an-ounce tax is passed through as higher retail prices, on average; whereas for all SSBs, including energy, sports, and fruit-flavored drinks along with sweetened water, coffee and tea, as well as soda, the pass-through average is 47%.

The U-C study measured changes in beverage consumption in low-income neighborhoods as of July 2015, eight months after the vote and four months after implementation. Similar districts in nearby Oakland and San Francisco were used as a control group. Data were drawn from in-person interviews with 990 people before the tax and 1,689 after.

Based on those surveys, the authors reported that consumption of SSBs decreased 21% in Berkeley and increased 4% in the comparison cities. Water consumption increased far more in Berkeley (+63%) than in the comparison cities (+19%). Both comparisons were statistically significant, signifying that the observed differences in beverage purchases between soda-taxing Berkeley and non-soda-taxing Oakland and SF are genuine and not a product of random chance.

As the Times’ Upshot piece suggests, the main takeaway is what some of us have known all along: raising the price of a good or activity leads people to demand and consume less of it. That’s the premise behind taxing carbon emissions. But the Berkeley study offers other lessons too:

  • Just 2 percent of Berkeley residents said they bought sodas outside of the city to avoid the tax. Though a higher tax would likely raise the percentage, the propensity thus far to curb consumption rather than game the system is encouraging.
  • Part of the reason for the steep (21%) drop in consumption of SSBs may be that “people became more aware of the health issue [from soda consumption] during the debate around the tax’s passage and the city’s efforts to discourage sugary drink consumption around the same time,” as the Times wrote. This demonstration of “tax salience” previously reported for British Columbia’s carbon tax confirms the merits of seeking a carbon price via a transparent fee or tax rather than by “hiding the price” through an opaque and convoluted cap-and-trade system.
  • Berkeley residents didn’t need subsidies to raise their consumption of bottled water; the “price push” of costlier SSBs was sufficient. This finding lends support to making carbon taxes revenue-neutral (via tax swaps or dividends) rather than applying the funds to subsidize clean-energy measures like weatherization or solar installations.

As the Times notes, the Berkeley findings are consistent with research indicating that Mexico’s nationwide soda tax cut sales of sugary drinks among poor households by 17 percent after the first year. Next up, in January, is Philadelphia’s 1.5 cents per ounce soda tax, which passed the city council several months ago.

The parallels to carbon taxing aren’t perfect, of course. The benefits of reduced soda use — less obesity, diabetes and tooth decay — are considerably closer and more personal than the benefits of clean energy. That, along with the soda tax campaign’s intentionally combative framing of “Berkeley vs. Big Soda,” may account for the extremely strong price-elasticity — a value of (minus) 2 or more — indicated by the 21% drop in SSB consumption among the surveyed residents. In CTC’s carbon-tax model, we employ far lesser price-elasticities for electricity, gasoline and other fuels: between (minus) 0.35 and 0.70, reflecting the fact that energy and fuels are more deeply wired into our economy and our behavior than are soft drinks.

Rather than extrapolate directly from the Berkeley soda tax study results, it’s best to regard them as further confirmation of the precept that taxing “bads” is a direct and effective way to make them less prevalent.

The AJPH article, “Impact of the Berkeley Excise Tax on Sugar-Sweetened Beverage Consumption,” was published on August 23, 2016. Click here for the abstract. For those interested, we calculated the soda price-elasticity by applying an approximate price increase of 0.7 cents per ounce (based on the 69% average pass-through) to an estimated average base soda retail price of 5 cents per ounce. For a 14 percent price rise (0.7 divided by 5) to effect a 21% contraction in usage, the price-elasticity must be (minus) 1.8. [Let us know via comments if you’d like to see the math for that.] Higher elasticities would result from using the 25 percent consumption drop relative to the control cities, or from applying the lesser pass-through rates for non-soda SSB’s.

Addendum, March 7, 2017 (contributed by CTC intern Michael Kendall)

New data are in from Mexico and Philadelphia, with both jurisdictions affirming that taxing sodas and other sugary drinks reduces consumption. In 2015, Mexico’s second year with the tax, purchases of sweetened beverages continued to fall. A study published in Health Affairs in Feb. 2017 provided a widely reported update on the effect of Mexico’s sugar-sweetened beverage tax on beverage purchases between 2012 and 2015. In 2014 sales fell by 5.5 percent from 2013; the reduction from 2013 grew to 9.7 percent in 2015. The decreases were greatest among the poorest households.

