Advancing from the “Bottom Up”

Posted: October 26, 2015

There are some “top down” systems of pricing carbon.  China announced last month that it would put a national cap and trade system in place starting in 2017.  (Ironically this market-based approach is being introduced in a centralized bureaucracy.)  The European Union continues with an emissions trading scheme (cap and trade).  And increasingly other nations are adopting some sort of pricing scheme.  But national systems have eluded us in the U.S. and with our neighbor, Canada.

Although President Obama supports a price on carbon in a market-based approach, Congress isn’t cooperating.  Although economists agree that pricing carbon is the most efficient strategy to reduce carbon emissions, the next best option considered by the administration is the Clean Power Plan – which allows pricing carbon as a mechanism to reduce emissions.  States are now considering cooperating in trading allowances to make such a system more efficient.

The level where carbon pricing is getting legislative traction is at the state/province and regional level.  California already has a cap and trade program with the province of Quebec as a trading partner.  Ontario recently announced it would join that coalition.  The Regional Greenhouse Gas Initiative (RGGI) is a coalition of nine Northeastern U.S. states with a cap and trade program for power plant emissions.  And British Columbia has had good success with a carbon tax.

Other U.S. states are moving toward a price on carbon:

• Massachusetts is currently considering legislation for a carbon fee and dividend scheme (MA Senate No. 1747) proposed by Senator Mike Barrett.  The bill has the endorsement of more than 40 legislators.  It will have a joint committee hearing on October 27, 2015.
• Washington currently has the possibility of seeing competing carbon tax bills on the November 16, 2016 ballot – one revenue neutral (Initiative 732), and potentially another proposal that is revenue positive.
• Oregon saw a bill for a cap and dividend program introduced this year.  The bill was in committee upon adjournment (SB 965).  (“Cap and dividend” is a cap and trade program where revenues are returned to taxpayers as a dividend).
• Vermont is holding public hearings to update their Comprehensive Energy Plan (CEP) and apparently in the three hearings held so far (five are scheduled) Vermonters are asking that a price on carbon be instituted in the update.
• Rhode Island State Senators introduced a bill (S 0417) for a carbon tax in February, 2015, but later withdrew the bill.  Supporters are hopeful that it will be re-introduced.  U.S. Senator Whitehouse [D-RI] has proposed a bill in Congress for a national carbon tax (S.1548).
• New York legislators introduced coordinated bills in both houses for a carbon tax (A8372 Cahil and S6087 Parker). Both bills were referred to committee in August, 2015.

The action towards pricing carbon is accelerating, but the increase in CO₂ is accelerating too.  We have some catching up to do, but we’re on a good path.