Progress toward putting an honest price on carbon

If you’re on this page, you probably fully understand that the prices of products containing carbon do not include all the costs they impose on society. The list includes medical costs related to polluted air, wildfire and hurricane damage due in part to climate change, and more.

So we applaud the Biden administration’s September 21 decision to determine an honest carbon price and use it in federal government purchasing choices. As The New York Times’ Coral Davenport wrote, “The idea is to take into account the greenhouse gases generated by goods and projects, how they contribute to global warming, and the cost of that to the economy.”

As she pointed out, “the potential impact is significant. The federal government is the world’s largest consumer of goods and services, spending roughly $600 billion each year. The changes could shift purchases for the federal government’s fleet of roughly 600,000 cars and trucks from gasoline-powered to all-electric vehicles, redirect the flow of billions of dollars of government grants and reshape or kill some major construction projects.”

A White House fact sheet cited a recent federal finding that climate-related disasters could increase federal spending by more than $100 billion annually and decrease annual federal revenue by up to $2 trillion by the end of the century. 

“It will be the first time this ‘whole of government approach’ is used to evaluate the climate consequences of government actions,” said Richard Revesz, the president’s regulatory chief.

“This is a very big deal,” said U.S. Senator Sheldon Whitehouse, the leading advocate in Congress for a strong, governmentwide social cost of carbon. This action, he noted, “will put the full weight of federal government decisions into fighting climate change – a solution I’ve been encouraging for many years. The International Monetary Fund has calculated the American government subsidy for Big Oil at $760 billion per year, none of which reflects the harm and damage the industry’s products do to the planet.  

“Under President Biden’s leadership, America is fighting back on behalf of taxpayers and will begin factoring the true costs of carbon pollution into a wide array of government actions, cutting back on taxpayers’ bills for climate-related disasters over the long term.  The biggest private sector companies have been doing this for years because it makes good economic sense.  By incorporating the social cost of carbon into procurement calculations, today’s action will result in economies of scale for clean energy and low-emission products, bringing down prices for consumers.”

As PoliticoPro’s Alex Guillen explained, the social cost of carbon was first calculated by the Obama administration and included only carbon dioxide. It was expanded to include other climate pollutants, notably methane and nitrous oxide. The price was determined to be $42. Under President Donald Trump, that figure was lowered to less than $5.

Biden ordered that cost restored to roughly the same level established under Obama (an inflation-adjusted $51) and directed an interagency working group to overhaul the metric. In November 2022, EPA issued a proposal with three possible levels for the social cost of carbon, including $120. That proposal will be finalized after EPA has reviewed public comments.

Coming up this fall is a U.S. Supreme Court decision on whether to hear an appeal by Missouri and other Republican-held states that challenges the use of the social cost metric. That case failed in a federal district court and in the 8th U.S. Circuit Court of Appeals. Both courts ruled the states lacked standing to bring their lawsuit because they failed to show they had been actually harmed by the metric.

We strongly advocate enactment of a fee on carbon to incorporate the costs of carbon in all prices throughout the nation’s economy.

Seventy percent of Americans would "make money" on carbon tax & dividend

The political consensus is that a carbon fee (a/k/a carbon tax) is a loser. Any new tax is a long shot, and when you’re talking about one that will increase the cost of filling your gas tank, it’s an even longer shot.

But a recent blog post by Frank Lysy, an economist who was formerly with the World Bank, takes issue with that conventional wisdom. He drives home the point that if all the tax revenue goes back to the American people, as many of us in the climate community have proposed, AND if supporters do a better job of explaining this proposal, the votes may well materialize.

Lysy emphasizes that 70 percent of Americans would receive more in the form of a “dividend” than they pay in a carbon tax. As he explains it:

“The US Treasury published a study of this scheme in January 2017, and estimated that such a tax would generate $194 billion of revenues in its initial year (which was assumed to be 2019).  This would allow for a distribution of $583 to every American (man, woman, and child – not just adults).  Furthermore, the authors …concluded that…the bottom 70%, as ranked by income, would enjoy a net benefit, while only the richest 30% would pay a net cost.”

Critics often argue that a tax on consumption is unfair to those with low incomes. But, Lysy points out, “[t]hose in the poorest 10% of households would receive an estimated $535 net benefit per person from such a scheme. The cost of the goods they consume would go up by $48 per person over the course of a year, but they would receive back $583.” The reality is that the well-to-do consume a lot more energy and thus would pay much more in carbon taxes.

Lysy compared this carbon tax proposal to what used to be called the food stamps program (formally now called SNAP, for Supplemental Nutrition Assistance Program). It is the largest cash income transfer program in the U.S. designed specifically to assist the poor. “The carbon tax scheme would be of greater benefit than food stamps are, on average, for lower middle-class households (those in the 3rd decile and above),” he calculated.

And it’s not as if high-income Americans would suffer. “In dollar terms,” Lysy wrote, “the richest 10% would pay in a net $1,166 per person in this scheme… But this would be just 1.0% of their per-person incomes. The 9th decile (families in the 80 to 90th percentile) would pay in a net of 0.7% of their incomes, and the 8th decile would pay in a net of 0.3%.”

Lysy compares this free market approach to the alternative: a regulatory solution to climate change. “Such systems are not good, by their nature, at handling innovations, as by definition innovations are not foreseen,” he explains. “Yet innovations are precisely what one should want to encourage… A carbon tax program would similarly encourage innovations, while regulatory schemes can not handle them well.”

What about imports? “There would also be a border-tax adjustment on goods imported, which would create the incentive for other countries to join in such a scheme (as the US would charge the same carbon tax on such goods when the source country hadn’t, but with those revenues then distributed to Americans).”

To help win over skeptics, Lysy suggests sending initial rebate checks before the carbon taxes are to go into effect, an idea termed a “prebate.” That would help overcome the fear that somehow the revenue would go into government coffers and never come back.

Please encourage your U.S. senators and House member to take a fresh look at the numbers–and vote for this common-sense solution. Let’s not wait for more hurricanes, floods, droughts and wildfires.

Labor & Environmental Groups Finding Common Ground

The labor movement and environmental groups have not always been the best of friends. Labor tended to view environmental regulations as impediments to construction, auto manufacturing, and other activities that provided good jobs that paid well.

Both sides seem to be moving beyond that old construct. One clear sign of the determination to work together to hasten the transition to a low-carbon economy is the BlueGreen Alliance. It was founded by the United Steelworkers and the Sierra Club, a duo that its executive director, Jason Walsh, describes as the “original odd bedfellows.”

The Alliance has grown to include 14 major national and international unions and environmental groups that collectively represent about 50 million Americans. The guiding principle that keeps these groups together is a belief that Americans shouldn’t have to choose between good jobs and a clean environment; we can and must have both.

Research by the International Labour Organization (ILO) and the Worldwide International Renewable Energy Agency (IRENA) documented that employment in renewable energy reached 12.7 million in 2021, a jump of 700,000 new jobs in one year, despite the lingering effects of COVID-19 and the growing energy crisis.

Solar photovoltaic (PV) has so far provided the biggest share of renewable energy jobs (4.3 million), followed by hydropower and biofuels (2.4 million each), and wind power (1.3 million). Other sectors like geothermal, heat pumps and ocean energy make up the rest of the jobs growth. 

Guy Ryder, who recently completed ten years as ILO’s director-general, said; “Beyond the numbers, there is a growing focus on the quality of jobs and the conditions of work in renewable energies, to ensure decent and productive employment. The increasing share of female employment suggests that dedicated policies and training can significantly enhance the participation of women in renewable energy occupations, inclusion and ultimately, achieve a just transition for all. I encourage governments, workers’ and employers’ organizations to remain firmly committed to a sustainable energy transition, which is indispensable for the future of work.”

Of course, there can be friction between labor and the environmental movement. “Permitting and siting certainly is a tension point that we are working through,” Walsh told Dan Gearino of Inside Climate News, “particularly with all of these new investments coming online. That requires us as a country to build a lot of stuff at speed and scale, and figuring out a position for our coalition that honors and protects our existing environmental laws, while also building out a lot of infrastructure, is a needle that we have to thread. 

“We are working internally right now to be able to put forward a unified position on permitting reform, and particularly focusing on transmission, which all of our labor and environmental partners recognize is absolutely a critical part of realizing the climate benefits of the investments from the Inflation Reduction Act.”

Another challenge for the alliance, Walsh told Inside Climate News, is the pay gap. “We were and still are—because the law hasn’t fully kicked in yet—seeing significant gaps in wages between workers in renewable energy sectors and workers and fossil fuel sectors. And that’s a big problem. It’s an equity problem, and it is a political problem. And we certainly can’t expect workers to accept the necessity of this transition if their jobs are going away, or they’re getting other jobs in clean energy sectors that pay less and offer less voice on the job and security on the job. So, our push for clean energy investments with strong labor and equity standards was an enormous unifier.”

As implementation of the Inflation Reduction Act (IRA) continues, there will be more and more opportunities for labor and environmental groups to cooperate on the energy transition. Of course, that transition would occur more rapidly if Congress put an honest price on carbon.

Wind & solar power ride to the rescue in Texas

You probably know that Texas, a hot place, has been dangerously hot recently. Many parts of the Lone Star State have routinely had highs exceeding 100 degrees, and the heat index, which includes humidity, climbed as high as 125 degrees in some Gulf Coast cities.

Fortunately, the state has been able to meet skyrocketing power demands, thanks to renewable energy sources. The amount of solar energy generated in Texas has doubled since the start of last year, The New York Times’ David Goodman reported. “And it is set to roughly double again by the end of next year, according to data from the Electric Reliability Council of Texas. Already, the state rivals California in how much power it gets from commercial solar farms, which are sprouting across Texas at a rapid pace, from the baked-dry ranches of West Texas to the booming suburbs southwest of Houston.”

So far this year, about 7 percent of the electric power used in Texas has come from solar, and 31 percent from wind.

