Two significant events this week are transforming the debate in Massachusetts about how we should move forward in fighting climate change, and made it clear that we have to do more.
First, the Boston Globe drew attention to the recent report from ISO, the region’s power grid operator, that carbon emissions from New England’s power plants actually increased in 2015 over the previous year by 5 percent, the first year-to-year increase since 2010.
Emissions had declined by about 25 percent in the last 15 years, largely due to the closing of the state’s coal plants and to energy efficiency improvements. But the region has lagged behind California and other places in shifting toward renewable energy such as wind and solar, and instead has become overly dependent on natural gas with its volatile supply and price. When the carbon-neutral Vermont Yankee nuclear plant closed in 2014, the energy was replaced with a 13 percent increase in natural gas-generated electricity and that dependence has increased even further.
Exactly the wrong direction at a time when Massachusetts already was unlikely to meet its 2020 deadline to reduce its global warming emissions by 25 percent below 1990 levels, a mandate established in the 2008 Global Warming Solutions Act (GWSA). Too many opportunities to accelerate a shift away from fossil fuels have been bypassed, and it has been too easy for the Governor and the legislature to punt on the issue and hope that things will somehow work out.
Just yesterday, the Supreme Judicial Court unanimously delivered its verdict on that timidity. The court’s clear and unambiguous ruling was that the state must comply with the GWSA mandates by implementing regulations that “address multiple sources or categories of sources of greenhouse gas emissions, impose a limit on emissions that may be released … and set limits that decline on an annual basis.”
The ruling was a victory for all those who want the state to build a stronger, more resilient economy on a foundation of locally-generated, reliable renewable energy that makes us safer and healthier. But the ruling also leaves the state in a quandary.
Current energy proposals in the legislature – many included in a still-developing energy omnibus bill that incorporates proposals from Governor Baker and legislators – are alone unlikely to bring the state into compliance with the 2020 requirements, and certainly not with the much tougher mandate to reduce emissions by 80 percent below 1990 levels by 2050. In a state that has prided itself on national climate change leadership for many years, we are slipping, still not being bold or aggressive enough to address one of the worst challenges we have ever faced.
Fortunately, there is another policy we can implement – incorporated in two bills now in the legislature – which has been successful all over the world in both reducing greenhouse gas emissions and strengthening the economy, and one that will be make almost every other environmental and energy policy we have, or might adopt, more effective.
Carbon pricing – charging fossil fuel importers a fee based on how much carbon dioxide pollution a fuel releases when burned – accomplishes several goals at once. It corrects what economists across the ideological spectrum have called a “massive market failure.” It sends a clear price signal that the social costs of fossil fuels – such as increased respiratory disease and extreme weather events – will no longer be hidden in our tax bills and insurance premiums but instead will be clearly reflected in the price of energy and products so we can make better, more reliable decisions about what to buy and where to invest.
Effective carbon pricing systems – such as the one in British Columbia which served as a model for the policy now being proposed in Massachusetts – have a strong track record of significantly reducing emissions – 16 percent in British Columbia since its adoption in 2008 – while replacing imported fossil fuel and stimulating local renewable energy with its locally-grown businesses and jobs. Massachusetts sends more than $20 billion every year out of state for the fossil fuels that are damaging our environment and health, and threatening our property and our lives. Keeping more of that money in the state would make us stronger.
Two current proposals at the State House would create a common sense carbon pricing system in Massachusetts. One proposal, S. 1747, would charge fossil fuel importers a carbon fee. The revenues from those fees would go into a special dedicated fund for rebates, and be passed on directly to households and employers in order to minimize any increased costs in living and doing business. Each resident would receive an equal rebate from the fund.
Since low- and moderate-income households tend to use less energy than wealthier ones, on average they would come out ahead, but everyone would have an incentive to reduce their use of fossil fuel in order to pay less in fees. Businesses, nonprofit organizations, and municipalities would receive a dividend from the fund based on their share of the state’s employment.Another developing proposal – S. 1786 – follows a similar model but would invest a small portion of the funds in clean energy and public transportation.
Research by the state’s Department of Energy Resources found that this kind of carbon-fee-and-rebate policy would have the single greatest impact in reducing greenhouse gas emissions – provide the biggest bang for the buck – among the policies currently in place or anticipated. That is the kind of policy Massachusetts leaders must now embrace. It is time for bold leadership.
