Carbon Pricing: an Idea Whose Time has Come

January 30, 2018

carbontax

Or at least an idea that keeps creeping in under the doorjam.

While the President’s broadcast from an alternative dimension celebrated the end of the “war on beautiful clean coal”, here on Earth, momentum increases to move to the energy of the future.

One of the key results of recent elections in New Jersey and Virginia will be new proving grounds for carbon pricing in the laboratories of democracy.  West Coast states moving ahead, as well as Canadian provinces.

New York Times:

WASHINGTON — Even as the Trump administration dismantles climate policies at the federal level, a growing number of Democratic state governors are considering taxing or pricing carbon dioxide emissions within their own borders to tackle global warming.

New Jersey took a major step in that direction Monday, when newly elected Gov. Philip D. Murphy, a Democrat, ordered his state to rejoin a regional carbon-trading program that his Republican predecessor, Chris Christie, had pulled out of in 2012.

The program, known as the Regional Greenhouse Gas Initiative, requires power plants in participating states to buy permits for the carbon dioxide they emit. State officials often use revenue from these permit auctions for energy efficiency programs.

In a so-called cap-and-trade program like this, power plants can trade the carbon permits among themselves, but the overall number of permits dwindles steadily over time. That effectively raises the cost of emitting carbon dioxide, prodding utilities to seek out cleaner sources of electricity.“

Pulling out of R.G.G.I. slowed down progress on lowering emissions and has cost New Jerseyans millions of dollars that could have been used to increase energy efficiency and improve air quality in our communities,” Mr. Murphy said. He estimated that New Jersey had foregone $279 million in permit auction revenue because of Mr. Christie’s withdrawal.

“Five years ago, New Jersey faced Superstorm Sandy,” he added. “That storm and the devastation it brought to our state was an all-too-real look at our new normal if we do not take climate change seriously.”

Nine other states have already imposed a price on carbon dioxide emissions from power plants through R.G.G.I.: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont. Separately, California has its own cap-and-trade program that covers not just power plants, but factories, oil refineries and more.

More states could soon join the carbon pricing bandwagon, a trend that many observers see as partly a reaction to the Trump administration’s unwillingness to act on global warming. Last year, in Virginia, former Gov. Terry McAuliffe ordered regulators to explore a cap-and-trade program for the state’s power plants. His successor, Gov. Ralph Northam, has vowed to continue the process, although a separate proposal to link Virginia’s program with R.G.G.I. would likely need to go through the legislature.

In Oregon, state legislators have introduced a bill to create their own statewide cap-and-trade program that might eventually be linked up with those in California, Ontario and Quebec.

And in Washington State, Gov. Jay Inslee, a Democrat, has proposed a direct tax on carbon dioxide emissions from all sources in the state, with the price starting at $20 per ton of carbon dioxide and rising over time. While some of the revenue from the tax would help offset the state’s budget deficit, much of it would be earmarked for clean-energy investments, projects to help the state adapt to floods and wildfires, and programs to cushion low-income residents from increases in energy prices.

NewJersey.com:

Reversing yet another policy of predecessor Chris Christie, Gov. Phil Murphy on Monday announced he’s returning New Jersey to a regional pact designed to fight climate change.

Murphy, a Democrat, signed an executive order to begin putting New Jersey back into the Regional Greenhouse Gas Initiative, a multi-state cap-and-trade agreement that Christie, a Republican, shunned as “gimmicky.”

“Leaving RGGI, as it is called by most, made us an outlier in our own neighborhood,” Murphy said during a news conference at the SeaStreak ferry in Highlands. “It signaled a retreat from a comprehensive and collaborate effort to curb the carbon emissions that contributed to climate change.”

“It was a decision that, frankly, lacked any common sense,” he added about Christie’s 2012 move to pull New Jersey out of the pact.

Under RGGI, power plant operators have credits for the amount of carbon dioxide that they emit. The power plant operators buy the carbon credits at quarterly auctions.

The proceeds from the auctions are used to fund renewable energy and energy efficiency projects throughout the member states.

Christie explained that he pulled New Jersey out of RGGI because it was “not effective in reducing greenhouse gases and is unlikely to be in the future.” Christie also argued that the program led to increased energy costs for New Jersey residents.

