Addressing the challenges associated with global warming and climate change will be more difficult now that President Trump has signaled his intent to withdraw from the Paris climate agreement and roll back several regulations that would help keep U.S. emissions on their current downward path. Even with full implementation of the Paris Accord, further measures are needed by all nations to achieve the deep reductions in emissions by mid-century that many studies suggest are warranted.
This task is difficult but not impossible, as shown by the amazing progress the U.S. has made in reducing other forms of air pollution over the last four decades. EPA data show that from 1970 to 2016, emissions of the six most common local air pollutants were reduced by 73 percent, while the economy grew by 253 percent. Repeating this success story over the next 30 to 40 years for carbon dioxide and other greenhouse gases is the challenge before us.
What measures are available to further reduce emissions? Which approaches would be most cost-effective? And, given the current political climate in Washington, D.C., what can Colorado and other states do? As professionals working on these issues, we are excited to participate in a community discussion at a forum, “Putting a price on carbon emissions,” sponsored by the League of Women Voters at Fort Lewis College on Monday, Sept. 25.
We will use this forum to explore two market-based approaches to reducing greenhouse gas emissions – carbon taxes and cap-and-trade. Carbon taxes increase the cost of fossil fuels in order to reduce consumption and, therefore, emissions. Under cap-and-trade, the government sets an overall limit (cap) on emissions and then requires sources of pollution to obtain an allowance for every ton of carbon they emit. Allowances are either auctioned or freely allocated by the state. Once a company holds an allowance, they can either use it to comply or sell (trade) it on the market.
While there are many differences between carbon taxes and cap-and-trade, they both use a price on carbon to reduce emissions. Many policy experts believe that these market-based approaches hold the greatest promise for allowing us to make a smooth transition from fossil fuels to renewable energy and other zero-carbon technologies.
There are also existing models of these policies that can provide inspiration for Colorado and beyond.
On the carbon tax front, a right-of-center government in the Canadian province of British Columbia instituted a revenue-neutral carbon tax in 2008. The carbon tax rate is now one of the highest carbon prices in the world at $24 per metric ton of CO2, equal to about 24 cents per gallon of gasoline or 2.4 cents per kilowatt-hour of coal-fired power. As expected, the policy has helped to reduce emissions. It has also helped cushion the financial impact of the carbon tax on households and businesses: the “revenue-neutral” component of the policy means that carbon tax revenue is balanced with reductions in existing taxes.
One of us (Bauman) led a ballot measure campaign to pass a similar revenue-neutral carbon tax in Washington state, but it was defeated at the polls in November 2016, in part because the support of Audubon Washington and Citizens Climate Lobby was countered by opposition from the Sierra Club and other groups that wanted to devote carbon tax revenue to clean energy and social justice efforts. Were Colorado to consider a carbon tax, climate activists would have to grapple with similar challenges because the state constitution requires taxes on motor fuels to go into the highway fund. On the plus side, a “clean the air, fix the roads” coalition might unite businesses and environmentalists behind a carbon tax.
On the cap-and-trade front, the California legislature recently extended and strengthened its landmark cap-and-trade program to require an additional 40 percent reduction in emissions by 2030.
This program is being jointly implemented by California and Quebec through the Western Climate Initiative, and those two jurisdictions will be joined next year by the province of Ontario.
Unlike other cap-and-trade programs in the U.S. and Europe, the Western Climate Initiative is the only one that applies economy-wide, covering 85 percent of total greenhouse gas emissions. This is a demonstration of another flexible, market-based approach that can be used to reduce emissions as we work to mitigate the worst impacts of global warming and climate change.
While the two of us do not agree on everything, we do agree that putting a strong price on carbon would be a huge step forward, and we hope that you will join us at the LWV forum at 7 p.m. Monday, Sept. 25, at FLC, Noble Hall, Room 130, to discuss these issues in more detail.
Yoram Bauman, a recent transplant from Seattle to Salt Lake City, has a PhD in economics, makes a living as a “stand-up economist” and was the founder and co-chair of the Carbon Washington I-732 ballot measure. Reach him at firstname.lastname@example.org.
Patrick Cummins, of Durango, is a Senior Policy Advisor with the Center for the New Energy Economy at Colorado State University and former Executive Director of the Western Climate Initiative.