Rebecca Morris is Director of Communications of the Massachusetts Campaign for a Clean Energy Future, a coalition of organizations supporting the implementation of carbon pricing in the Commonwealth.
stomv says
Both S. 1747 and S. 1786 give all (or most) of the money directly back to residents as rebates. I think this is half baked.
RGGI is our regional greenhouse gas cap and trade system. Massachusetts collects a big chunk of change, and you know how much we give back to ratepayers? None. At least not directly. Instead, we give it back to ratepayers in the form of energy efficiency programs. We invest the revenue from the carbon price into techniques that reduce carbon emissions, in a rational, bang-for-buck based process.
Why not do the same with S. 1747 and S. 1786? Why not invest the revenue in subsidizing thermal EE (insulation, windows, etc.)? In subsidizing new renewables? In subsidizing mass transit? In subsidizing improved local policy for smart growth, sidewalks and bike lanes? Why not invest the revenue in Massachusetts? Why not invest the revenue in creating local middle class jobs rather than allowing for one more Amazon purchase? Why not invest the revenue in cutting carbon? Because I’ll tell you what, if researchers at DOER found that tax and rebate provides “the biggest bang for the buck” it’s only because they didn’t consider the model I just described at all.
jconway says
On Vancouver/BC the rebate made pricing incredibly popular and offset the sticker shock when costs go up. It’s also a nice universal cash transfer program and we can use it as a pilot for UGI or a NIT.
stomv says
Sure the rebate is popular. So was GWB’s check he mailed to every household. It doesn’t make it good policy.
I think the rebate comes out of Democratic politicians being too wimpy to just pursue great public policy. They’re watering it down before the debate even happens, under the misguided (and sometimes Obama-esque) idea that if they pre-negotiate to the Republican position that they’ll just get it done. It’s foolish IMO.
Argue to invest the whole tax revenue into carbon cutting measures. Then, if you need to compromise to get it done, you go the New Hampshire RGGI route and give it back to the ratepayers. But don’t give it away early. It’s negotiating with ourselves to present a worse public policy proposal.
jconway says
The rebate accomplishes this in three distinct ways:
1) It protects working class taxpayers from the change
A carbon tax will lead to higher prices on gas and the other goods and services that depend on the carbon economy and the rebates are a great way to ensure those folks at the bottom of the economic ladder aren’t hurt by this policy and can even benefit from it and support it.
2) It ensures the tax has one goal: properly price carbon
A Chicago hotel bill has five different taxes that five different entities charge on top of the bill leasing credence to the Beatles charge that the tax man would “tax the street” if he could. It’s an example of a state so poorly
mismanaged that it’s taken taxes that once had noble intentions and raises them exorbitantly just to confiscate more revenue from working people.
A revenue neutral carbon tax is passed once, and properly prices carbon. Making it a revenue raising tool will make it just another scheme like casinos, lottery, cigarette tax, etc. for politicians to raise taxes on consumers instead of the wealthy, and to take vice taxes that are supposed to let us pay for the social costs of a given activity and then them into unlimited coffers. So philosophically if you want to price carbon than price carbon.
3) No way it passes if it’s not revenue neutral
A modest gas tax indexing bill was too complicated and too much of a price increase for MA voters. The BMG hive mind reacted to that by blaming the voters rather than realizing why the policy was unpopular and proposing a policy that could pass. This could pass. Baked could conceivably sign something like this and the ads could emphasize the rebates so voters are voting for money in their pockets instead of voting against it. Most voters don’t care about climate change or the environment and they won’t no matter how much we “educate” them on it, but they will vote for free money over a tax any day.
If far more progressive electorates like Canada’s or Nordic countries couldn’t pass a revenue generating tax than we won’t. Revenue neutral is the only carbon pricing scheme that has actually been passed in the real world. BC’s is widely popular and has been wildly successful at achieving its goal of reducing emissions and use. We should wisely follow the example of practices that worked in the real world rather than make this yet another front in the philosophical war over taxes and revenue.
We can solve the revenue problem with the millionaires tax. Let’s just tackle climate change with this tax.
stomv says
False.
The goal is to reduce carbon emissions. One method to do that is to increase the price consumers pay for carbon emissions. Another method to do that is to use government subsidies to reduce the price consumers pay for a low/no carbon emission alternative.
