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Adventures in carbon pricing

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A federal carbon tax in the U.S. appears to be a political dead letter, but all sorts of interesting experiments in carbon pricing are underway regionally.

First: the California Assembly this week votes on the California Clean Car Discount Act, a “feebate” system that imposes a direct charge on sales of gas guzzlers and uses the funds to reward buyers of fuel sippers. The way it works it pretty simple. If you buy a Chevy Tahoe, you’ll have to pony up a $2,500 fee, which then goes straight to all the folks buying Honda Civics. Fees and rebates are determined on a sliding scale based on the fuel efficiency of the vehicle in question.

Although not quite a carbon tax, the system does establish clear price signals for energy efficiency, and such feebate systems are thought to be an improvement over CAFE. Unfortunately, some members of the Assembly are still sitting on the fence:

“What if some poor guy in Watts retires and says, ‘I want an SUV,'” Dymally said. “Do you punish him for that?”

Feel free to email Assemblyman Dymally to explain respectfully that no one wants to punish, um, poor inner city…retiree SUV drivers. We just want them to shoulder the full cost of their choices, so that the rest of don’t have to. (You might also point out that some of the cleaner SUVs won’t be subject to any charges under the bill.)

Further north, Bay Area regulators are mulling a straight-up carbon tax of 4.2 cents per metric ton. This is, by any measure, a pittance, but environmentalists are nevertheless ecstatic about the possible precedent. Indeed, the move would represent the flexing of newfound regulatory muscles, as air quality boards begin treating CO2 as a regular old pollutant.

Stories like this always come with unintentionally amusing quotes:

Once a carbon fee is in place, critics worry, it could easily increase.

You could call that a worry, or you could call it the point.

Moving still farther north: British Columbia just enacted an honest-to-goodness carbon tax, effective July 1. The tax will start at about $10 per ton, rising to about $30 per ton in 2012. This is a tax shift, meaning that all revenue will be returned to tax payers through offsetting tax cuts and credits (which is generally speaking a good thing).

What makes this news particularly intriguing is that British Columbia is also part of the Western Climate Initiative, a collaboration between BC, California, Washington, Oregon, New Mexico, and Arizona. So soon enough, BC could be operating under both a carbon tax and a cap-and-trade system. Despite what you may have heard, there’s no particular reason the two carbon pricing mechanisms can’t shake hands and be friends. This will be worth watching.

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