Philadelphia’s tax on sugary drinks went into effect on Jan. 1, and evidence from the initial month points towards significant reductions in sales. Philadelphia supermarkets and beverage sellers are reporting 30-50 percent drops in January sales, though the media narrative is focusing on threatened reductions in workforces rather than reductions in purchases. (Google “Philly soda tax” to get a taste of these headlines.) What’s not yet clear is whether soda purchases have risen significantly outside city limits. We’re looking forward to February data from Philadelphia and we’ll be keeping an eye on similar soda taxes going into effect in San Francisco, Oakland, Boulder, and Albany.

Addendum, Jan. 14, 2017

A front-page New York Times story yesterday about heavy purchases of sodas and other sugary drinks by recipients of food stamps included this passage, near the end: 

In 2014, a group of Stanford researchers studied 19,000 SNAP [Supplemental Nutrition Assistance Program] participants and compared whether banning sugary drinks or incentivizing fruits and vegetables would affect obesity rates. The researchers found that the incentive program would not. But banning sugary drinks from SNAP, they said, “would be expected to significantly reduce obesity prevalence and Type 2 diabetes incidence, particularly among ages 18 to 65 and some racial and ethnic minorities.”

In other words, raising the price of sugary drinks (the effective result of making those drinks ineligible for SNAP purchases) would be more effective in curbing use than subsidizing alternatives. That’s the carbon tax paradigm, in so many words: Making the “bad” (fossil fuel use) more costly through carbon taxes is more effective than lowering the price of alternatives to fossil fuels through subsidies.

Gary Johnson walks back his carbon-tax talk

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The weed-growing, road-biking, jeans-wearing candidate for president won’t be endorsing a carbon tax after all.

Libertarian Party nominee (and former New Mexico governor) Gary Johnson had signaled his openness to a revenue-neutral carbon tax in an interview last week with the New York Times’ John Harwood. As Harwood reported:

He [Johnson] also distinguishes himself from most contemporary Republicans by accepting the reality of what he calls “man-caused” climate change. As a solution, he wants to explore taxing carbon — not for the revenue, but to provide a financial incentive to reduce emissions. “That may have the result of being self-regulating,” Mr. Johnson said. “The market will take care of it.”

Libertarian presidential candidate Gary Johnson at a rally at the University of Nevada in Reno this month. Photo credit: NY Times.

Libertarian presidential candidate Gary Johnson at a rally at the University of Nevada in Reno this month. Photo credit: NY Times.

Credit Harwood for hinting (“not for the revenue”) that Johnson was trying to align himself with a revenue-neutral carbon tax. Unfortunately, Johnson failed to spell out how the revenues from his carbon tax would be returned to U.S. households. While his use of the word “fee” (see below) suggests he had in mind the fee-and-dividend scheme advocated by the Citizens Climate Lobby (and backed by us at CTC), he never actually said so, leaving him open to charges from aggrieved libertarians that a Johnson administration was looking to increase their tax burden.

It didn’t take long for Johnson to walk back his carbon-tax talk, in this interview with Nick Gillespie, editor-in-chief of the libertarian Web site reason.com, last Friday:

NICK GILLESPIE: Earlier this week, you suggested you were in favor of a carbon tax or fee. Yesterday, at a rally in New Hampshire, you said you were against it. What is your position on carbon taxes?

GARY JOHNSON: [A carbon tax] sounds good in theory, but it wouldn’t work in practice. I never called it a tax. I called it a fee. As it was presented to me, this was the way to reduce carbon and actually reduce costs to reduce carbon. Under that premise—lower costs, better outcomes—you can always count on me to support that [sort of] notion. In theory it sounds good, but the reality is that it’s really complex and it won’t really accomplish that. So, no support for a carbon fee. I never raised one penny of tax as governor of New Mexico, not one cent in any area. Taxes to me are like a death plague.

GILLESPIE: You do believe that climate change is happening and that human activity adds to it. Does that mean it is an issue that should be addressed by government policy?

JOHNSON: Well, I’ll agree with the first two, but I’m a skeptic that government policy can address this. The United States contributes 16 percent of the contribution of carbon in the world…

GILLESPIE: So you would be against the United States unilaterally making any kind of move that puts a huge economic disadvantage that also wouldn’t really mitigate carbon?

JOHNSON: If there is any way we can address this issue without the loss of U.S. jobs, my ears are open.

Whew. Does Johnson have a reasoning deficit, or was he just trying to avoid having to explain himself to other libertarians? Who knows, but either way Johnson’s turnabout deprives U.S. voters of a chance to learn about the least complex way to tackle climate change: to charge an “upstream” fee on fossil fuels’ carbon content and “dividend” the proceeds equally to every American household, thus adhering to the spirit of “no new taxes,” while the resulting higher prices of fossil fuels spark a steady but relentless transformation of the U.S. energy system from dirty to clean energy.

