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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1 Comment

  1. Andrew E - February 20, 2008

    I live in BC and I am extremely happy to see this carbon tax come through. It is a great thing and I think the government is doing a good job (on paper at least) to ensure that it is business and working class friendly. All great things….but
    There is a big dichotomy with the Liberal government currently in power (note- the Liberal party is not “liberal” or progressive in the standard sense). They are pushing forward with massive road building projects that will encourage more people to drive. They are tripling the size of the port near Vancouver (not good for air quality or CO2 emissions). They are not doing anything to help contain farmed salmon from escaping into the wild. And, they are not doing anything to prevent developers creating sprawling new subdivisions (in fact in many cases, they are encouraging it). I could go on…
    What I am saying is that although the carbon tax is good news, there is still a long, long way to go. There are quite a few simple (but less flashy) proposals that they could implement that could enable even greater CO2 reductions, but the BC liberals are not going there because it would anger their donors.

  2. dennis wojciak - February 27, 2008

    from what i heard yesterday, if you break a low energy bulb in your house, you’ll practically have to evacuate due to the mercury.

  3. Adam Stein - February 27, 2008

    Nope, definitely not. The mercury exposure if you break a CFL is equivalent to eating a few cans of tuna.

  4. Libertarian Girl - February 27, 2008

    The problem with this is that it will hurt car companies– especially our domestic ones– even more than the CAFE standards have. Those who are passing these laws should also be prepared for the real consequences of more out-of-work automobile workers and closed dealerships. The market has shown that people prefer SUVs and that car companies make more selling SUVs than they do smaller cars (which have smaller profit margins).
    I’m not saying whether it’s good or bad, but you just have to realize that this WILL hurt industries.
    It also adds to the misperception that hybrid cars are really great for the environment– actually, becoming a vegetarian is BAR NONE the best thing you can do for the environment. Anyone who really cared about the environment would therefore legislate a heavy tax on meat consumption and a rebate to those who buy vegetables. I never see TerraPass talking about this aspect of environmentalism.

  5. Adam Stein - February 27, 2008

    Hey Libertarian Girl –
    We have written about vegetarianism a number of times (and even included a bunch of recipes!), but you’re right that it’s not a big emphasis here. Probably we should cover food issues more heavily. I think part of the reason we write more about transportation is that choice of car is a much simpler change for most people. Not sure if this is a great excuse, though…
    I’m a bit skeptical of the claim that this measure will hurt the auto manufacturers. These sorts of claims are always made about environmental regulations, and they always seem to be overblown. But I confess: I think this measure is worth it anyway. We need to start pricing environmental damage into purchase choices, and we should deal with labor and employment issues through separate means.

  6. J-M - February 27, 2008

    I live in BC also. The federal government just came out with their budget which is far from green in comparison. They did subsidize the car manufacturing industry and reduced taxes for big business and the provincial budget did much of the same– again! Why?
    This takes away from competition. Ford and GM expect hand-outs to appease the jobs and keep the large revenues, but they are putting out crap and practicing poor management! Instead of following Toyota’s better example of going green (reducing waste and building smaller than standard cars with better fuel efficiency), they are keeping with the status quo and whining at the possibility of changing CAFE standards to be more like Europe or Japan. India has now put out a very affordable car as well (Tata’s Nano) which has a MUCH lower ecological footprint than N. American manufactured vehicles — and yet we’re all up in arms over the possibility of millions of Indians and Chinese driving around like we do.
    I don’t feel North American (conservative) governments are allowing a level playing field for smaller car companies, like ZENN (Zero emissions, no noise), to provide a viable plug-in alternative. The latest car shows were MAJOR disappointments.
    Meanwhile, oil reserves dwindle, prices go up (but still WAY cheaper than they should be without subsidies — ever been to Europe?), devastation in the Alberta tar sands (now the largest carbon emitter on the planet!) and people complain.
    We need to tax what’s bad for us and give incentives to what’s good. Hence, the whole point behind carbon offsets.
    As for meat? Well, I’m veg and agree that a tax on meat would be good, transport costs ARE affecting food prices, but realistically, incentives to buy organic AND local are the way to go. Again, if there were no subsidies for cheap toxic diesel for massive cargo ships, we wouldn’t be eating broccoli from China now would we?…
    End the subsidies, increase carbon taxes to $30/ tonne (instead of $10) and implement a carbon cap and trade system and we’re well on our way to recovery.

