Sen. Michael Barrett has introduced a carbon fee+dividend bill. The intent is to put a price on carbon, and then immediately plow it back into household incomes in the form of a dividend from the state. This will put an economic “signal” on fossil fuels, discouraging their use, thereby encouraging conservation and clean energy — without diminishing people’s actual buying power. The bill is revenue-neutral: The only money the state keeps is that which is necessary to administer the program.
Where this has been tried, the economy has not suffered. Just the opposite, in British Columbia:
The British Columbia tax started at $10 per ton of carbon dioxide and rose $5 a year until it peaked out at $30 a ton. British Columbia officials said the tax works out to about 24 cents on a gallon of gasoline.
In British Columbia’s 2014-15 budget, officials said the carbon tax raised $1.2 billion, all of which went back to residents in the form of lower corporate and income tax rates and cash payments targeted at low-income people. The officials said a family of four earning less than $38,000 a year would receive a check for $300.
Michael Bernier, the parliamentary secretary for energy in British Columbia, said his province’s carbon tax has proven that government can tax carbon and reduce greenhouse gas emissions without harming the economy. He said fuel use is down 16 percent in British Columbia since the carbon tax was imposed (fuel use is up 3 percent across Canada, he said) while the province’s gross domestic product is up 9.2 percent. “You can have both,” Bernier said.
via British Columbia officials say carbon tax is working – CommonWealth Magazine.
This mirrors the local economic effect of the Regional Greenhouse Gas Initiative, which has boosted the regional economy and created jobs.
Fossil-fuel-poor Massachusetts might be one of the best places to implement this. Money that we spend on fossil fuels is whisked out of the state, whereas energy conserved keeps money in your pocket. And clean energy tends to be local energy — so local it might be on your roof.
Possible concerns include regional equity, and whether the fee is progressive, and the already high cost of energy in this region. Barrett’s bill does stipulate that residents of designated “rural areas” — those presumably more dependent on gasoline — would receive a 30% higher dividend. And I would like to see attention paid to insulating (hah) lower income residents from the effects of the fee.
Massachusetts already has high energy prices, being at the end of gas pipelines. But building more gas pipeline capacity is like treating a heroin addiction with a bigger needle, compromising our ability to move off of fossil fuels. Again, if the fee boosts conservation and renewables, in the long run it would make local energy abundant, bringing down energy prices.
Finally one might wonder how little Massachusetts, possessing only 6.5 million people, can affect global warming. Of course, we can’t control it in isolation; but we are not alone. If the new EPA rules stand, many states will move into carbon markets like RGGI. California (pop. 38.8M) out of necessity has become an efficiency leader. Germany created demand for the international renewables market simply by force of political will. We’re not alone, not by any stretch.
Stopping an irreversible climate catastrophe requires an all-hands-on-deck approach. The carbon-fee is one thing that we can do, that happens to strengthen the local economy as well.
paullauenstein says
A fee-and-dividend carbon tax would provide an incentive to use less fossil fuel. It would benefit those who shrink their use of fossil fuels and hurt those who use more fossil fuels. Given the gridlock in Congress, a state-by-state approach might be the only way to get this done.
jconway says
This is an approach tailor made for a moderate Republican. It’s revenue neutral so it doesn’t raise any taxes, puts money in blue collar wallets, and actually utilizes the market rather than government to reduce emissions. This is the kind of thing he should be jumping on. Time for him to put his money where his mouth is on climate change.
Charley on the MTA says
GOP former US Rep Bob Inglis just won the Profiles in Courage award for a. giving a damn about climate change, and b. calling for a carbon tax as an economically “neat” way to curb carbon usage. (Inglis has heaped scorn on Waxman-Markey, the climate bill that passed the House but died in the Senate at least partially because of Scott Brown.)
Conservative-ish economist Greg Mankiw is also for a carbon tax, as are many other conservatives that don’t happen to be in Congress right now. Hm.
jconway says
Becker and Posner backed it in their blog, Will Cochrane and Richard Epstein both endorsed it on my radio show, as did Charlie Wheelan when he unsuccessfully ran to replace Rahm in Congress. It’s one of those conservative ideas like mandating health insurance coverage that has become a heresy in this political era.
historian says
I hope Barrett can make some headway. Has DiLeo made any utterances on this?
stomv says
That’s nonsense. Greenhouse gases have the same impact whether they come from rural or urban areas. In the mean time, while it’s true that folks in rural areas typically have higher energy usage, it’s also true that they typically have far lower housing costs. Sure, my household transportation costs are ~$2500 or $3000 a year (two adults), but I could buy four similarly sized homes in a rural area of the state for the price of mine in an urban area.