They both work. A carbon tax that returns the revenue to ratepayers only employs the first method. A carbon tax that invests the revenues in carbon-cutting measures employs both methods and is necessarily more effective per dollar of carbon tax collected. There’s also plenty of prior art: it’s what Massachusetts does right now with RGGI revenue. Which gets me to
But we already have. See: RGGI. And yes, it’s not a tax, it’s a fee, yadda yadda. The point remains. If the goal is to cut carbon, using the revenue to cut carbon means we (a) reach our goal more quickly, and (b) reduce the dollars in taxes we’re assessing on the population more quickly, because carbon emissions will be reduced more quickly.
jconway says
And certainly we could use the revenue to help use greater rebates or subsidies for consumers to encourage them to consume less. I do think you need the rebates to offset the initial shock of higher prices for working class people and to get their buy in.
It’s gateway communities and blue collar suburbs that voted down the gas tax indexing by the highest margins, though it was widely unpopular everywhere outside of the predictably most liberal communities (our three hometowns, Newton and the pioneer valley college towns).
So the rebates would help with that, provide a nice universal benefit to all residents making a UGI or NTI more palatable down the road and helping ease the stigma of EITC and EBG utilization. It’s a win win.
stomv says
I recognize that getting the thing passed will require trades and watering down.
I just don’t understand why the proponents are voluntarily watering it down now, rather then compromising when the time comes.
jconway says
I know the Barrett bill pre-compromises but I believe there was one that didn’t floating around the House. I can see Baker actually signing a carbon pricing scheme that was revenue neutral, or voters approving of it at the ballot, I don’t see the other proposal passing. It sounds too much like a tax.
stomv says
but why not move Overton’s window when public policy and sound economics are on your side?
SomervilleTom says
I don’t know about Chicago.
I do know about Massachusetts. Our taxes are too low. The voter rejection of the gas indexing bill reflects a failure of our political system to acknowledge plain and well-documented facts. It reminds me of a similar failure, at the national level, regarding policy towards climate change.
I agree that our political process must acknowledge the reality of however well- or ill-informed the electorate is. Nevertheless, facts are facts and some of those facts are politically unpopular. In my view, the BMG hive mind blamed voters only to the extent that we stated clearly the facts of the situation.
One fact is that our taxes are too low. Another fact is that residents of Western Massachusetts are overly dependent on fossil fuels. A third fact is that our current government policy reinforces that dependency by keeping gasoline prices artificially low. A fourth fact is that the changes that we MUST make are pervasive and are likely to fall on low- and middle-income residents.
That fact is exhibit A in why we MUST therefore find a way to increase the tax burden of our wealthier residents. We get to choose who pays the price for the changes we must make. We do NOT get choose whether or not those changes are needed. The longer we defer those changes, the more expensive they get.
We cannot solve the revenue problem with the millionaires tax, as currently formulated, because it targets ONLY income. I am getting weary of reminding us that income is NOT wealth. I’m reasonably certain that Abigail Johnson (the wealthiest resident in Massachusetts, according to Forbes) will not be affected by the contemplated millionaires tax — she will simply have her money-people adjust her portfolio and compensation plans as needed to reflect Ms. Johnson’s view of what her tax obligation is. The same source estimated the 2015 net worth of Ms. Johnson as $4.2 B. If Ms. Johnson paid the same 5% rate on that FIVE HUNDRED MILLION DOLLAR increase in net worth as the rest of us, she would have a Massachusetts tax bill of $2.5M on just that increased net worth alone.
Does anyone here believe she actually paid anything approaching that? Does anyone here join me in my disappointment that the state provides NO information about what our wealthiest residents collectively paid in taxes? I suggest that the top quintile, by wealth, of Massachusetts residents should pay, in aggregate, more in 2016 than they did in 2015. I suggest that the amount of this increase should be about 5% of the increased wealth of this cohort during the year. It would be nice if the state published the data allowing this calculation to be performed. To my knowledge, it does not.
Even with the millionaires tax, we will still need WEALTH taxes. We will still need significant increases in the gift/estate tax. We still need significant increases in the capital gains tax.
I disagree that we should partition “the revenue problem” from climate change. Our revenue problem cannot be separated from our wealth concentration problem, and our climate change issues cannot be solved by forcing the 99% to pay the price while the 1% continues to plunder the rest of us.
A final fact that cannot be contested is that the IMPACT of climate change will fall disproportionately on our low- and working-class population. The voters that rejected the modest gas tax increases will be paying catastrophically higher amounts as the effects of our collective carbon emissions hit home. We know that climate change will produce more frequent and more intense weather events such as tornadoes. We know that already-suffering Springfield still shows the unhealed scars of just one tornado in 2011. Such storms will only increase in frequency and intensity.