  7. Anonymous - February 27, 2008

    Instead of using tax payer money to try and even things out with the coal & oil industry. Why don’t we just stop subsidizing oil and coal? Tax payers will keep more of their own money, the cost of coal and oil will rise on its own and consumers will be encouraged by their wallets to buy into the “green” revolution.
    Sending more and more money to Washington for the lobbyist, pessimistic and corrupt politicians to fight over doesn’t help us one bit.

  8. Anonymous - February 27, 2008

    Instead of using tax payer money to try and even things out with the coal & oil industry. Why don’t we just stop subsidizing oil and coal? Tax payers will keep more of their own money, the cost of coal and oil will rise on its own and consumers will be encouraged by their wallets to buy into the “green” revolution.
    Sending more and more money to Washington for the lobbyist, pessimistic and corrupt politicians to fight over doesn’t help us one bit.

  9. Curmudgeon - February 27, 2008

    I’m old enough to remember the first go-round we had with US automakers wailing about the (then new) CAFE standards. The arguments were similar to those raised above regarding feebates. They said it would take years for them to catch up with the Japanese car makers, who had a head start in small-car technology, so Congress MUST NOT raise mileage standards that would cut into lucrative US big-car sales. That was more than 20 years ago.
    Due to their lobbying, CAFE standards have remained stagnant here, while Europe and Japan have roughly doubled their efficiency. 20 years later, the US automakers, having put their money into lobbying and developing armada-sized SUV’s instead of R&D on fuel efficient cars, are in the exact same boat as 1980 – they are losing market share to the efficient Japanese manufacturers, as Toyota surpasses GM worldwide. Thanks to the “free market”-ers of the world and a Congress more concerned with mollycoddling Detroit than planning good policy, we have squandered 20 years where we could have caught up with or even overtaken the Japanese automakers in fuel efficiency, put our industry in the lead, reduced our environmental impact greatly, and set up a technological base for years or decades of future automotive products in an oil-constrained world.
    Failure to raise the CAFE standards has hurt our automakers, our nation, and our planet. Failure to act now will continue to do so.

  10. Neil - February 28, 2008

    Well, truth be told, as a Canadian, I don’t really give a damn if American car companies aren’t willing to compete with their superior Japanese counterparts (it is, after all, their prerogative to respond to market forces and regulations, or not). All autmobile manufacturing in Canada is foreign-owned, with offshore companies increasing in investment in employment in the country. So if the big 3 are losing market share, Toyota, Honda et al. are more than welcome to take over their old factories instead.

  11. Avery Moore - February 29, 2008

    Not surprisingly, there’s a certain level of desperate credulity in some of the responses above. The underlying belief appears to be that if only some government would just just wake up to its green responsibilities and impose a Carbon Tax, a long awaited momentum would build to do the same good elsewhere.
    A sane hope to be sure, but also note that the responders who wrote in from BC are unanimously unimpressed by the tax, its implementation, its underlying agenda, its self-contradictory goals, and its timidity.
    Yes, this is a Carbon Tax, but whether it is the right Tax is dubious.
    The more details emerge from this venture – a yearly subsidy of $327 million for BC oil exploration, the tax’s incredible regressiveness, the inflationary effect of applying this tax to home heating without offering subsidy for alternatives, the paltry protection for people at income levels less than affluent, and so on – you come away far from impressed that this is a model anyone else should follow.
    Even at this stage the effort looks far too much like sophistry. An attempt to paint concrete green and then promote the ruse as a brilliant environmental initiative.
    We’ll soon see exactly how bad this gets.

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