What’s further disappointing in the exchange with Gillespie is Johnson’s apparent ignorance of the potential of a U.S. carbon tax — particularly the simple and transparent fee-and-dividend version — to spark parallel measures in other countries. That would have put the lie to two big canards about a U.S. carbon price: that it can only affect a fraction of global emissions, and that it would hobble U.S. industries, costing American jobs.

Johnson did leave himself a possible out by saying he might reconsider “if we can address this issue without the loss of U.S. jobs.” Still, his backtracking makes it harder for that oft-rumored but still unseen cadre of climate-concerned Congressional Republicans to come out for a carbon tax after the November elections.

Worse for himself, though, Johnson blew an opportunity to win over voters who want climate action but have been disinclined to vote for Clinton.

Then again, Johnson’s muddled talk about vaccination — further on in the Gillepsie interview he said he wants it left to individuals’ choice — might have repelled those voters anyway. At the least, it suggests a pervasive ignorance about externalities and “the commons,” about economics and ethics.

Whether Johnson and other libertarians like it or not, our vaccination decisions affect each other. So do unpriced carbon emissions.

Addendum: For you libertarians out there, Forbes contributor Tim Worstall’s post critiquing Johnson’s flip-flop is worth reading.

Washington Carbon Tax Ballot Initiative Picks Up Biggest Corroboration Yet

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The Pacific Northwest’s leading ecology think tank, Sightline Institute, this week issued three linked papers intended to give Washington State voters an “impartial and informed” analysis of Initiative 732, the Nov. 8 ballot measure to establish the nation’s first statewide carbon tax.

Ruth Mountain in the North Cascades. We summitted it in 1972, before the onset of severe climate change. Photo courtesy of peakery.com.

Ruth Mountain in the North Cascades. Snow was deep when we summited it in late August 1972, before the onset of rising temperatures. Photo courtesy of peakery.com.

The takeaway is clear: the Sightline papers blow away the objections that for months have clouded perceptions of I-732 and threatened to capsize the extraordinary grassroots movement led by CarbonWA that last year collected 350,000 signatures and made the Evergreen State the epicenter of carbon tax organizing.

Here are key quotes from the Sightline papers:

  1. “We find I-732 a worthy policy to put Washington on a path to cutting pollution and encouraging clean energy while also helping low-income families by making Washington State taxes less regressive.”
  2. “I-732 would give Washington the continent’s, if not the world’s, most potent, persistent, and comprehensive incentive to move swiftly beyond dirty fossil fuels and to a carbon-free future.”
  3. “I-732 is revenue-neutral, to the best of anyone’s ability to forecast it… [The argument to the contrary] is a red herring… I-732 is likely to be much closer to revenue-neutral than the [State Department of Revenue’s] forecast suggests… Even if the Department’s estimates are correct, I-732 will still be a rounding error… I-732 will likely have less than a 1 percent impact on state tax revenue for decades.”
  4. “Initiative 732 does exactly what the scientists and economists prescribe: it sets a science-based, steadily rising price on pollution. The citizens’ initiative covers most of the state’s climate pollution, makes the tax code more progressive, and is administratively elegant.”
  5. “I-732 would be the biggest improvement in the progressivity of Washington’s state tax system in 40 years.”

 
Individually and collectively, these statements demolish the major criticisms that have been leveled against the carbon tax initiative.

#1 validates CarbonWA’s claim that the carbon tax is economically progressive — a result of dedicating the lion’s share of revenues to lowering the regressive state sales tax, with other funds allocated to funding the Working Families Rebate — an extension of the federal Earned Income Tax Credit.

#2 validates the precept that the most potent way to eliminate carbon pollution is to tax it, and confirms the organizers’ belief that establishing the first U.S. statewide carbon tax could be a climate breakthrough.

#3 refutes the assertion by state budget analysts that the I-732 revenues won’t fully pay for the tax cuts, calling it a “red herring.”

#4 and #5 are icing on the #1-#2-#3 cake.

(We admit to having grabbed the five points from a CarbonWA press release; it’s late Friday afternoon here on the East Coast and we’re trying to wrap the week. But we did confirm each quote from the Sightline reports.)

Read the Sightline reports and see for yourself the care they took with their analysis and the quality of CarbonWA’s work in devising and fine-tuning I-732. Then go to the Yeson732 Web site to learn how you can donate, network, agitate and support their ballot initiative which, hands down, is the boldest and best effort yet to establish carbon emissions pricing in the United States.