Don’t get me wrong, I believe that a carbon tax is a regulatory policy that will help reduce carbon emissions. Personally, I’d like to see some of the revenue go directly towards energy efficiency for both heating and electric use. I’d also like to see some of the revenue go toward low- or no-carbon transportation, such as pedestrian, bicycle, and public transit facilities. If we use the revenue to make it easier for people to avoid paying the tax in the first place, we’ll be both putting the money back in their pockets and have more effective and rapid reduction of carbon emissions.
SomervilleTom says
Not only is the rural exception unfair, it creates an incentive for the precisely wrong behavior:
1. Because, as you observe, housing costs are so much lower, the effect of this is to subsidize urban residents to move to rural areas.
2. This encourages existing and new rural residents to become even more dependent on fossil fuel than they already are.
3. By artificially reducing transportation costs, it encourages existing and new rural residents to choose jobs that require lengthy commutes, rather than developing new workstyles that allow residents to work near their homes.
4. By encouraging commuting, it further erodes already struggling local villages, towns, and cities. When residents work far away, they also shop, eat, and purchase sundries far away. This encourages “ex-urban sprawl” as commercial centers grow around automobile-centric interchanges and exit ramps rather than where people live.
The rural exception should be removed from this otherwise attractive proposal.
jconway says
If it helps it pass I don’t particularly care. I think you have to go revenue neutral in this tax averse environment, and frankly, as was the case in BC, it’s a great step forward for basic income-a policy progressive should be jumping on the barricades to support. And I think you need a rural exemption to get Western MA legislators to back it, otherwise it becomes another ‘Beacon Hill ignores us’ kind of issue.
That said, I think you could inverse the idea of an exemption and simply double the revenue they get back. Rural folk get a bigger rebate. That would be the better way to tweek it, though we might run the risk of diverting funds from other sources to pay for it.
Christopher says
It takes rural areas to both grow crops and raise livestock. Even though I’m not a fan of living in the boonies myself I have never understood and disagree with the apparent demonization of people who would rather live a little more spread out in these discussions. What we should be doing is working toward cleaner and more efficient energy sources. While I want to do more for the environment the judgementalism around this issue is both unattractive and a political loser.
stomv says
Come on. A remarkably small number of people who live in rural Massachusetts are farmers.
Reread s’tom’s comments. (1) is about how low fossil fuel costs puts the squeeze on farmers because their land use now competes with folks who want to live on 5 acres and drive to the city to work. Same goes for (3), and, to the extent that rural centers suffer due to cheap fossil fuels and that harms the rural residents (like farmers!), (4) as well.
s’tom’s comments are in a large part about how cheap fossil fuels harms farmers.
SomervilleTom says
I love farmers. Some of my best friends are farmers. Nothing I wrote demonizes anybody.
Like it or not, using fossil-fuel energy for ANYTHING — transportation, agriculture, heat — has a very real environmental cost. It is not “judgementalism ” to insist that we be realistic about that cost.
This reminds me of the discussions around the fisheries, where the hard-nosed reality is that we have killed the fisheries, and around flood plains, where the similarly hard-nosed reality is that sea levels are rising.
If our political system cannot handle reality then our political system is broken.
Charley on the MTA says
Public transit. The MBTA and other RTAs. Would reduce carbon emissions and help local economies, giving people a lifeline to jobs.
Is that a more attractive/popular/feasible idea than the rebate? I doubt it. But it’s never been floated.
jconway says
If your goal is to reduce emissions the carbon tax is the best way to do this, having the rebate gets you to passage in our “no new taxes” climate with the Governor and legislature we have. This bill could pass today, and the rebate would help spur the economy and lay he foundations for basic income like BC. Two birds with one stone. Public transit ridership increased in BC since even with the rebate, folks got sticker shock seeing he true price of carbon and choose alternatives. Obviously you and stomv have ideal plans and this falls short of it-but it’s a progressive plan that can pass today. And you know better than most folks here that time is not on our side.
stomv says
One way to do both is to divert some of the inside-128 rebate directly to the MBTA. Now you’ve got the same carbon tax everywhere, rural folks get more cash back, Boston Metro gets better MBTA.
What about Gateway Cities? What do they want? Money like rural? Transit like urban?
jconway says
Now you just got buy in from a whole host of non-MBTA based stakeholders to support the MBTA, that is a very well designed policy fix stomv!
paulsimmons says
Below is a partial quote from S1786: