State Actions

The two large pricing schemes currently in force in the U.S. include California’s cap and trade system and the Regional Greenhouse Gas Initiative (RGGI) – a cap and trade system on power plants across nine northeastern and mid-Atlantic U.S. states. California is further considering a carbon tax and other market mechanisms as other tools to reach its emission reduction goals.  Washington state’s Clean Air Rule, September, 2016, instituted what is essentially cap and trade on large stationary emission sources.

Also, Boulder, Colorado has a city carbon tax, initiated in 2006.

Several other states currently have some sort of recent carbon pricing and/or have some sort of push underway. Proposed legislation for some form of price on carbon is accelerating quickly, with a total of twenty-nine legislative proposals in 2017, with many moving pieces. Notably, there is an attempt at coordinating efforts among Rhode Island, Massachusetts, and Connecticut in the Northeastern U.S.

Northeastern U.S.

Carbon pricing policies are currently under consideration in six Northeastern states:  Connecticut, Massachusetts, New Hampshire, New York, Rhode Island and Vermont. The efforts are loosely coordinated by the National Caucus of Environmental Legislators (NCEL). For an excellent summary and updates on legislation see the state information on the NCEL website.

A summary of all current carbon pricing systems and legislation proposed in the 2017 legislative sessions of the Northeastern U.S. is shown in the table on the right.

Connecticut formed the Governor’s Council on Climate Change in 2015 to evaluate ways to reach the state’s ambitious greenhouse gas emissions reduction target of 80% below 2001 levels by 2050.

HB 7247 Establishing a carbon price for fossil fuels sold in Connecticut (Rep. Jonathan Steinberg) proposes a carbon fee that would start at $15 per ton of CO2, increasing by $5 per ton annually. 25% of funds would go toward climate resilience, efficiency and other renewable energy programs, 30% would provide dividends to employers in the state, 40% would provide dividends to state residents, while no more than five percent would go toward administering the program.

Massachusetts has been in legislative discussions in past years and is extending discussions into 2017.

S 1821, An act to promote green infrastructure, reduce greenhouse gas emissions, and create jobs is a resubmission of S.1747, introduced in 2016 (Sen. Michael Barrett). It is a fee starting at $10 per ton of CO2, rising $5 a year until $40 a ton. All revenue would be returned to households and businesses.

H 1726 An act relative to creating energy jobs (Rep. Jennifer Benson) is a carbon fee that would start at $20 per ton of CO2, rising $5 a year until $40 a ton, when it would be reviewed by the legislature. 80% of revenue would  be returned to households and businesses, and 20% would be reinvested in transportation, resiliency, and clean energy projects that reduce emissions, and prepare for climate change impacts.

H 3473 (Rep. Solomon Goldstein-Rose) is a fee starting at $15 per ton of CO2, and rising $10 annually. The revenue would be returned to consumers through a rebate process, which a slight increase for rural residents.

New Hampshire is beginning to consider carbon pricing and are proposing a study commission to look at possibilities. SB 123 Establishes a study commission (Sen. Martha Fuller Clark).

New York legislators introduced coordinated bills in both houses for a carbon tax in 2015 (A8372 Cahil and S6087 Parker). Both bills were referred to committee.

In 2016, the New York State Climate and Community Protection Act (A10342) passed the Assembly but did not pass in the Senate. The bill would require reducing New York state greenhouse gas emissions from major sources to zero by 2050. The bill included market-based mechanisms (e.g. cap-and-trade or carbon tax) as tools to reach the goal.

And in 2017, again two coordinated bills were introduced:

A00107/S02846 Establishes a tax on carbon-based fuels (Sen. Kevin Parker, Assemblyman Kevin Cahill). The bills propose a fee that would start at $35 per ton of CO2, increasing by $15 a ton annually to a maximum of $185. 60% of revenue would be returned to low and moderate income households, while the remaining 40% would be invested in clean energy and transportation infrastructure.

A01919/S04598 (Assemblywoman Barbara Lifton, Sen. Liz Krueger) would authorize a study on implementing a greenhouse gas or carbon emissions fee or tax.

Rhode Island State Senators introduced a bill (S 0417) for a carbon tax in February, 2015, but later withdrew the bill.   A coalition called Energize Rhode Island has been active since then andpushing for a carbon tax.

S0365/H5369 Clean energy investment and carbon pricing act of 2017  (Sen. Jeanine Calkin and Rep. Aaron Regunberg) is a resubmittal of a bill in 2016. It is a carbon fee which would tart at $15 per ton of CO2, increasing by $5 per ton annually. Revenue distribution would be 25% to fund programs for renewable energy, energy efficiency and climate-change adaptation, 30% returned as a dividend to companies based on their number of full-time employees, and 40% paid as a dividend to each Rhode Island resident.

The bill, if passed, will only take effect if Massachusetts and Connecticut pass similar bills. Rep. Jonathan Steinberg of Connecticut and Massachusetts Sen. Michael Barrett are legislating similar carbon tax bills in their states.

Vermont has a growing push for a price on carbon.  Vermont House Bill 412, which would have instituted a carbon tax, was introduced in 2015 but failed. The 2016 Comprehensive Energy Plan (CEP) lists market-based policies (cap and trade, carbon tax, and renewable portfolio standards) as tools that can be used to reduce emissions. Energy Independent Vermont, a coalition pushing for a carbon tax, is proposing a tax returning 90% of revenue in taxes, with 10% for increasing energy efficiency and clean energy investments.  Electricity, which is covered by RGGI, is excluded from the proposed tax.

Then in 2017, a host of bills have been introduced:

H.531 An act relating to establishing a carbon pollution fee in Vermont (Rep. Diana Gonzalez) would establish a carbon pollution fee in Vermont and return revenue to state residents.

H.532 An act relating to replacing statewide education tax revenue with a fee on carbon dioxide pollution (Rep. Martin LaLonde) would replace statewide education tax revenue with a fee on carbon dioxide pollution.

H.533 An act relating to eliminating Vermont’s sales and use tax and replacing it with a carbon fee on corporations (Rep. Sarah Copeland-Hanzas) would eliminate Vermont’s sales and use tax and replace with a carbon fee on corporations.

H.273 An act relating to a cap and trade program (Rep. Mollie Burke) enables Vermont to participate in a cap and trade program for emissions from transportation, heating, cooling, and ventilation. 25% of revenue would support weatherization programs, 25% would support electricity efficiency, and the remaining 50% would support sustainable transportation.

H.394 An act relating to a carbon tax and cap and trade study (Rep. Mollie Burke) proposes to require the Joint Fiscal Office to study the costs and benefits to Vermont of carbon pricing and cap and trade models to reduce greenhouse gas emissions, and submit a report of its findings to the General Assembly.

Western U.S.

The three Pacific Coast states of California, Oregon and Washington have or are considering carbon pricing. Utah just entered the fray this year with a proposal for a carbon tax.

A summary of all current carbon pricing systems and legislation proposed in the 2017 legislative sessions of the Western U.S. is shown in the table on the right.

California has had cap and trade since 2012; it now covers 85% of California emissions. The cap and trade system has been hindered by litigation claiming that cap and trade is a tax and therefore required a 2/3 vote. AB 32 ,The Global Warming Solutions Act of 2006, which established cap and trade, passed by a majority vote. Further it is arguable whether cap and trade can extend beyond 2020 which was the limit in AB 32.  SB 32 of 2016 extends the emission goals to 2030, so the answer is not clear.

To solve both issues, three bills have been submitted in the 2017 legislature. Two (AB 378 and SB 775) extend cap and trade to 2030 and, if passed by 2/3 (Democrats currently hold a supermajority in both houses), would make the point of the litigation moot. A third bill (AB 151) The bills are in flux at this point, moving through amendment procedures in committee. However the highlights as of this update are listed below:

AB 151 California Global Warming Solutions Act of 2006: market-based compliance mechanisms: scoping plan: report (Assembly members Burke and Cooper) proposes reforms for the cap and trade system to better assure that revenues produce California jobs, reduce greenhouse gases in California rather than in other areas via offsets, and have a health co-benefit.

AB 378 Greenhouse gases, criteria air pollutants, and toxic air contaminants (Assembly members Cristina Garcia, Holden, and Eduardo Garcia) extends cap and trade to 2030; requires the California Air Resources Board to not only consider, but also account for the social costs of carbon when adopting rules and regulations; adds protections for disadvantaged communities. In addition or instead of cap and trade, this bill allows for other market-based compliance mechanisms (e.g. carbon tax).

SB 775 California Global Warming Solutions Act of 2006: market-based compliance (Senator Wieckowski) extends cap and trade to 2030; puts price restrictions on allowances after 2020 with an initial minimum reserve price of $20 per allowance, and an initial auction offer price of $30 per allowance when auctioning allowances. These escalate each quarter by $1.25 for the minimum reserve price, and the auction offer price each quarter by $2.50 (plus any increase in the Consumer Price Index); there will no longer be free allowances nor offsets and trading would be restricted only to the current year with no banking allowed; there would be border adjustments to assure fair and competitive conditions; and revenue (now spent on climate mitigation and adaptation projects, aka climate resilience) would be split among funds for infrastructure, a dividend to all residents, and funds for research. Like AB 378, this bill allows for other market-based compliance mechanisms (e.g. carbon tax).

Oregon – Two proposals were introduced in 2015. HB 3252 would place a fee of $60/ton on carbon emissions, with revenue to be spent to a) create a jobs, economic development and transition assistance fund, b) create assistance for low- and moderate-income households, and c) direct Highway Transportation-restricted funds to be used for eligible low-carbon projects, such as expanding capacity for high capacity transit. HB 3250 was a cap-and-dividend bill that places legal limits on climate pollution, auctions permits, and returns all revenue in equal payments back to taxpayers and their dependents.

Although the carbon tax proposals failed, in 2016 SB1547 passed which establishes a Renewable Portfolio Standard requiring that electricity used in the state from renewable sources ramp up to 25% of the total electricity portfolio in 2025 and 50% by 2040.

The 2016 Oregon legislature requested that the Department of Environmental Quality (DEQ) do a study on how a market-based approach to reducing greenhouse gas emissions would work in Oregon.  DEQ focused on a cap-and-trade program that would be compatible with the Western Climate Initiative’s multi-jurisdiction carbon market (WCI). WCI currently links cap-and-trade programs in California and Quebec, with Ontario expected to join in 2018.  The results of the DEQ study were presented to the Oregon legislature in early, 2017.

Several bills have been proposed in the 2017 Oregon legislature:

SB 557HB 2135 (Sen. Lee Beyer, House Interim Committee on Energy and Environment) would change Oregon emission reduction goals to be 20% below 1990 levels by 2025, 45% below by 2035, and 75% below by 2050. In addition to the emission reduction goals, the bills introduce a cap and trade program. Effective Jan 1, 2021, the bill would require the Environmental Quality Commission to determine the method for the distribution of auction proceeds and rules for offset credits.

SB 748 (Sen. Lee Beyer) is a “cap and penalty” bill.  “Carbon pollution permits” would be required for covered entities, and penalties charged if the permit is exceeded.  The Environmental Quality Commission and other committees will determine which are covered entities, how permits will be granted or sold, and how revenue will be used.

HB 2468 (Reps. Holvey, Barnhart, Helm, Nosse, Power) would set a cap on carbon emissions and direct the Oregon Environmental Quality Commission to evaluate statewide and multistate carbon cap-and-trade system and market-based mechanisms, as a means of achieving the limits on greenhouse gas emissions.

LC 1242 is not yet introduced, but was released as a draft in November, 2016. It would impose a carbon tax with revenues to be distributed through five funds.

For updates on the Oregon campaigns see Renew Oregon and Our Climate.

Washington state’s  Clean Air Rule, September 15, 2016, instituted what is essentially cap and trade on large stationary emission sources. The Emission Reduction Units (ERUs) are approximately equivalent to allowances used in other cap and trade systems.  The declining cap is set to decline by 1.7% per year from the baseline calculated by the Washington state Department of Ecology for each entity. ERUs can be traded within Washington and with other states, provinces, or nations with similar systems.

Washington also had two competing initiatives for the 2016 ballot:  The revenue neutral Initiative 732 would tax carbon, and return revenue as reduced tax to all and rebates to working families.  A competing initiative sponsored by the Alliance for Jobs and Clean Energy would use revenues to invest in clean energy and protect vulnerable families.  But only I-732 made it on the ballot for a vote.

Initiative 732 is modeled after the  carbon tax in British Columbia, but also included a rebate to working families.  It would place an initial $25 tax on a metric ton of carbon dioxide, and then use that money to fund both tax cuts and tax rebates throughout the state.  The campaign for I -732 was not united.  Groups like the Washington Environmental Council and the Sierra Club opposed the measure because it didn’t go far enough, notably not investing in the huge infrastructure that will be needed to move to a decarbonized economy.

In the 2017 session five carbon tax bills are proposed:

SB 5127/HB 1555 (Senators Braun, Ranker, and Hunt; Reps. Lytten and Doglio) creates a carbon tax on fossil fuels beginning at $25/ton carbon dioxide with a 3.5% increase + inflation each year, with revenues to be used for industrial energy efficiency, clean transportation, energy efficiency of existing buildings, and emerging technologies.

HB 1646/SB 5509 (Reps. Fitzgibbon, Appleton, Fey, Goodman, McBride, Cody, Macri, Doglio, Pollet, and Jinkins; Senators Carlyle, Ranker, Frockt, Hunt, and Saldaña) imposes a carbon tax on fossil fuel emissions. It creates a carbon program oversight board to advise the governor on how best to reduce greenhouse gas emissions in addition to creating an economic and environmental justice oversight panel. The bill proposes a $15/ton carbon dioxide fee with a 7% increase + inflation each year. Revenue would be put towards storm water infrastructure, transportation, clean tech, utilities, and social justice.  The House bill was proposed by the Alliance for Jobs and Clean Energy.

SB 5385 (Senators Hobbs and Hunt) imposes a fossil fuel carbon pollution tax of $15/ton carbon dioxide. This bill requires at least 50% of funds to be transferred to the multimodal transportation account to assist certain school district programs.

Utah is entering the discussion.

HB 457 (Rep. Joel Briscoe) imposes an escalating tax on fossil fuels with revenues to be spent on transportation infrastructure as well as providing a tax credit (dividend).

History of U.S. Federal Carbon Pricing Legislation

Last updated Mar 9, 2017