Sightline Report #1, Aug. 1, Weighing CarbonWA’s Tax Swap Ballot Initiative

Sightline Report #2, Aug. 2, Does I-732 Really Have a “Budget Hole”?

Sightline Report #3, Aug. 3, Weighing the Critiques of CarbonWA’s I-732

 

Brookings report on state carbon taxes is a winner

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The Brookings Institution is out with a handsome new report, State-Level Carbon Taxes: Options And Opportunities For Policymakers. We’re still digesting it, but it looks like one of the most lucid and useful publications on carbon taxes to appear in a long time. At a minimum, it’s essential reading for at least two (overlapping) groups: people seeking to advance carbon taxes at the state level, and people who want to steep themselves in the nuts and bolts of implementing actual carbon taxes.

The authors are three heavy hitters in carbon tax policy and advocacy: Adele Morris of Brookings, Yoram Bauman of Carbon Washington, and David Bookbinder of the Niskanen Center. Together they bring to bear key disciplines (economics, law, political organizing), extensive knowledge, and keen interest. It’s no surprise their report is a winner.

Here’s the start:

Much has been written about the design of a federal-level carbon tax. This paper adapts these findings to the state level, motivated by pending federal regulations (which place implementation obligations on states), policy discussions in states with commitments to ambitious long-term emissions targets, and state budget shortfalls that could necessitate new revenue. Notwithstanding the myriad political impediments to a carbon tax, this paper explains how state policymakers can design one to fit their fiscal, economic, distributional, and environmental goals.

They find that “a $20 per ton tax on energy-related CO2 emissions could raise up to 2-3 percent of state GDP in the most emissions-intensive states.” That is significant, they say, because current state revenue instruments — sales, property, income, and business taxes — typically collect only about 5% of GDP. Moreover, contrary to the usual view that a carbon tax might be an unreliable revenue generator, if only because the revenue base of carbon emissions would shrink over time, the report concludes that carbon fees could prove less volatile than other state revenue sources.

Bar chart w top 15 states (c tax revenue as share of GDP) _ 4 Aug 2016

Graphic is from Brookings issue brief (see link at end).

While carbon fees of $20/ton are almost certainly far lower than the levels needed to fully drive the transition of the U.S. economy to a low-carbon base, it’s a reasonable level for considering state taxes, given issues of leakage, interstate competition, and poorly diversified state economies. In any event, the report’s insights into state carbon tax implementation don’t depend on any particular tax level.

For all 50 states plus the District of Columbia, annual revenues from applying $20/ton state-level carbon taxes to all fossil fuel combustion would total $106 billion, based on 2013 emissions and assuming, for simplicity, zero price-responsiveness. That’s around two-thirds of one percent of combined state GDP. But the range is enormous, from a low of around 0.3 percent (for California, Connecticut, and Massachusetts; here we exclude DC, for which the tax revenue would equate to just 0.05% of GDP), to more than 2 percent for North Dakota and West Virginia and more than 3 percent for Wyoming. (See graphic; Wyoming was inadvertently omitted.)

Tellingly, of the 15 states with the highest shares of potential carbon tax revenues relative to GDP, 14 are “red” on the political map. Only New Mexico voted for a Democrat, President Obama, in 2012 (and 2008). The correlation of carbon-dependence with electoral conservatism underscores (and reflects) the political polarization over climate belief and carbon-reduction policy. And while organizing for state carbon taxing has been exclusively focused on low-carbon blue states such as Washington and Massachusetts, the sheer fiscal potential of carbon taxes in the states shown in the graphic suggests vast untapped potential to transform state economies from fossil-fuel extraction to a broader and more sustainable base.

The Brookings report is far richer than mere figures and graphs. It dives deeply but clearly into thorny questions like interstate transport of fuels and electricity, and harmonizing of state carbon fees with EPA Clean Power Plan requirements, that haven’t arisen at the federal tax level. Issues of federal pre-emption (e.g., for aviation fuels), compliance with the “dormant” Commerce Clause of the U.S. Constitution, and revenue usage are treated as well. The report is also richly referenced and annotated.

Whether or not the path to a U.S. carbon tax will need to wind from one or a few early-adopting states to Congress can’t be predicted. Regardless, the Brookings report is both a masterful summation of state carbon tax issues and a vital read for anyone pursuing carbon pricing in the United States.

Link to the full 32-page Brookings report: State-Level Carbon Taxes: Options And Opportunities For Policymakers

Link to the Brookings issue brief (contains graph shown above): What to consider when designing a state-level carbon tax

Should We Care that Clinton Isn’t Pushing a Carbon Tax?