But Murphy — who was sworn in Jan. 16 to succeed Christie — said that while New Jersey had long been a model for environmental policy, the state “lost that part of our soul” under his predecessor the last eight years.

The new governor argued that returning to RGGI was needed because New Jersey is a coastal state that’s vulnerable to climate change — especially just five years removed from Hurricane Sandy.

Carbon Brief:

China’s greenhouse gas emissions are the highest in the world and are estimated to have risen by around 4% last year, halting several years where they flatlined. It burns more coal than the rest of the globe put together.

Alongside other policies to cut emissions, China has long had plans to create a national carbon market. First floated in the country’s 12th Five-Year Plan in 2011, plans to roll out a nationwide scheme in 2017 were confirmed by Chinese President Xi Jinping in a US-China joint climate statement in the run-up to the Paris climate summit in 2015.

In January 2016, a notice to industries set out the steps they should take to prepare for the national scheme. This notice was circulated by China’s National Development and Reform Commission (NDRC), the state agency tasked with developing the ETS. Draft plans covering three sectors were then set out for consultation with industry and other government departments in May 2017.

On 19 December 2017, China released an initial framework for the first nationwide phase of the ETS, just inside the deadline set by the president’s 2015 pledge. This was the first document with final approval by the state council, the country’s chief administrative authority. (Note that Carbon Brief is relying on an unofficial translationof this framework plan, published by crowdsourced translating website China Energy Portal).

Initially set to cover more than 3bn tonnes of CO2 from the power sector, the carbon market will be the largest in the world and close to double the size of the next largest, the EU ETS. Once operational, it will mean around a quarter of global CO2 emissions are covered by carbon-pricing systems.

In developing its plans, China has reportedly been very conscious of the issues affecting other emissions trading schemes. It has conducted extensive discussions with representatives from schemes in California and the EU, in an effort to learn from their mistakes.

According to Jeff Swartz, director of climate policy and carbon markets at the South Pole Group and previously director of international policy at the International Emissions Trading Association (IETA), these include the need to have good emissions data and to set a conservative emissions benchmark from historical data. He tells Carbon Brief:

“The government in China has studied this clearly: there are traces in the plan to make sure the cap is set appropriately. They have understood the mistakes in Europe.”

 

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22 Responses to “Carbon Pricing: an Idea Whose Time has Come”

  1. davefinnigan Says:

    For a detailed and award-winning plan for a revenue neutral, rising fee on GHG emissions that will steer the economy to a low-carbon future and re-establish US climate leadership, see the Proposal by Citizens Climate Lobby, which just won the Popular Choice Award in the MIT Climate Colab contest entitled Carbon Pricing 2018. https://www.climatecolab.org/contests/2017/carbon-pricing/c/proposal/1333986

    • greenman3610 Says:

      watch for upcoming video, touches on this topic

    • Gingerbaker Says:

      OK, I fell for it again.

      And I went to davefinnigan’s link about “carbon pricing’.

      And it is, sad to say, the same old gobbledygook:

      * It’s a carbon tax.

      * Explained with a preface about recouping external costs of FF’s, and then never addresses the fact that it will do ZERO about actually recouping these external costs (this is the first hint this is a brain-worm, not a rational idea)

      * It is incredibly vague – there are zero specifics

      * It doesn’t give any idea about whether it any money raised is going to be used for anything at all, or just returned to consumers

      * It is just chock full of economist-speak, jargon. It repeats itself ad nauseum on all the good things it will do, despite the fact that it NEVER defines what those things are going to be

      Oh, frack it – I could go on and on, but frack it. Peter – the world need as honest conversation about whether a carbon tax is a good idea or not. Every time they have been tried, they have failed, including , now, in British Columbia, the former poster child for carbon tax success.

      I do not see how – when we actually parse specific proposals – a carbon tax can be proposed that can actually work as intended.

      And nowhere, at any time, in any place, has any so-called carbon tax been shown to be effective as targeted subsidies in producing new RE infrastructure.

      Presenting more self-congratulatory hype about carbon tax by a group advocating carbon tax is not helping our national conversation at all, Peter. We need a REAL conversation about this topic. Not propaganda.

      A REAL conversation with specific proposals analysed pro and con. An honest accounting of all previous carbon tax failures and why they happened and how that can be avoided in new proposals. A comparison vs targeted subsidies.

