Pricing carbon emissions in Canada and the United States

The coal-fired power plants at Craig, the second largest installation in Colorado, would be affected by a carbon tax. Photo/Allen Best

The coal-fired power plants at Craig, the second largest installation in Colorado, would be affected by a carbon tax. Photo/Allen Best

British Columbia has price on carbon emissions. How about the U.S.?

by Allen Best

British Columbia has a carbon tax and, according to one Canadian professor, it has worked out quite well.

“It’s probably the most ambitious carbon-pricing experience in North America,” said Stewart Elgie, a professor of sustainable prosperity at the University of Ottawa, on a recent webinar sponsored by the Association of Climate Change Officers.

Will the United States ever adopt a carbon tax?

Frank Reynolds, who directs a rapidly growing group called the Citizens’ Climate Lobby, thinks it can. That’s the entire mission of his organization. But it must come from the right-of-center folks, he says, and not the usual suspects.

“It’s important for Republicans to lead on this issue,” said Reynolds. “When Democrats propose it, it almost instantly becomes a partisan issue. What we have tried very hard [to do] is to find Republicans who will lead or be part of a bipartisan proposal.”

A carbon tax would add a charge to all sources of carbon, including gasoline, depending upon their relative contributions of C02 emissions.

A carbon tax would be assessed on all sources of carbon, including gasoline, depending upon their relative contributions of C02 emissions.

Reynolds spoke soon after 10 Republicans in Congress had agreed to co-sponsor a resolution that acknowledges a human contribution to climate change and, according to the National Journal, endorsing the need to respond.

“We think this argument can be won from the right,” said Reynolds.

Several dozen nations in the world have some form of a tax on carbon. Carbon itself is not a problem, but emissions from the burning of carbon are. The intent of a tax is to reflect the risk posed to civilization by the accumulating gases in the atmosphere and hence create incentive to innovate and change.

A price can be levied in various ways. One mechanism is cap-and-trade, which was approved by the U.S. House of Representatives in 2009 before being defeated in the U.S. Senate. Economists, however, almost universally favor a more direct carbon tax (or fee, as the Citizens Climate Lobby prefers) that can be applied directly at the point of production. The cost can then be passed along through the supply chain of goods and services.

British Columbia’s experience

British Columbia adopted its tax of $15 per metric ton of emissions in 2008, boosting the tax by $5 per ton annually until 2012, when it reached $30 per ton. Poor and rural residents get breaks.

With the increased revenue from carbon, income taxes have been lowered and so have corporate taxes. BC (as the province is commonly called in Canada) has the nation’s lowest income tax rates and the second lowest corporate taxes.

Elgie said BC’s fuel use dropped 19.1 percent after adoption of the tax while the rest of Canada’s increased 3 percent. Lately, it has been rising once again—possibly because people have become accustomed to the tax.

The tax seems not to have harmed BC’s economy. As measured by gross-domestic product, BC’s economy has slightly outperformed the rest of Canada’s during the last five years, Elgie said. However, that does not mean the tax caused BC’s greater prosperity.

Elgie credited Gordon Campbell, the premier of BC at the time of the adoption of the tax. California under Arnold Schwarzenegger had been exerting leadership on climate issues, and Campbell read Tim Flannery’s “The Weathermakers,” a book about the accumulating evidence that humans can influence the climate, over a Christmas vacation. That’s what motivated his action. “His whole party wasn’t with him, but he got it and decided to follow Schwarzenegger on this,” Elgie said.

While Campbell lost the next election, it was not specifically his advocacy of a carbon tax, said Elgie. The lesson: a carbon tax is not a political landmine.

“Fear of the political downside is vastly overstated,” he said,” and those who have actually done it, it has not hurt.”

In the United States, Citizens’ Climate Lobby has deliberately kept aloof from partisan politics. At the group’s meetings (note: I have attended several), you almost never hear the word “denier,” the word of opprobrium commonly hurled at those dissenting about the science of climate change.

Instead, CCL has methodically set out to create a grassroots campaign, with at least one chapter in each of the nation’s 435 House districts. It now has 428. It seeks to have volunteers and activists who speak directly to members of Congress or their staffers, their talking points thoroughly understood, the agenda narrowly focused, and with the intention of finding common ground. CCL seeks to focus on things that people can agree upon, rather than those that separate them.

