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’s cap and trade is a key element for them to reach their emission reduction goals.  Washington state’s Clean Air Rule, September, 2016, instituted what is essentially cap and trade on large stationary emission sources, but it is currently in litigation.

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 plethora of legislative proposals in 2017-18, with many moving pieces. Notably, there is an attempt at coordinating efforts among Rhode Island, Massachusetts, and Connecticut in the Northeastern U.S. None of the carbon tax/fee proposals has yet to pass.

For a compilation of legislation passed by states see the Digital Environmental Legislative Handbook. For an excellent summary and updates on legislation see state information on the NCEL website.

Northeastern and Mid-Atlantic U.S.

Carbon pricing policies are currently being debated in seven Northeastern states and the District of Columbia:  Connecticut, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, Vermont, and Washington D.C. The New England efforts are loosely coordinated by the National Caucus of Environmental Legislators (NCEL).

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) proposed 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.

Maryland‘s HB 939 would establish a greenhouse gas (GHG) “pollution charge”. Revenue from the charge would be used to provide rebates to households and employers and to fund State and local GHG reduction activities. The bill would take effect July 1, 2018, but is contingent on the enactment of substantially similar legislation in at least two other states (likely Massachusetts and Rhode Island).

Massachusetts has been in legislative discussions in past years and is extending discussions into 2018.  In June, 2018, S2545, passed the Massachusetts State Senate but will face hurdles in the House. S2545 would establish a “market-based compliance mechnism” to apply to sectors including transportation.  Massachusetts is already part of the Regional Greenhouse Gas Initiative – a cap and trade system on power plant emissions.

Earlier Carbon Pricing Legislation in Massachusetts

  • S 1821, An act to promote green infrastructure, reduce greenhouse gas emissions, and create jobs was a resubmission in 2017 of S.1747, introduced in 2016 (Sen. Michael Barrett). It proposed 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) proposed 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) proposed 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.
  • S 1869 was first introduced in 2015 and reintroduced in 2017. It would implement an economy-wide revenue-neutral carbon pricing system if the state fails to meet its 2020 greenhouse gas reduction goals.

New Hampshire is beginning to consider carbon pricing and are proposing a study commission to look at possibilities. SB 1230 would establish a study commission.

New York –  Two coordinated bills were introduced in 2017:

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.

A03967 (Assemblymember Felix Ortiz)was introduced in January 2017. It would require a fee to start at $5 per ton of CO2 and increase by at least the rate of annual inflation plus 1% for the first ten years in effect. Revenues from the fee would go into the Carbon Tax Revenue Fund.

Rhode Island –  A coalition called Energize Rhode Island has been active since 2015, pushing for a carbon tax.

SB2188/HB740 (Senator Jeanine Calkin and Representative Aaron Regunberg) was reintroduced in February 2018. It would impose a fee on CO2 emissions, starting at $15 per ton of CO2, increasing by $5 per ton annually until it reaches $50 per ton. The rate will then increase each year in accordance with inflation. 70% of the revenue would be refunded via per capita and per employee rebates to families and businesses, while 28% would be invested in climate resiliency, renewable energy, and efficiency programs.

The bill, if passed, will only take effect if there is a regional carbon fee enactment. Massachusetts and Connecticut are currently legislating similar bills.

Vermont –  In January 2018, bills S284 / H791 were introduced by Senator Christopher Pearson and Representative Sarah Copeland-Hanzas. The bills would set a charge of $5.00 per tonne of carbon in 2020, rising by $5.00 each year until reaching $40.00 per tonne in 2027. All revenues from charge will be returned customers on their electric bills.

Earlier Carbon Pricing Legislation in Vermont

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, was excluded from the proposed tax.

In 2017, a host of bills were introduced but all remained in committee:

  • 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.

Virginia –  The Chesapeake Climate Action Network (CCAN) has been working for years with legislators in the General Assembly to pass a bill generally called the Virginia Coastal Protection Act, which would have Virginia join the Regional Greenhouse Gas Initiative. The proposal has had support of  Governor McAuliffe (2014-2018) and Governor Northam (2018 – ).

Washington D.C. –  Councilmember Mary Cheh presented a draft proposal for a price on carbon in May 2018, following the DC Council introducing a bill requiring 100% of the District’s electricity to come from renewable sources by 2050.

Midwestern U.S.

The first midwestern state to join the recognition that we need a price on carbon is Minnesota, with legislation introduced May 2018.