      Because, in the U.S., we can NOT have both – subsidies will be all killed as a prerequisite to whatever carbon tax the Republicans will allow. So you had better be CERTAIN any carbon tax can work at all, and if so, what specifics are essential for a carbon tax to actually work.

      Because all this hype about a carbon tax is dangerous as hell to our futures, Peter, if it doesn’t work. And right now – there is NO indication that it works. Clanging a drum on that bandwagon is not being responsible.

      • funslinger62 Says:

        And the broken record is playing again.

      • funslinger62 Says:

        I’ve already informed you about a book that very succinctly describes why a carbon tax is the best single solution to the problem. It doesn’t have to be the only solution, but it will be the most effective one.

        • funslinger62 Says:

          The book does a very good comparison to other policies to show why a carbon tax is the best solution.

          • Gingerbaker Says:

            Great!

            Please summarize the plan for us all. With specifics.

            So we all can agree with you.

            And sing your praises. Over and over again.

            Like a broken record.

          • funslinger62 Says:

            Why should I waste my time? The link provided by davefinnigan is just such a plan. You apparently didn’t understand it.

          • Gingerbaker Says:

            I read it, and wrote my first post here about it.

            It leaves all specifics to Congress to be determined later. (LOL!)

            It makes makes FF’s more expensive to the consumer, because the carbon fees on producers are allowed to raise the price of the FF.

            Then proposes rebates to consumers. Many will not be getting back what they pay in, a recipe for disaster and new hatred of renewable energy.

            So, we are left with a regressive tax which puts zero economic pressure of the entities which make macro decisions about renewable energy. There is not the slightest scintilla of assurance that any of these moneys will result in a single dollar of new RE investment. And an unspecified amount of those moneys will be lost to “overhead” costs.

            Tell me where I am wrong.

  2. rhymeswithgoalie Says:

    Gingerbaker: “Please summarize…with specifics.”

    My laugh for the day.

    • Gingerbaker Says:

      I don’t see the humor. Everybody has only a vague notion of what the term means to them. And definitions vary all over the place.

      What we need to see is, for each definition, how large a tax, on who does it fall; can that cost be passed on to someone else. Are monies paid back to consumers, are they collected for every transaction. On what products do they cover. Where does the money go? Why must it result in new RE infrastructure.

      Frankly, what I have encountered, most every plan makes no sense, because the costs fall onto those who do not make decisions about multi-billion dollar infrastructure investments. That’s why a summary can work with a few details.

      C’mon – if you have actually thought this through, you can cover it in a few paragraphs. The problem is, almost nobody think it through past some simplicity they think they remember from Economics 101.

      • funslinger62 Says:

        Apparently, you didn’t read davefinnigan’s link.

      • funslinger62 Says:

        The plan at the link is:
        A $15/ton carbon tax added at the point where carbon products first enter the market. This price increases by $10/ton per year until carbon is an insignificant factor in production.

        All revenue from the tax should be distributed back to consumers in an equitable way that counters the regressive nature of the tax. No revenue outside of the administrative costs of implementing the tax stay with the government.

        To make the tax more politically palatable all carbon based regulation and all energy subsidies should be eliminated. Read the linked book to see how a carbon tax compares favorably to regulations and subsidies.

        • Gingerbaker Says:

          As I said above:

          It leaves all specifics to Congress to be determined later. (LOL!)

          It makes makes FF’s more expensive to the consumer, because the carbon fees on producers are allowed to raise the price of the FF.

          Then proposes rebates to consumers. Many will not be getting back what they pay in, a recipe for disaster and new hatred of renewable energy.

          So, we are left with a regressive tax which puts zero economic pressure of the entities which make macro decisions about renewable energy. There is not the slightest scintilla of assurance that any of these moneys will result in a single dollar of new RE investment. And an unspecified amount of those moneys will be lost to “overhead” costs.

          And now, you confirm my worst fears when you say:

          ” all carbon based regulation and all energy subsidies should be eliminated”

          This proposal could not possibly do a better job at highlighting my criticisms of carbon taxes. Thanks for your help in promoting it. 🙂

          • funslinger62 Says:

            “Then proposes rebates to consumers. Many will not be getting back what they pay in, a recipe for disaster and new hatred of renewable energy.”

            Duh. If the consumers keep buying carbon-intensive products they shouldn’t get back as much as they pay.