The plain fact remains that the residents of Western Massachusetts can pay now or they can pay later.
jconway says
From a policy standpoint we surely agree. I think a big issue is that Western and Central Mass voters aren’t really seeing any wise investment in their regions infrastructure or transit needs in the present situation and won’t believe you when you promise it in the future if they pay higher taxes now. I also think treating gas usage like tobacco use is a bad corollary.
It’s not a vice tax, it’s a utilization fee and we can use the rebates to offset the costs for the occasional joe plumber who actually needs a truck for his job. And they do exist, half of my uncles are in the trades and require trucks for their jobs.
Chicago, IL is the highest taxed municipality in the country. All regressive consumption taxes with no exemptions. It made me realize Massachusetts was actually a bargain, especially since I felt that our schools and roads were better despite having lower revenues. IL is also a failed state like Venezuela where crony capitalism fueled by state funds has run its course. So it’s apples to oranges, I am saying they people generally like higher taxes if they feel they see the benefits. They won’t see the benefits of lower emissions, it’s too abstract, so giving them a rebate check is an easy way to make this lei if scheme permanent and popular. Worked in BC. Worked in the EU. It would work here. Non revenue neutral carbon taxes haven’t been implemented anywhere AFAIK.
SomervilleTom says
The facts are clear. The science is compelling. We are assisting the residents of Western MA in their own destruction by encouraging them to expand their fossil fuel addiction.
I agree that those residents don’t believe the statements. That is an indictment of our decades-long long culture of corruption on Beacon Hill. The answer is to remove the corruption. In the meantime, the problem is here and now. We currently subsidize a lifestyle that is already causing our mutual destruction. Pretending otherwise is hypocritical and dishonest.
Did you watch the clip at the end of my comment? My comparison is to “deferred” maintenance rather than to tobacco use. Anyone who has owned a car and attempted to “save money” by not changing or replenishing the oil (because oil is “so expensive”) knows the consequences.
Your uncles and the occasional Joe Plumber are going to have to budget for higher costs for their vehicles and/or their fuel. Perhaps each will choose a hybrid truck when they become available in 2020. Realistically-priced gasoline encourages demand for such vehicles, and doesn’t depend on honest government to do so.
George W. Bush also thought a rebate check would work. It didn’t.
Your commentary rejecting the gas tax reinforces my perception that, when push comes to shove, the UIP is not willing to face inconvenient facts about our taxes and our economy.
The facts about the needed increases in gas and carbon taxes are clear — the task of finding a winning political argument falls on those who advocate effective government. A political system that cannot accomplish these increases is a political system that has failed.
petr says
… they want ‘vision’, which — by its very definition — is a long term view: a seeing into the distance, past obstacles, into solutions and even unto the gestation of new worlds.
They can have that. Or they can have ‘winning political arguments’ which, as far as I can tell, is limited to the upcoming election cycle and no further.
They can’t have both.
Citing this in the context of ‘winning political arguments’ is like pushing the cart over the hill as you slaughter the horse. The argument you make has nothing to do with the saliency of the proffered political argument, and everything to do with the perspicacity (or lack thereof) of the voters. No political argument is a ‘winning’ argument if the voters are too stupid, or too pigheaded, to see past their own immediate gratification. Citizenship has responsibilities commensurate with the rewards.
Andrei Radulescu-Banu says
One benefit of a carbon tax, if done right, is that it will set in place the tracking system necessary to drive policy decisions on actual generation and consumption of energy. But to achieve the lowered emissions, there will have to be a lot of directed policy to achieve that – which comes with all the risks and political jockeying inherent with top down economic planning.
stomv says
We already know an awful lot. We know what fossil fuels are burned by what power plants, to the hour, courtesy of the EPA. We know gasoline purchases with high degree of fidelity courtesy of state and federal gasoline tax. Natural gas is a regulated utility, so we know industrial, residential, and commercial consumption with significant granularity.
Andrei Radulescu-Banu says
In general the consumption records are poorer than generation records. Heating oil use is not tracked; gasoline is tracked in aggregate not per consumer.
stomv says
There is heating oil data out there — it’s disjoint and opaque, but it exists. As for “per consumer” tracking, so what? A carbon tax isn’t going to do that either.
How does a carbon tax point to tracking consumer-level consumption?