Global Threats to Carbon Pricing

Even as we continue lobbying for enactment of a national carbon fee and dividend in the United States, CCL volunteers should be aware of threats to existing carbon pricing policies around the world and take action to defend them.

In this post I’ll take a close look at two examples near home of threats arising from the rise of “populist” right-wing movements that oppose carbon pricing along with most other effective climate policies, and popular concerns stemming from the sharp rise in energy and other prices that accompanied the pandemic and Russia’s invasion of Ukraine.

Revolt of the “populist” right

Here in the United States it’s no secret that a victory by Donald Trump in the 2024 election would prompt a wholesale campaign to roll back nearly clean energy policies in the United States. One recent analysis estimates that a Trump victory could lead to an addition 4 billion metric tons of CO2 emissions in the United States by 2030.

Less widely known here in America, however, is the threat to roll back Canada’s landmark carbon fee and dividend law, one of the best models of carbon pricing in the world despite its limited success to date. Canada’s carbon price (which has a number of complicated exceptions by province and industry) hit C$80/ton on April 1 and is schedule to rise C$15 per year until reaching $170/ton in 2030.

Although the carbon tax championed by Prime Minister Justin Trudeau passed in 2019 and has survived challenges, the opposition Conservative leader Pierre Poilievre vows to “axe the tax.” Endorsed by the U.S. conspiracy theorist Alex Jones, Poilievre is described as a “firebrand” and a “populist attack dog.” As Politico observes, “The slogan-a-minute Conservative warrior spent the past year successfully turning the Liberal government into a punching bag over its complicated carbon tax . . .”

Trudeau doesn’t suffer Joe Biden’s age problem but shares the low approval rating of his beleaguered American counterpart. Unless public attitudes change radically, he will lose the next national election no later than October 2025. This June, in an ominous portent, a Conservative candidate won an upset election in a district of Toronto held by Liberals for more than three decades. The main issue flogged by the Conservatives, familiar to most Americans, was the soaring cost of living since the onset of the pandemic.

As both Rick Knight and I have discussed, the Canadian government until recently did a poor job of communicating the many benefits of its carbon dividend, including the fact that most households come out ahead financially as the quarterly rebate more than covers their increased energy costs. Trudeau’s government launched a new branding campaign in February to highlight the dividend and win back public support for its signature climate policy. 

But it’s not easy to combat opposition misinformation when the public is so fed up with high prices. If indeed Canada’s next national vote is “a carbon tax election,” as Poilievre vows, and if Trudeau loses, the impact on global efforts to promote effective climate policies could be severe.

The popular backlash against higher energy prices

As Canada’s example shows, even a well-intended carbon-fee-and-dividend policy that benefits most households isn’t immune to misinformation campaigns by “populists” and oil industry-funded advocates who tap into public frustration over high consumer prices. Although the price spikes of the last few years were caused mainly by pandemic-related supply chain disruptions and soaring energy prices in the wake of Russia’s invasion of Ukraine, climate and clean energy policies make an easy target.

That’s even more true when climate activists fail to introduce dividends or similar mechanisms to help low- and moderate-income families afford alternatives to gasoline to fuel their cars or natural gas to heat their homes.

In a January 2023 post on Nerd Corner heralding Washington State’s new “cap-and-invest” carbon pricing program, I warned that it “allocates no revenue back to households in the form of dividends, so consumers have no financial cushion against rising energy prices. The coming months will provide a test of how committed Washington state residents are to spending more to reduce carbon pollution even if they see no direct climate benefits.”

Sure enough, the aggressive pricing program began generating significant opposition within months. One Democratic state senator who supported the law said, “I really worry we won’t see other governments following Washington’s leadership on climate if we can’t show that it’s possible to fight carbon pollution while still balancing it with affordability.”

As gasoline prices climbed, a petition drive to repeal the law, led by a wealthy hedge fund manager, qualified for the 2024 ballot. An article on Grist.com warned, “If Washington’s law goes up in flames, [other] states might decide against enshrining similar carbon-cutting laws.”

A huge battle is shaping up. The backers of Initiative 2117 spent heavily on the petition drive and have little cash on hand, but a good deal of public support. The No on 2117 coalition has deep financial support from environmental organizations, Microsoft founder Bill Gates and former CEO Steve Ballmer, Amazon, some unions, and even BP America. Even so, it faces an uphill battle persuading voters to support a tax on fossil fuels with few obvious benefits.

Ironically, many businesses apparently believe the program won’t survive, so they are buying fewer emissions allowances on Washington’s carbon market. Lower demand in turn has cut the state’s carbon price roughly in half, thus putting less pressure on gasoline and other fossil fuel prices. If consumers feel less aggrieved, perhaps they’ll be more likely to oppose repeal of the program.

Earlier this month, the executive officer for climate change and research at the California Air Resources Board endorsed the campaign to preserve Washington’s carbon pricing law, saying “we need them to be successful because we need many more states to come up and be in the place to be able to implement these programs.”

“Everything should be done to support them making it through that ballot measure,” she added. CCL volunteers should heed that call to action—not only in Washington state, but in Canada and everywhere else the cause of carbon pricing is coming under attack.