            Most consumers will want to start buying products that are less carbon-intensive to reduce the amount they pay in carbon taxes. Exactly what we need to happen!

            It’s only a recipe for disaster if most consumers are as clueless as you about how it works.

          • funslinger62 Says:

            Your concerns should be answered in the book I linked. Read it.

          • funslinger62 Says:

            “It leaves all specifics to Congress to be determined later.”

            Oh really?

            The plan recommends a $15/ton carbon tax the first year increasing by $10/ton every year after that. It also recommends a dividend be returned to consumers using the revenue minus the administrative costs in an equitable way to reduce its regressive nature. That’s it.

            To increase the chance of getting Congress to pass a carbon tax, the plan recommends less-effective alternatives. One is to use the cost of the carbon tax to offset other taxes (that would be more difficult to implement than a dividend). Another alternative is to eliminate regulations and subsidies.

            Nothing is being left for Congress to decide later. Congress would decide at the time the bill is passed.

          • Gingerbaker Says:

            “It leaves all specifics to Congress to be determined later.”

            Oh really?”

            Yes, really:

            “Congress will determine the mix of direct dividend return and/or tax swaps, eligibility for the dividend, distribution methods, how to prevent fraud and whether the direct dividend is taxable.”

            Congress, will determine a lot more than that, btw.

            “Duh. If the consumers keep buying carbon-intensive products they shouldn’t get back as much as they pay. …It’s only a recipe for disaster if most consumers are as clueless as you about how it works.”

            So we see:

            1) This is a merely a surcharge on FF’s on => consumers. Not decision makers re macro RE capital expenditures. And you, like others, seem very happy about the punitive nature of this surcharge. What brilliant thinking – make tough economic times tougher, instead of making RE cheaper. Are you ***ing nuts?

            Meanwhile, back at the electric utility, they could give a flying **** about the surcharge – it is passed along to consumers – they do not eat it. Indeed, those monopolies who operate on a cost plus basis will simply pocket more profits.

            2) Interestingly, here is what your vaunted proposal piece has to say about the success of carbon taxes around the world:

            “A patchwork of carbon prices have been enacted in about 40 countries, mostly through emissions trading systems. No carbon trading system has yet been definitively shown to have significantly reduced emissions. About 15 countries and jurisdictions tax some carbon emissions, the B.C. carbon tax showing definite benefits.”

            Too bad they put such British Colombia (from a comment I have here awaiting moderation since 2/1-18):

            https://thetyee.ca/Opinion/2016/03/08/BC-Carbon-Tax-Failure/

            https://www.seattletimes.com/opinion/look-to-b-c-for-evidence-carbon-tax-doesnt-work/

      • Peter Joseph Says:

        GingerBaker: As the author of the MIT entry, be advised that strict limitations on word count are imposed, making it impossible to elaborate. You might want to read the many links and references before opining. You might then understand the proposal.

    • Gingerbaker Says:

      And, just to make it clear, people who say – or write books – that claim that a carbon tax MUST and WILL work, have a problem:

      They simply have not worked anywhere yet:

      https://www.jacobinmag.com/2016/10/oil-fossil-fuel-climate-cap-trade-tax-renewables/

      https://thetyee.ca/Opinion/2016/03/08/BC-Carbon-Tax-Failure/

      https://www.seattletimes.com/opinion/look-to-b-c-for-evidence-carbon-tax-doesnt-work/

      https://ensia.com/features/carbon-pricing-why-isnt-it-working/

      In Ireland, a carbon tax raises monies on the backs of the working class, but emissions continue their rise, and government is looking to spend that revenue on things other than new RE infrastructure:

      http://www.publicpolicy.ie/the-carbon-tax-7-years-on/

      https://www.theaustralian.com.au/national-affairs/carbon-tax-has-been-ineffective-says-report/news-story/eebbe70361616cb2ce1278c9800e0bfa

      A look at all the carbon taxes in the world. Including Sweden, which has the highest CT in the world – gasoline is ridiculous. Look at the results. Compare the results (they only looked at previous vs post 5-year period of emissions) with those of the U.S., which does not have a carbon tax – we did better

      (and remember, what we really need to measure is not emissions [because as you make gasoline and heating fuel more burdensome, people reduce because they are suffering economically] but , rather, what we should be looking at is whether we are building RE infrastructure because of the carbon tax)

      https://aceee.org/files/proceedings/2016/data/papers/9_49.pdf

      So I will ask again – is it better to make FF’s more expensive, or to make RE cheaper? I am wholeheartedly for the latter.

