What are the differences between the Barrett and Pacheco bills?
Barrett’s bill is revenue neutral. It uses a rebate to give back all revenues raised by the policy to households and organizations. Pacheco’s bill sets aside 20% of revenues to spend on clean energy and public transportation and gives the other 80% back to residents. Barrett’s bill also has more details. His strategy is to keep the bill from being labeled “a tax” while having enough details so it appeals to specific interests like businesses and advocates for the disadvantaged. Sen. Pacheco’s strategy is different. He wants to have a lively debate among legislators and the public about the best policy choices before nailing down the details. To support this debate, he’s planning a series of statewide public forums. At the moment, 350 Mass and the Campaign for a Clean Energy Future are supporting both bills.
Is it fair?
The government is always going to need to charge companies and individuals taxes. But right now, the system isn’t as efficient or fair as it could be. We put a price on people’s incomes, even though we want incomes to rise. But we don’t put a price on polluting, even though we’d all like to see less pollution. Earning money carries a cost in the form of taxes, while contributing to global warming is free, because there’s no price on carbon. A carbon fee removes this imbalance, by putting a fair price on carbon emissions while effectively reducing everyone’s tax rates by sending them a rebate.
What’s the point of putting a price on carbon and then just giving the money back?
The reason carbon pricing works is because it creates incentives. If there’s a carbon price, then the cost of burning fossil fuels goes up. If you don’t make any changes, you’re not any worse off, because you get a rebate check from the revenues that are collected. But if you do make changes, say by weatherizing your home, installing solar panels, or switching to a more efficient mode of transportation, you still get that rebate check. So now you’re better off – you’re polluting less and you’re getting more money.
Will it actually reduce emissions?
The evidence says yes. Several Scandinavian countries have had a carbon fee since the 1990s and have reduced emissions. British Columbia put in a fee-and-rebate approach in 2008 and has seen fuel consumption drop by 16%, while it went up by 3% in the rest of Canada. It makes sense that a higher price would drive down consumption.
Regional Economic Models, Inc. (“REMI”) was hired to do a study on a possible carbon fee and rebate program in Massachusetts. They looked at carbon fees under a wide range of assumptions, including different price and rebate levels, and they found that in their models emissions could go down by between 2 and 8 million metric tons a year, enough to cut our emissions to between 80 and 88% of their 1990 levels (they’re currently at 89%).
What effect will it have on our economy?
The other places that have implemented carbon pricing haven’t suffered economically for it. In fact, British Columbia has seen its economy grow at a faster rate than the rest of Canada in the five years after it implemented its carbon price (1.75% from 2008-2013 compared to 1.28% in the rest of Canada).
Across the three scenarios modeled by REMI, the state gained between 2,000 and 11,000 new jobs because of fair carbon pricing. Some of these jobs came from investments in clean energy and public transportation. Other jobs come from the lower effective tax rates that companies had because of the rebates.
It’s also important that Massachusetts doesn’t have much in the way of fossil fuel reserves of its own. We have to import them from other states outside of New England. So every dollar that’s spent on fossil fuels goes out of the state. But if we have fair carbon pricing, we’ll shift from imported fossil fuels to home-grown green energy, and more of those dollars will stay in the state.
Why not just expand cap-and-trade under the Regional Greenhouse Gas Initiative?
Massachusetts does have a cap-and-trade agreement with New England states. The problem with cap-and-trade is that it requires a complicated permitting system. Also, the states involved have given out so many permits that the cap is higher than current emissions and isn’t doing much to reduce them. There are too many ways for companies to avoid the cap by using “offsets” (giving money to organizations who are reducing emissions), without actually reducing their emissions at all. Also, the prices of permits can vary a lot, which makes it hard for businesses to plan ahead.
Carbon pricing helps solve all these problems. There are no complicated permits or exchanges: there’s just one price for carbon, which everyone knows in advance and can account for in their planning. And there’s less room for manipulating the system by offering too many permits or setting the cap too high.
Will it hurt low-income families or rural drivers who have to travel long distances?
One of the coalition’s eight principles is that carbon pricing shouldn’t have an unfair impact on people who are forced to spend a large portion of their income on fuel and energy. This includes low-income residents, who spend a high portion of their household budgets on fuel and heating. This also includes people in rural areas who have to drive longer distances and have less access to public transportation. These issues can be dealt with in a carbon pricing program by adjusting the rebate system. REMI found that using these kinds of adjustments, 80% of taxpayers would come out ahead or about even.
Is there any chance of it actually happening?
There are already two bills in the state legislature that would set up carbon fee and rebate programs. Both have gathered a number of co-sponsors and both bills were introduced by influential senators. There are many groups across the state that are strongly in favor of passing some form of carbon pricing. Carbon pricing also has the advantage of being one of the few environmental policies that has been able to get support from both major political parties. There is definitely momentum building for carbon pricing in Massachusetts. But ultimately, whether it passes or not will depend on support from the people of Massachusetts.
What can I do to help?
By reading this, you’ve already performed an important civic duty – getting informed. Our focus right now is on reaching out to people across the state about carbon pricing. There are lots of ways to help: write a letter to the editor, host or attend a house party, put us in touch with a group that might be interested in carbon pricing – you can probably think of more. Get started by joining your local 350 Mass node today!