So the SJC has decided that there’s absolutely no way for the state to wriggle out of the emissions caps in the 2008 Global Warming Solutions Act. Seizing the moment, some Senators are reviving interest in the cleanest, most economically-efficient and free-market-y way to drive down emissions: A carbon fee:
Under questioning from State Sens. Marc Pacheco, D-Taunton, and Michael Barrett, D-Lexington, both of whom support carbon pricing, at a hearing of the Senate Committee on Global Warming and Climate Change, Suuberg said, “We’re going to take a look at all of the strategies.”
Although Suuberg said carbon pricing, in which residents and businesses pay for the amount of energy they use, raises “cost issues,” but he declined to rule it out entirely before the administration has examined all its options. “We’re looking at everything right now,” Suuberg said. “We want to make sure we’re looking at the most cost-effective measures.”
Sen. Barrett’s refundable carbon fee — with proceeds going back to the public in the form of refund checks — is the approach favored by conservative economists like Greg Mankiw and former GOP Rep. Bob Inglis — in other words, people who recognize climate as an enormous concern, but distrust the ability and power of government to make decisions about allocating resources. If you drive up the price of carbon, people will find a way to avoid paying it, putting renewables on an equal footing with dirty fuels. The Citizens Climate Lobby has been pushing this for some years now. There is one that exists in British Columbia right now, and it has worked well at driving down emissions, with seemingly minimal economic disruption.
There are many concerns and complications with this approach.
- How do you equitably refund the proceeds? Is it fair? Is it regressive? Structure matters.
- There’s a good argument that the proceeds would be much better spent on efficiency programs, creating a virtuous cycle driving down emissions.
- If a tax/fee can be passed, it can be repealed. This happened in Australia. For all that cap-and-trade is messy and involves vested interests of all sorts, that web of permits, contracts, tax credits, etc. keeps stakeholders invested (literally) in its permanence and success. A carbon tax is a more of a pure political play, and constituencies can and do change their minds.
On the other hand, it may be that people come to enjoy the refund check from the state more than they mind paying the tax. In that case it becomes a politically safe “entitlement”, like Social Security. Keep your government hands off my carbon refund!
It’s funny how things work in politics: You work on something for years and years, nothing happens, it seems futile … and then suddenly the window of opportunity opens. Is this the moment for the carbon fee? Would the Governor support it? The Speaker?
1. You don’t refund the fees to ratepayers or citizens. Instead, you reinvest the fees into reducing carbon output from Massachusetts. You invest that revenue in energy efficiency programs for electric, heat, and cooling. You invest that revenue in subsidizing new renewable generation, especially PV on muni/county/state government roofs. You invest that revenue in job training for clean tech, thereby helping to drive down cost of carbon-cutting. You invest that revenue in sidewalks, bike lanes, mass transit, and telecommuting. You invest that revenue in electric vehicle charging stations. You invest that revenue in assisting cities and towns update zoning and land use policies to create lower-emitting built infrastructure.
Every single one of those investments in Massachusetts reduces the amount of money ratepayers/taxpayers will pay next year and every year thereafter in carbon fee. Importantly, every single one of those investments in Massachusetts creates middle class Massachusetts jobs.
2. Yes, yes there is, and not just energy efficiency programs (see 1).
3. That’s a great argument for either (a) cap and trade, or (b) refund check, rather than a carbon tax invested in (1) above. I’d be reticient if I didn’t point out that we already have a carbon cap and trade system, RGGI. It’s only for the electricity sector now, but as Connecticut, Delaware, New York, Rhode Island, Vermont and the District of
Columbia are exploring, RGGI expanded to the transportation sector makes a bunch of sense.
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My preference: expand RGGI to transportation pronto. It uses a program that works, has an expenditure pattern that works (RGGI does (1) focused on electricity now), multi-state provides greater global benefits and fewer people crossing the border to save a buck. Then, immediately start working on RGGI heating fuel.
While I agree with a lot of what stomv wrote above, one beauty of some sort of rebate is that people like getting those, and if properly handled, could entrench the fee politically. A carbon tax that is spent, ostensibly on efficiency programs, but in actuality by our legislature, leaves open the significant possibility that legislator’s buddies and family members will wind up being paid $$$$ to be on the board that selects what efficiency program to fund, or will turn out to be a semi-corrupt fundee, which leaves the whole thing politically vulnerable.
Sorry for the long sentence.
Maybe you could convince me per capita. But it should be simple and should not give special compensation to those who use lots of energy, which would defeat the purpose.
A household with ten individuals (Mom, Dad, five adult kids, Grandma, Grandpa, Uncle Mark) consumes a great deal more energy than a household with just one. If the ten-person household drives to work, they use a LOT more carbon than the one-person household.
I don’t like the idea of sending money collected from gasoline suppliers to either.
I’m not really bought into the dividend concept anyway. If I understand the concept correctly, then the amount of dividend checks will decrease as we collectively use less carbon. It sounds to me as though dividend checks create an incentive for residents to want to see more, rather than less, carbon consumption.
In particular, it seems to me that the contemplated dividends involve collecting funds from companies that use too much carbon and sending at least a portion of those funds to their customers. I think that sets up a different incentive structure than we want.
It seems to me that a basic principle of tax policy is to tax things we want to discourage and exempt things we want to encourage.
If we don’t want to use the the carbon tax proceeds to build transportation, then we might at least distribute prepaid MBTA passes or something comparable.