President Trump is facing growing pressure to pass a nationwide fee on carbon pollution. During his first week in office, Elon Musk, founder of Tesla Motors and advisory council member to the President, floated the idea of a carbon fee to Trump. Depending on who you ask, Trump’s response was anywhere from rejection to lukewarm consideration. Secretary of State Rex Tillerson has also been vocal about his support for a carbon price as the leader of fossil fuel giant Exxon, who has factored some form of a carbon price into their manufacturing and exploration costs ranging from $40 to $80 per ton.
Adding to this pressure is a group of elder Republicans and economists, who met with the Trump administration today to present a carbon pricing proposal. Among the group was former Secretaries of State James Baker III and George Shultz, as well as former Secretary of the Treasury, Henry Paulson Jr. They pitched the idea as a “conservative climate solution” based on free-market principles.
What’s in the proposal?
The proposal has four pillars. First, it calls for a gradually increasing carbon fee, starting at $40 per ton. The fee schedule gives Americans flexibility and time to adapt and change their carbon-intensive practices. After five years, a Blue Ribbon Panel would recommend whether or not the fee should increase further, based on the best climate science available at the time.
Second, the revenue generated from the fee would be distributed equally to Americans on a quarterly basis. The dividend would be administered by the Social Security Administration, who would the money via checks, direct deposit, or putting the money into retirement accounts.
The third pillar deals with international trade. Exports to countries that lack carbon pricing systems get rebates on the carbon fees that they paid. Importing good from these countries would result in carbon fees on the goods. The revenue from those fees would be given back to Americans, increasing the amount of their rebate.
The last pillar is the one we need to keep our eye on. It calls for “significant regulatory rollback”. In essence, they are proposing that the carbon fee be a replacement for climate and environmental regulations that are already in place. The proposal says, “Much of the EPA’s regulatory authority over carbon dioxide emissions would be phased out, including an outright repeal of the Clean Power Plan. Robust carbon taxes would also make possible an end to federal and state tort liability for emitters.”
While they write that the initial fee rate should be set so that the resulting emissions reductions exceed the reductions that current regulations would accomplish, neither policy type on its own is sufficient to achieve the curb in carbon pollution that we need. The proposed carbon fee only applies to CO2 from the burning of oil, gas, and coal, leaving 20% of greenhouse gas emissions unaccounted for.
The fee doesn’t address methane or hydrofluorocarbons, gases that are much more effective at trapping heat than CO2 and have worrying potential to worsen the situation. This interactive graph shows what’s at stake by repealing our climate regulations (note: the goal in the graph is based on the Paris Agreement, which Trump has promised to pull out of). The plan may also repeal incentive programs that are important for the growth of the renewables industry.
Here’s our take.
The Republican carbon pricing proposal has similarities to the policies that Climate Action Business Association supports. The starting fee of $40/ton of CO2 is a respectable price for the beginning of the program. We also support revenue from the carbon fee being returned to Americans as a rebate, as well as policies that propose reinvestment of the revenue into clean energy infrastructure. Either approach creates a market incentive to reach our end goal: reduce emissions.
However, repealing our current regulatory measures is highly dangerous; EPA climate regulations and carbon pricing must go hand-in-hand in order to achieve the emissions reductions we need to ensure a stable future. While a fee on carbon pollution is an important mechanism for reducing emissions, it is but one tool in the toolbox. We need to be diligent and relentless while pushing for a variety of policies to curb climate change that propel us forward.
The proposal also limits the ability of states to take judicial action against any executive order. As has been seen in Massachusetts, allowing judicial action ensures that political intent isn’t warped or revoked. Removing this right threatens the value of the the policy and the commitment to ensuring its effectiveness and efficiency.
While it’s uncertain what will result of the proposal, it is important to remain open to collaboration. With an extremely low approval rating, any policy coming from the new administration is met with skepticism and downright disregard by many. The base for this distrust is, in most cases, valid. Let us move forward by working with the administration and our partners to improve upon any policy recommendations that include a price on carbon so that it prioritizes transparency, efficiency, and equity.