Solar energy and batteries played a large role in preventing power outages during the latest heat wave—even as other energy sources struggled to stay online, Kristoffer Tigue wrote in Inside Climate News.

“Yesterday at 6:31CT, one of the four nuclear units in Texas stopped producing power,” Doug Lewin, an energy consultant and president of Austin-based Stoic Energy, wrote on Twitter June 16. “A new fast acting backup reserve (ECRS, which is mostly batteries) stabilized the grid and prevented bigger problems.”

“Renewables are definitely saving the grid and saving our wallets,” said Alison Silverstein, an independent energy consultant based in Austin, referring to the impact on electricity prices.

Texas still trails California in the amount of solar power on the roofs of homes. But in the growth of solar farms, it has been rapidly outstripping the Golden State, Goodman reported in The Times. In Fort Bend County, outside Houston, there are now six large solar farms, up from one in 2020.

Some of the credit goes to former Gov. Rick Perry, a Republican who helped establish Texas as the leading state for wind power. He backed a multibillion-dollar effort in 2005 to create transmission lines to bring power from the windy western part of the state to the major population centers.

Unfortunately, the oil and gas industry remains so politically strong in Texas that the Republican-dominated State Senate passed several bills in the spring that contained provisions that would add new costs and regulations to the solar and wind industries and severely limit the number of new projects in the state, energy experts told The Times. Those bills failed to pass before the legislative session ended, but they are likely to be reintroduced when the Senate reconvenes.

“Renewables have proved a favorite scapegoat for any problems with Texas’s power system — even when they’re actually the key to alleviating those problems,” columnist Catherine Rampell wrote recently. 

Thanks to the Inflation Reduction Act’s incentives for development of solar and wind energy, other states may be able to catch up with Texas. The transition would be even swifter if Congress taxed carbon dioxide emissions.

CHINA AND THE U.S. MUST FIND A WAY TO TEAM UP TO COMBAT CLIMATE CHANGE

“We ultimately can’t solve climate change without China. It’s by far the largest emitter in the world,” Joanna Lewis, a China specialist at Georgetown University, told The Washington Post. 

And at times, China and the U.S. have risen above the challenges posed by their economic and geopolitical rivalry. At a UN climate conference in Glasgow in 2021, a joint U.S.-Chinese pledge to cooperate on climate issues helped push other negotiators toward a more ambitious final agreement, diplomats said at the time.

But there have been many ups and downs. As The New York Times’ Peter Baker wrote recently, “at an international climate change conference early in his administration, President Barack Obama confronted a senior Chinese official who offered what the American delegation considered a weak commitment. Mr. Obama dismissed the offer. Not good enough.”

The Chinese official “erupted,” Baker wrote, relying on an oral history produced by Columbia University. “What do you mean that’s not good enough? Why isn’t that good enough?” The official mentioned a past conversation he had had with John Kerry, then a Democratic senator. “I talked to Senator Kerry, and Senator Kerry said that was good enough.” Baker wrote that Obama “looked at him evenly and said, ‘Well, Senator Kerry is not president of the United States.’”

Can the two nations find a way to cooperate on climate? “Today we’re faced with a really complex geopolitical environment. And I don’t think that the U.S. government has a clear understanding of how climate fits within its overall strategy toward China,” said Kelly Sims Gallagher, a professor at the Fletcher School at Tufts University who was a senior adviser on Chinese climate issues under Obama.

She suggested that the Chinese may be using climate as a bargaining chip to achieve other gains in its overall relationship with Washington. “Climate is understood by China to be something the U.S. wants, and it's using climate as a source of leverage in the multifaceted relationship,” she told The Washington Post.

Kerry, who now serves as special presidential envoy for climate, said recently that he had been invited to China in the “near term” to keep talking about climate issues.

China’s climate performance is a mix of good and bad. Regrettably, provincial governments approved more coal-fired power plants in the first three months of 2023 than they did in all of 2021, according to Greenpeace East Asia. 

But China also installed a record amount of solar power capacity last year — and this year alone is set to install more than the entire existing solar capacity of the United States.

To nudge China to reduce emissions and act more ambitiously on climate, the Biden administration has started to explore other tools, including tariffs that would be linked to the carbon footprint of Chinese imports, reported The Post’s Michael Birnbaum and Christian Shepherd.

Such tariffs could be an effective long-term incentive for Chinese manufacturers to invest in cleaner technology and research to lower emissions in steel, aluminum and other exports, said Philippe Benoit, a scholar at the Center on Global Energy Policy at Columbia University.

That idea has raised hackles in China, which contends that tariffs would be less about battling climate change than about blunting Chinese trade. A tariff would “primarily be intended to protect domestic industrial competitiveness,” said Sun Yongping, director of the Global Climate Governance Research Center at Huazhong University of Science and Technology. If implemented, it would “cast a shadow” over U.S.-China climate cooperation and damage mutual trust by creating challenges for Chinese exports, he said.

One way or another, the two giants must find a way to work together. “It would be a huge missed opportunity for the U.S. to not be engaging in one of the few areas where we can have constructive conversations with China,” said Georgetown’s Lewis.