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The conventions are over, the country is pivoting toward the Nov. 8 elections, and Dave Roberts, Vox’s energy and climate blogger, is out with a post insisting, yet again, that “a carbon tax is not some magical climate cure-all.”

Roberts has said this before, many times. We (CTC) even posted a point/counterpoint with him after he poured cold water on carbon taxes in 2012, after Hurricane Sandy. Now, with so much going on — a glass ceiling-shattering nomination by the Democrats, a civil society-threatening nomination by the Republicans — should we care?

Does it matter that neither candidate advocates a carbon tax?

We should. For one thing, Roberts is an influential journalist; here’s NY Times superstar columnist Paul Krugman linking to Roberts last summer. For another, a carbon tax shattered its own vault of silence in the Democratic primary season; after Bernie Sanders’ unapologetic calls in speeches and the debates, advocating a tax on carbon emissions isn’t necessarily a ticket to political oblivion. Moreover, Roberts’ post today raised questions about a carbon tax’s magnitude that are worth addressing.

What set Roberts off this time was a recent editorial in Technology Review that chided the Democrats for “ignoring the one thing that could best help curb carbon emissions.” That thing is, of course, a carbon tax. The TR editorial dutifully blasted Trump’s climate denialism and the GOP’s labeling coal a “clean energy source,” and then said:

But the Democratic platform might not be meaningfully better. Although Hillary Clinton has a climate change plan, and it is supportive of President Obama’s Clean Power Plan (which is held up in the courts), and makes broad promises to cut subsidies for the oil and gas industry, it leaves out one big thing: a carbon tax. (emphasis added)

That last bit was too much for Roberts. Clinton’s energy plan, he wrote, would

  • expand solar and other clean alternatives.
  • increase US energy efficiency by a third and decrease US oil consumption by a third within 10 years of her taking office.
  • aim to meet or exceed the carbon reduction target Obama promised in Paris: 28 percent under 2005 levels by 2025.

Roberts continued:

Clinton has said exactly how much carbon her plan would reduce. Would a carbon tax reduce more? It obviously depends! A high carbon tax would. A low carbon tax wouldn’t. A revenue-neutral carbon tax that reduces the income tax would be different from a carbon tax that funds clean energy deployment… The effects of a carbon tax depend entirely on its size and implementation details.

There’s some truth there. But let’s go further.

To begin, saying how much carbon you hope to eliminate isn’t the same as having a plan to eliminate it. And unless we’ve missed something, Clinton hasn’t spelled out how she’s going to cut oil usage by a third.

Spurred by plunging prices, U.S. consumption of petroleum products in 2015 rose for the third consecutive year and is now within 7 percent of the 2005 peak. (To see for yourself, download the latest Monthly Energy Review and navigate to Table 3.5, “Petroleum Products Supplied by Type,” totals column.) Without a stiff carbon tax that not only steers purchases away from SUVs and pickups but also counteracts the resumed trend of more miles driven, there’s no way the ambitious (on paper) Obama-Clinton fuel-economy standards can bend the petroleum curve sharply downward, as we’ve written here.

Indeed, our own modeling suggests that even a robustly rising carbon tax that reached triple digits in its tenth year would only cut oil usage from the 2005 peak by a quarter.

A briskly rising carbon tax can cut emissions fast and far.

A briskly rising carbon tax can cut emissions fast and far.

The chances of achieving a 28 percent cut in economy-wide CO2 emissions by 2025 are brighter, partly because 2015 emissions were already 12 percent below the year-2005 benchmark. And our model predicts that a triple-digit carbon tax would, in its tenth year, be cutting CO2 emissions by 40 percent below emissions in 2005. As the Republican candidate remarked about a different type of performance, “I guarantee you there’s no problem” — provided the tax is high enough, as our graphic shows.

But that’s with a carbon tax. Without one — or some economy-wide carbon price — it’s difficult to see how the U.S. can progress from 12% below 2005 currently, to 28% below by 2025, as we wrote in 2014, following the announcement of the historic U.S.-China emissions pact. The picture is probably little different today, insofar as the positive changes since then — coal’s accelerated demise and the rapid uptake of ever-cheaper photovoltaics — are being undermined by the rise in usage of cheap oil.

There you have it: while the Clinton energy plan may be great for solar, it doesn’t map a path to deeply cut oil use and carbon emissions. In contrast, an economy-wide carbon tax — and here Dave Roberts is right, the tax must be robust, even steep — can do both.