Minnesota‘s Legislature is considering SF 4086 and HF 4517 which would impose a fee, starting at $40 per ton of CO2  in 2020 and increasing by $5 during the first five years. Beginning in the sixth year, it would increase by $10. Beginning in the 12th year, the fee would increase by $15.  The bill is revenue neutral and would return the funds collected in the form of a rebate to individuals on a per capita basis.

Western U.S.

The three Pacific Coast states of California, Oregon and Washington have or are considering carbon pricing. Utah  entered the fray in 2017 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. Further cap and trade was (until 2017) in litigation claiming that since it was in effect a tax, it needed to be passed by a 2/3 vote.

In 2017, three bills were passed as part of the effort to extend cap and trade to 2030 and to make the litigation moot. AB 398 extended cap and trade to 2017, AB 617 to improve air quality. Governor Brown and others negotiated strongly to get the needed 2/3 vote. As a compromise ACA-1, which became Proposition 70 on the June 2018 primary ballot would have required a 2/3 vote again in 2024 to agree on how to spend revenue but was defeated at the ballot box.  The three bills were supported by several Republicans.

Hawaii has the ambitious goal to reach 100% renewable energy by 2040. In January, 2018 Representative Kaniela Ing introduced HB 1991 which would impose a tax of $10 for every ton of carbon dioxide emitted from the use of fossil fuel. It would require 20% of the tax collected be deposited into the Environmental Response Revolving Fund.

New Mexico like New Hampshire has a bill introduced January 2018 to study effects of carbon pricing. SM 23, would require a legislative committee to study how a possible state revenue-neutral carbon fee could be implemented and what impacts it would have on the economy, jobs, health and greenhouse gas emissions.

Oregon – State legislators in Oregon are proposing legislation that would reduce greenhouse gas emissions via a “cap and invest” system.  The coordinated bills introduced in January 2018, SB 1507/HB 4001would establish limits on greenhouse gas emissions in the state and require the largest emitters to purchase allowances to cover their output, similar to California’s system. Revenue generated from the auction of these allowances go to communities disproportionately impacted by global warming and other energy and climate mitigation initiatives.

Earlier Carbon Pricing Legislation in Oregon

Two proposals were introduced in 2015. HB 3252 would have placed 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 placed legal limits on climate pollution, auctioned permits, and returned all revenue in equal payments back to taxpayers and their dependents.

Although the carbon tax proposals failed, in 2016 SB1547 passed, which established 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, Quebec, and Ontario.  The results of the DEQ study were presented to the Oregon legislature in early, 2017.

Several bills were 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. The Clean Air Act is currently in litigation.

In January 2018 seven different carbon tax bills were introduced.

They differed by the amount of tax and the tax increase, and in details of how the revenue is to be spent. The differences are seen in the table below. All the bills allow for some exemptions and/or tax credits.

This plethora of bills will likely be combined into a compromise bill if they gain ground at all. SB 6203 seems to have the most opportunity. There have been two substitutions of the original bill.

Ballot Measure I-1631 has qualified for the ballot in 2018. It proposes a tax of $15/ton, increasing by $2/yr plus inflation to 2035.  There are exemptions for energy intensive industries and others. All of the tax on utilities is returned to utilities. Balance is split with 50% in carbon reductions, 20% water/forest programs, 15% low income programs and 15% rural economic development. See a comparison chart of SB 6203 and I-1631 here.

A Lesson to Learn from…Washington had a revenue neutral carbon tax on the 2016 ballot. Initiative 732 would have taxed carbon, and returned revenue as reduced tax to all and rebates to working families.

Initiative 732 was modeled after the  carbon tax in British Columbia, but also included a rebate to working families.  It would have placed 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.With the divided campaign the measure failed with a 59% No vote.

A second initiative attempt to institute a carbon fee (I-1631) also failed in the 2018 mid-term elections. It was opposed principally by oil companies, with a whopping $31 million budget.

Earlier Carbon Pricing Legislation in Washington

In the 2017 session five carbon tax bills were 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 403 (Rep. Joel Briscoe) would assess an upstream fee of $10/ton of CO2 increasing by 3.5% plus inflation each year. Net proceeds then return to the economy via eliminating a variety of state taxes, such as sales taxes on grocery store food or income taxes on mining and manufacturing businesses. In addition to eliminating taxes, the funds would also fund an Earned Income Tax Credit (EITC) match, where families affected by intergenerational poverty would receive a Utah state tax credit equal to 75% of their federal EITC amount.

History of U.S. Federal Carbon Pricing Legislation

Last updated November 9, 2018