Article Against Carbon Pricing

@Emily O'Keefe I'm seeing a lot of “now that we have the IRA we don't need a carbon price” stuff lately.  But there is no analysis of the IRA that I have seen that concludes that we can get US emissions below target with that alone. There are some interesting state policies: CA has cap and trade, WA just implemented a cap and trade, the NE states have a pricing system (I'm not super familiar with how it works)  None of these are fee and dividend and none have high enough prices to have the impact we are looking for.  Unless folks around here all change their mind I'll keep advocating for a carbon price. 
 

Hi @Emily O'Keefe.  I would recommend reading @Jonathan Marshall's blog post about why we still need a national carbon fee.

I think the NYT article makes some big mistakes and misses some key points.  It's mostly centered around the question of why we focused on carbon pricing for so long instead of IRA style subsidies.  That misses the point that no major climate policy could have passed the divided/polarized climate prior to 2021–2022, including subsidies.  Somehow the article forgets that the IRA just barely squeaked through after Senator Manchin nearly killed it about a dozen times, and a carbon price had nearly as much support (49 senate votes) as the IRA ultimately got (50 senate votes, barely).

The claim that a fee & dividend policy fails to reduce clean tech costs and thus doesn't help low-income households misses the point that low-income households get a net income from a fee & dividend policy.

Anyway, the IRA is great, but that doesn't change the fact that by itself it's not enough and a carbon price would complement it and help us reach our Paris targets.

@Emily O'Keefe This article, like too many in the New York Times on this issue, offers the opinion of a very select group of carbon tax skeptics without attempting to really assess the facts. I addressed the political viability of carbon pricing in my recent research guide, “Building Support for Carbon Pricing.” In it I note in response to another New York Times article that "to call the cause of carbon pricing ‘hopeless’ seems premature when a record 68 such programs covered 23% of all global emissions in 2022, according to the latest World Bank report. America’s leading trade partners–the European Union, China, Canada, and Mexico–all use some form of carbon pricing. At the start of 2023, Washington state bounced back from its previous setbacks and began implementing a new ‘cap-and-invest’ carbon pricing system to help slash emissions 95% below 1990 levels by 2050. Moreover, a rising carbon tax reportedly came within one vote of being included in the budget reconciliation bill later known as the Inflation Reduction Act of 2022. Climate activists are not about to give up on a policy instrument described by the IPCC in 2022 as ‘one of the most widely used and effective options to reduce GHG emissions.’” 

As @Dana Nuccitelli notes, the IRA is great as far as it goes, but subsidies can get you only so far. In addition to my CCL blog, I looked closely at the relative merit of subsidies vs. carbon pricing in this Nerd Corner post. For more evidence that carbon pricing works really well in the real world, see the OECD study summarized in this post.

I've also discussed the great merits of carbon fee and dividend for both economic and environmental justice in this whitepaper. In one of his blogs a year ago, Dana quoted the findings of the Intergovernmental Panel on Climate Change that "using tax revenues to issue payments back to taxpayers that are disproportionately impacted or to redistribute capital among regions may be one of the most important features of carbon tax policies.” Unlike a well-designed carbon dividend program, many subsidies actually go disproportionately to affluent households, who can afford solar panels, EVs, and the like. 

For these reasons and more, I'm proud that CCL maintains its core focus on enacting a socially just carbon pricing program, while recognizing the need for other complementary policies to help us address the climate crisis.

@Mark Vossler
Thank you for your response. I will keep advocating for a CFD as well! Me and my chapter at William & Mary are actually starting a collective action movement for a CFD! The movement is only a couple weeks old right now, but I think it has the chance to grow really big. This is our Instagram. I made a post about the movement on here about a week ago if you're interested. :)

@Jonathan Marshall
Thank you for your response! The research guide you put together is extremely helpful. My college chapter and I are trying to start a collective action movement for a CFD, so hopefully that help builds major support. I made a post about a week ago about the movement if you're interested. This is our Instagram! (started maybe 3 weeks ago?) 

@Emily O'Keefe Continuing to advocate for a CFD is important even if one never passes.  I'm confident that our actions are part of the reason the IRA passed. If we keep it up our elected officials will know that their constituents care about climate and will still make progress. Maybe they will pass a CFD, maybe a carbon price that is sort of like it, but we gotta keep it up!!
 

@Emily O'Keefe Thanks for the Instagram link, and keep up your good work!
 

Hi @Dana Nuccitelli thank you for your analysis that was really helpful and makes sense!

@Emily O'Keefe, I'm glad you got feedback from my great research teammates Dana and Jonathan. A couple more thoughts I would add that may (or may not) be helpful. 

First, subsidization sounds more direct than carbon pricing if you assume that government agencies will always make perfect decisions on where to send the money. But in the real world, and especially in the hugely complex world of energy, that hardly ever happens. First of all, the prospective clean energy is not built and operated by the government, but by government contractors whose motivations and judgment tends to be clouded by the fact that they have the opportunity to use public money rather than their own money to cover their risks. The government agencies that hand out this money work very hard to do a good job, but they are chronically understaffed and always have the influence of lawmakers – who love to direct funding to their own states and districts -- hanging over their heads. That's one of the reasons it's more effective to incentivize private investors who tend to take much greater care to pick the right projects when it's their own money that they are risking. That's why carbon pricing, which disincentivizes fossil energy, is a more effective pathway.

Second, another thought has to do with the rhetoric about “carrots and sticks.” often used by opponents of carbon fee and dividend. They tend to overlook the fact that all policies contain both carrots and sticks. With government subsidies, the carrots go to the private companies that receive the subsidies, while the sticks fall on the heads of the taxpayers whose tax dollars are paying the tab. But with a carbon fee and dividend, it's the fossil fuel companies that get hit with the stick, while American families – especially those of lowest income – receive the carrots in the form of monthly dividends. Maybe some skeptics will warm up to the idea when they realize the greater fairness of this approach.

Rick 
 

Excellent points @Richard Knight.  Thank you.