Did Technology Review hyperventilate when it said that without a carbon tax, the Democratic climate stance in the election “might not be meaningfully better” than the Republican? Yes, somewhat. But let’s let the Pulitzer Prize-winning fact check site Politifact have the last word.

Two months ago, Politifact fact-checked this proposition: “Bernie Sanders says only he supports carbon tax and [an] ‘aggressive’ approach to climate change.” It rated Sanders’ claim — not just that he alone among the candidates supported a carbon tax but that his climate change approach was aggressive — “mostly true.”

That’s not to say we want Clinton to call explicitly for a robust carbon tax this fall. That’s a political calculation best left to others. But let’s be clear among ourselves of her climate plan’s shortfall vis-a-vis the task at hand.

Only Climate Darkness at End of GOP Tunnel?

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The Republican Convention is over. And it’s fair to wonder if the dream of a bipartisan carbon tax is over as well.

It’s not just the viciously hard-right emotions and ideologies so prominently on view in Cleveland. While those are disturbing enough, they could perhaps be written off as convention fever. But we can’t ignore the persistent absence of palpable climate concern in virtually the entire Republican Party.

Trump fans in West Virginia in May were more decorous than most GOP delegates in Cleveland.

These Trump fans in West Virginia in May were more decorous than most GOP delegates in Cleveland.

Consider A Cure for Trumpism, the high-minded essay by two leading “reform conservatives” that led the New York Times’ Sunday Review section on the eve of the convention. Stretching over 2,000 words, this blueprint for a revitalized Republican Party, by Times columnist Ross Douthat and National Review editor Reihan Salam, never mentioned climate change or global warming.

There’s also the strange case of Jay Faison, the plutocrat whose ClearPath Action Fund, the Times informed us in June, “will spend at least $2 million on digital media campaigns to defend [Republican] Senate incumbents running in two of the tightest races in the country, Rob Portman in Ohio and Kelly Ayotte in New Hampshire.” That’s in “recognition of the senators’ support for clean energy,” Faison told the Times. “ClearPath is also spending several hundred thousand dollars on digital advertising campaigns to support Representatives Carlos Curbelo of Florida and Tom Reed and Elise Stefanik of New York, all Republicans running for re-election in similarly tight races,” the Times noted.

Since Faison routinely lambasts the Obama Administration’s Clean Power Plan as too regulatory, you would think he backs invisible-hand approaches like taxing carbon. Not so, according to this account in the Daily Caller:

North Carolina philanthropist Jay Faison has come out against taxing carbon dioxide emissions as a conservative solution to both fighting global warming and promoting cleaner sources of energy.

“We don’t need more subsidies and top-down regulation,” Faison told reporters [on March 8] at the National Press Club. “[M]aking traditional energy sources, like coal and natural gas, more expensive is not the way to power innovation in green energy.” (emphasis added)

That’s a zinger, all right — correcting the massive market failure that is unpriced climate pollution means more “top-down regulation.”

So what climate solutions does the GOP’s great green hope support, if not a carbon tax or other price mechanism? Here’s the Daily Caller again:

Faison argued [that] more needs to be done to get rid of burdensome regulations on hydroelectric dams and nuclear power plants.

There you have it. Precious few Republicans are willing to publicly support carbon taxing, even in revenue-neutral form. Either climate pales beside real issues like immigration, family-friendly tax reform and foreign policy (Douthat & Salam), or we can cure it, somehow, without resorting to carbon taxes (Faison).

What about the Republican rank-and-file? Evan Lehmann of ClimateWire was at the GOP convention and he spoke about climate with some 51 GOP delegates. Here’s how he distilled their responses:

A Texas delegate tilted his hat back when asked about climate change and said, “Ew.” A delegate from Florida lamented his party’s inaction on warming. And one from Wyoming claims it’s a conspiracy to hide the government’s involvement in the spread of a damaging beetle.

The bad, the good, and the ugly, you might say. (That beetle infestation, by the way, which is devastating lodgepole pines throughout the Rockies, is itself largely a result of climate change.) Not exactly the stuff of a party steeling itself for taxing carbon emissions  — or taking any concerted action on climate.

We could also cite the failure of even a single House Republican to vote against the Scalise Amendment denouncing a carbon tax. And that was in June, after any of them might have had to fear a primary challenge for veering from party orthodoxy.

Their rationale could be Koch Brothers money, or resentment of scientific elites, or, as writer Rebecca Solnit has suggested, an “ideology of isolation” that militates against grasping the interconnectedness at the heart of ecological thinking. Another factor, hinted at by former GOP House member Nan Hayworth in an interview with the Guardian this week, is that Republicans, having ceded the climate issue to Democrats, are now loath to be identified with it:

My former colleagues understand the importance of protecting the environment, but one of the problems is the political opposition from environmental groups and the left is so extreme in some cases, even when they try to move towards environmental points of view they get no credit for it politically.