Carbon fee and dividend

“We are advocating for one very simple policy,” said Reynolds. “We call it carbon fee and dividend.” Like British Columbia, the group proposes to distribute revenues collected on carbon back to the public in a way that offsets income taxes.

The group’s board includes Jim Hansen, the famous climate scientist, and George Shultz, the secretary of state under President Ronald Reagan.

Reynolds said the group focuses hard on solutions, not the problem. He cited the work of Robb Willer and Matthew Feinberg, then professors at the University of California, Berkeley, who in 2011 issued a paper: “Apocalypse Soon? Dire Messages Reduce Belief in Global Warming by Contradicting Just-World Beliefs.” In their research, the professors explore why, even as the scientific evidence in support of global warming has mounted, public belief in the United States has stagnated or even decreased.

“One possible explanation for this pattern is that information about the potentially dire consequences of global warming threatens deeply held beliefs that the world is just, orderly, and stable. Individuals overcome this threat by denying or discounting the existence of global warming…”

Reynolds’ takeaway after examining the studies by the California professors: “The minute you had a solution, it completely changed the dynamics.”

That understanding defines how CCL meets with Congressional staffers. “We will talk about the science if anybody wants to talk about science,” he said. “Seven percent of Congressional representatives push back on science. But if you go in and want to work on solutions, there is a lot of interest engaged on both sides of the aisle rather than having an

The ColoWyo Mine, located about 30 miles south of Craig, Colo., supplies coal for the Craig Generation Station, Colorado's second biggest generating complex. Photo/Allen Best

The ColoWyo Mine, located about 30 miles south of Craig, supplies coal for the Craig Generation Station. Photo/Allen Best

argument about whether the problem exists.”

On simply the matter of economic impact, CCL believes it has a strong case. The group members can cite studies that find that a carbon fee will actually increase jobs.

Reynolds also said it’s important to press the right buttons. “We have officials who will push back on the science, but at the same time are concerned about air and water being too dirty,” he says.

For Republicans, however, the biggest issue is not whether the United States needs to do something. Instead, he said, it’s whether U.S. efforts are meaningless if other nations do not also take action. This is a reference especially to China and India, the planet’s gigantic, emerging economics.

Also at issue is where the money goes. Republicans, he says, want to know about administrative costs. And, once again, they worry about revenues being kept by government, providing a means to grow government.

What will a price on carbon do to coal? “Any price on carbon will push coal out of the equation,” said Reynolds. “There’s just no getting around it.”

Elgie agreed. “It’s just a matter of how fast,” he said. Oil and gas, he added, will be around longer.

Representatives from California Air Resources Board and from the RGGI (Regional Greenhouse Gas Initiative) of the nine northeastern states also spoke on the webinar.

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About Allen Best

Allen Best is a Colorado-based journalist. He publishes a subscription-based e-zine called Mountain Town News, portions of which are published on the website of the same name, and also writes for a variety of newspapers and magazines.
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2 Responses to Pricing carbon emissions in Canada and the United States

  1. paul says:

    Economic and political scientology at its finest.

    • jan freed says:

      Scoffers are a dime a dozen.

      A “carbon fee and dividend” makes enormous sense! Prestigious panel a REMI confirmed the basic features of this approach.

      This way citizens would RECEIVE the carbon 
fees as a monthly dividend. That would cancel out any price spikes in dirty energy.

      Polluters PAY the fees, so it holds fossil fuel corporations responsible for the damages they cause, hundreds of billions of dollars per year (Harvard School of Medicine).

      It would rapidly lower emissions, as happened in BC Canada with a similar policy. BC lowered both emissions and taxes with their fees.

      A study by respected Regional Economic Modeling, Inc. found the dividends would help to create 2.9 million additional jobs in 20 years.

      To those who reject the science: perhaps nothing will change
 your mind. But what have you got against cleaner air, less asthma in our kids, fewer heart attacks, and more money (the dividend) in your pockets?

      To those accepting the science: Any effort to
 limit the problem of climate change is worth it.

      For example: the cost of sea level rise ALONE is so great that no effort to prevent it is unwarranted.

      Why even bother with the paid deniers who thrive creating the 
delay of a false debate? IMO we must take action by supporting responsible adults, of either party, for Congress.

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