      • Robert Archer Says:

        The detail is all in the MIT submission. For example, Gingerbaker says all regulation will be eliminated but didn’t acknowledge the following quote from the document:

        “Regulatory programs will still be needed where the market and pricing do not penetrate sufficiently to alter decisions, or non-market factors interfere, e.g., rental buildings where landlord and tenant incentives are not aligned. ”

        Dismissing the carbon tax policy is unfortunately a feature of some influential groups (Food & Water Watch, sometimes the Sierra Club, Washington State–selective groups). Regulation without an escalating carbon tax has gotten us to where we are today–not a good place. Note that the greatest advocate of regulation, Germany, has had emissions rising the last two years after hundreds of billions of clean energy subsidies.

        Experience to date shows the major regulatory programs/subsidies are (i) regressive–the primary benefits go to the upper 10-20% of the population (UC Berkeley, Borenstein et al); (ii) more expensive than the results achieved by a carbon tax; and (iii) do not impact the whole economy as a carbon tax does. What is needed? A broad-based carbon tax rising from $15/ton by $10/year; all revenues rebated to every household which holds harmless the lowest 70% of the population; and a border tariff adjustment which maintains industry competitiveness and pushes countries with no carbon pricing to put in place a comparable system.

        I repeat the quote from the MIT report:

        “Regulatory programs will still be needed where the market and pricing do not penetrate sufficiently to alter decisions, or non-market factors interfere, e.g., rental buildings where landlord and tenant incentives are not aligned. ”

        Finally, there is one thing that the economic profession has shown to be true beyond any doubt: raise the price, consumption declines. (The very limited effectiveness of the cap & trade programs in Europe, RGGI and California with their low prices do not refute this basic economic tenet.)

  3. Robert Archer Says:

    Thanks to Gingerbaker for providing a rich example of the arguments against a carbon tax which is a menu of conflation (carbon tax with cap and trade), errors of omission, misstatements (all regulation will be eliminated–see actual statement from the MIT submission below), cherry-picking newspaper reports instead of actual research regarding British Columbia, etc.

    The detail is all in the MIT submission. For example, Gingerbaker says all regulation will be eliminated but didn’t acknowledge the following quote from the document:

    “Regulatory programs will still be needed where the market and pricing do not penetrate sufficiently to alter decisions, or non-market factors interfere, e.g., rental buildings where landlord and tenant incentives are not aligned. ”

    The disinformation, whether by a troll or a die hard advocate of regulation today, regulation tomorrow, regulation forever leaves Gingerbaker’s posts without merit.

    Let’s assume Gingerbaker is actually a dedicated and sincere regulatory advocate for the sake of discussion. Trashing the carbon tax policy is a sad place to be and not an unusual one for some environmental groups (Food & Water Watch, sometimes the Sierra Club, Washington State–selective groups). The unthinking clinging to every type of regulation and against a carbon tax has gotten us to where we are today–not a good place. Note that the greatest advocate of regulation, Germany, has had emissions rising the last two years after hundreds of billions of renewables subsidies.

    Do your homework: the major regulatory programs/subsidies are (i) regressive–the primary benefits go to the upper 10-20% of the population; (ii) more expensive than the results achieved by a carbon tax; and (iii) do not impact the whole economy as a carbon tax does. What is needed in the 21st century? A broad-based carbon tax
    rising from $15/ton by $10/year; all revenues rebated to every household which holds harmless the lowest 70% of the population; and a border tariff adjustment which maintains industry competitiveness and pushes countries with no carbon pricing to put in place a comparable system.

    I repeat the quote from the report to debunk the regulator advocate’s erroneous claim:

    “Regulatory programs will still be needed where the market and pricing do not penetrate sufficiently to alter decisions, or non-market factors interfere, e.g., rental buildings where landlord and tenant incentives are not aligned. ”

    Finally, remember that there is one thing that the economic profession has shown to be true beyond any doubt: raise the price, consumption declines. (Please don’t cite the ineffectiveness of the cap & trade programs in Europe, RGGI and California with their low prices–that is a false conflation with the carbon tax policy which is entirely different.)

    Robert A.


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