Really? Republicans would get no political credit for backing effective climate action? With head-spinners like that, it’s hard to disagree with the suggestion last week by veteran Times columnist Tom Friedman that “the best thing that could happen to America [is] that Donald Trump is not just defeated, but is crushed at the polls.”

Friedman was envisioning a “sweeping victory” in which the Democrats not only keep the White House but retake Congress, giving them “a chance to put in place a revenue-neutral carbon tax” without needing a single GOP vote. Whether November goes that way is anybody’s guess, but today’s Republican Party is so tied up in anti-climate knots that it’s hard to see a bipartisan path to the only policy that can drive down emissions fast and far.

Carbon Tax Works: CTC’s New Carbon Tax Model

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We’ve just posted the annual update to our spreadsheet model — our powerful but easy-to-use tool for predicting future emissions and revenues from possible U.S. carbon taxes. The model, which runs in Excel, accepts any carbon tax trajectory you feed it and spits out estimated economy-wide emission reductions and revenue generation, year by year.

Stiffer tax means steeper reductions. Our model quantifies the relationship.

Stiffer tax means steeper reductions. Our model quantifies the relationship.

Here’s what’s new:

1. A year of new data: The most obvious update is our incorporating 2015 baseline data on energy use, CO2 emissions and emission intensity for each of the model’s eight sectors.

2. Oil refining made explicit: We’ve added an eighth sector: oil refining. Until now, refinery emissions were lumped with “Other Petroleum Products,” which was too broad-brush, especially considering that they accounted for an estimated 6.4% of U.S. CO2 emissions last year. Refinery fuel use now has its own sector. This not only trims the catch-all “Other” category, allowing greater precision; it also ensures that future changes in use of gasoline, diesel, jet fuel and other petroleum products are carried through the supply chain to yield emission changes in the refining process, not just at the exhaust pipe.

3. Sharper graphics: The graphics in this post are among the dozen with which the spreadsheet conveys the rapid reductions from robust carbon taxes, especially vis-a-vis well-meaning but limited policies such as the Obama Administration’s Clean Power Plan.

An enhanced graphic from CTC's carbon-tax spreadsheet model.

Our updated model has lots of graphics.

4. Emissions consequences of cheap oil: While the model is baselined to official U.S. forecast energy prices (from the Energy Information Administration’s “Annual Energy Outlook”), the current version is the first in which the 2015-2016 oil price slump reverberates for many years. The lower baseline price projections for gasoline and other petroleum fuels don’t change the predicted impact of carbon taxes on demand for those fuels, but they do establish a higher usage trajectory than in previous years, underscoring the need for a robust carbon tax.

As a reminder, here are two key features we added last year:

1. Smoothing the carbon tax impact: The model can reflect lags in households’ and businesses’ adaptation to more-expensive fossil fuels. The user sets the adaptation “ceiling” rate; the model automatically carries over any excess to future years.) This feature is helpful for trajectories like the Whitehouse-Schatz bill, which kicks off with a bang at $45 per ton of carbon dioxide but then rises only slowly. Under our default setting, in which the economy is assumed to react in any year only to tax increments up to $12.50 per metric ton of CO2 ($11.34 per short ton), the reductions from that initial $45/ton charge are spread over four years rather than, unrealistically, assigned to the first year.

Results assume carbon tax starts and increments annually at $12.50 per metric ton of CO2.

Results are for tax that rises annually at $12.50 per metric ton of CO2.

2. Demand impacts vs. Supply side impacts: At the bottom of the Summary page is a new section comparing the projected CO2 reductions from changes in fuels’ carbon intensities (“supply side”) versus reductions from reduced energy usage (“demand side,” e.g., lower electricity purchases, less driving or flying). Under our default carbon tax — the one proposed by Washington Rep. Jim McDermott — an estimated 58% of projected CO2 reductions are on the supply side (i.e., due to decarbonization); a large minority, 42%, come about through reduced demand, illustrating that subsidies-only policies miss out on huge CO2 reductions. Indeed, they undercut reductions from decarbonization by stimulating energy usage through lowered energy prices, as we pointed out in our 2014 comments to the Senate Finance Committee.

Please download the spreadsheet — here’s the link again — and run it in Excel. See for yourself the relative efficacy of a carbon tax trajectory that increases by a fixed amount each year, as does the McDermott tax, vs. one like Whitehouse-Schatz that starts high but rises only by small, percentage-driven amounts. See also how much more quickly emissions decline under either carbon tax scenario, compared to the Clean Power Plan and other regulatory policies forced on the Obama Administration by the recalcitrant Republican-controlled Congress.

As you work (play?) with the model, jot down your thoughts so you can tell us what works and what needs improving. Thank you.

Note: graphic at top has replaced similar graph that (confusingly) expressed carbon tax in terms of annual increments.

Last Week’s Democratic Platform Vote Was a Win for Carbon Taxes

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“Carbon and other greenhouse gases should be taxed at a rate high enough to spur the transition away from fossil fuels consistent with the temperature goals agreed to in Paris in 2015.”

That’s the carbon tax resolution that environmental activist Bill McKibben pressed the Democratic Party Platform Drafting Committee to adopt at its meeting in St. Louis last week. The proposal lost 7-6, as did allied resolutions opposing fracking and investments in fossil fuel infrastructure. Still, the vote is the latest step by carbon taxing on its march into the political mainstream.

Carbon tax campaigner: 350.org's McKibben

Carbon tax campaigner: 350.org’s McKibben

Befitting McKibben’s gift for concision, the resolution was scarcely longer than a tweet. But it spoke volumes: carbon emissions must be taxed; ditto, other greenhouse gases like methane; and the tax must be high enough to catalyze an energy revolution. Note also what the resolution did not say: that carbon should be “priced,” an expression that, though useful in its place, can be a weasel word allowing for cap-and-trade schemes. No, the proposal specified a carbon tax, straight up and robust.

Two Congressmembers on the panel were equally unambiguous:

  • “Taxing carbon is the most effective way to reduce carbon emissions. It will offset the massive societal cost of unchecked carbon emissions.” — Barbara Lee, California 13th CD
  • “This is a very market-y proposal. Companies aren’t internalizing all their costs, they’re externalizing them onto the rest of us. Shouldn’t they be responsible for covering the cost they impose on us? I think yes.” — Keith Ellison, Minnesota 5th CD

Those are pretty sophisticated arguments. Less so was this objection from Hillary Clinton surrogate Carol Browner:

The concern we have about a carbon tax is that it won’t necessarily achieve reductions. It will generate revenue, but it won’t necessarily achieve reductions because some companies will simply pay the cost. And what we want, and what we think is absolutely essential, is measurable reductions of carbon pollution in the air.

If it’s measurable reductions Browner wanted, she could have cast her eye at British Columbia, where a “starter” carbon tax of just $20 per ton of CO2 cut emissions in its first four years, although those cuts have stalled out, predictably enough, as the tax level stopped rising.

And anyone with a basic grounding in economic policy analysis will see right through Browner’s argument. Those hypothetical “companies [that] will simply pay the cost” of high-carbon energy won’t be around for long; they’ll be supplanted by enterprises that can provide electricity, manufacturing and transport more cheaply because they’ve heeded the carbon price signal and switched from dirty energy to untaxed clean fuels and efficiency. Households and businesses will also adopt sustainable practices that gain cost-effectiveness as the carbon tax takes hold.

Read our follow-up post, Time for Climate Advocates to Move Beyond the Clean Power Plan.

Bizarrely, Browner based her canard about carbon taxes — that they generate revenue rather than cutting carbon — in part on the failure of California’s cap-and-trade system. Presumably, Browner, a prime Democratic Party environmental apparatchik for over two decades, knows better. One can only imagine McKibben’s frustration as he saw carbon taxes tarred with the cap-and-trade brush.

Needless to say, Bill isn’t backing down, as he made clear in his post-mortem in Politico calling out the Clinton campaign for “obstructing change” by locking up the Democratic Party platform. While we’re sad that the carbon tax resolution didn’t pass, we’re pleased that McKibben not only drafted but fought hard for it.

Carbon tax proponents have long seen the logic in having Bill advocate for carbon taxes. Taxing carbon pollution jibes perfectly with the agenda of 350.org, the organization he has built into a formidable global grassroots force. No other policy tool both undermines the profitability of the fossil fuel industry and also leverages divestment (financially and culturally) from that sector.

McKibben’s leadership for carbon taxing in St. Louis — and, hopefully, beyond — is both heartening and important.

To View the Platform Committee Debate: The entire (10-hour) debate is on YouTube. McKibben’s opening argument starts at 5:39:20. Barbara Lee’s remarks begin at 5:45:25 and Keith Ellison’s at 5:45:50. Carol Browner’s objections begin at 5:47:30.

Analee Graig, an undergrad at SUNY-Binghamton, contributed reporting to this post.