Sign up | Login with →

Comments by Jesse Jenkins Subscribe

On When Politics Constraints Carbon Pricing, Part 3: Why Carbon Revenues are Just as Important as "Putting a Price on Carbon"

Dear Bob,

Thanks for the comment. I actually considered writing about BC's carbon tax experience -- as well as other subnational examples like the Regional Greenhouse Gas Initiative in the Northeastern US and California's AB 32 -- but cut them for the sake of brevity, and focused only on national-level examples (my paper actually discusses the two subnational US examples however). 

That said, I have followed BC's carbon tax experience over the years. At $30/ton, it's one of the few policies (the only one really) in North America to reach anything close to what economist's estimate as the social cost of carbon (although still on the low end of those estimates, which range from roughly $15-150/ton and rise over time). 

Still, BC has extremely low carbon emissions from the electricity sector, which is dominated by hydropower, so the impact of BC's carbon tax per household is lower than in most other regions of North America. BC residents feel the impact mostly in gasoline costs, which have risen about 7 cents per liter.  BC consumes about 4.5 billion liters of transportation fuel per year, or about 975 liters per year per resident. So that's only on the order of $70 per person per year in higher fuel costs. Assuming transportation fuel cost increases represent two-thirds of the total impact on household costs, BC's apparent household WTP for climate policy is probably still right within (or at least not far off) the $80-200 per household per year range evident in the United States (as described in my paper). And that's before considering that BC's carbon tax includes a significant tax shift (cuts to personal and business tax income rates) to offset the initial cost increases due to the carbon tax. That's a very quick back of the envelope estimate, but I doubt I'm off by anything close to an order of magnitude. Thus, it looks to me that while BC's policy achieves a higher carbon price than in other jurisdictions, the political economy constraints there are no less stringent than elsewhere in North America. Total household initial costs are fairly low still, and that's likely critical to the political sustainability of BC's carbon tax policy. 

So you point to BC as the model for everwhere else. I'm not so sure. If you tried to implement the BC tax shift approach elsewhere, in regions with a higher carbon footprint per household, you'd wind up with a much lower and thus less effective carbon tax. And if you spend all of your revenues on tax rebates instead of investing in clean energy R&D and additional abatement, you will accomplish little else.  There are of course other subnational examples to keep an eye on. RGGI has seen substantial cuts (on the order of 40%) to electricity sector CO2 in the Northeast, although most of that is likely due to the ongoing shift from coal (and oil) to gas-fired plants in the region. That said, RGGI's modest (just about $3/ton CO2) and politically sustained carbon price has also raised billions in revenues across the region that have been directed to energy efficiency programs, clean energy RD&D programs at places like NYSERDA and the Massachusetts Clean Energy Center, and other mitigation efforts. California is considering similar uses for the revenues generated by its AB32 cap and trade program, which took effect in 2012.  Your comment also raises three great questions for further research. I don't have a direct response for those here, but suffice to say, those are all important considerations. For now, I'll just focus the conversation on the BC experience and what we can learn there. I personally see another example of a politically constrained carbon price, and not necessarily a model for widespread replication elsewhere...
Jesse
July 28, 2014    View Comment    

On Why Does Politics Keep Getting in the Way of Pricing Carbon? - Part 1

Hi Peter,

How would this option 3 differ from the status quo? What measures would you suggest to make it a reality? And why are you confident it will lead to substantial emissions reductions? 

I'm not totally clear what you are suggesting so it is hard to respond. Thanks. 

Jesse

July 26, 2014    View Comment    

On Why Does Politics Keep Getting in the Way of Pricing Carbon? - Part 1

Good suggestion. Ill edit accordingly. All figures in the article are dollars per metric ton of co2.

July 26, 2014    View Comment    

On Why Does Politics Keep Getting in the Way of Pricing Carbon? - Part 1

Hi Marchant,

The inside-baseball dynamics on the Hill clearly play in here too. I've seen enough legislative efforts to know how that works and I don't mean to neglect those factors. In my view, however, they are the secondary constraints. If the primary political economy constraints are not attended it, the chances of having any requisite support on the Hill will be slim. In contrast, if the primary political constraints are attended to and not violated, the inside baseball can progress and a viable  Hill strategy, as you discuss here, can be developed.

Jesse

July 24, 2014    View Comment    

On Why Does Politics Keep Getting in the Way of Pricing Carbon? - Part 1

The influence of money in politics is clearly another manifestation of the political obstancles arising from entrenched commercial interests. However, you write: "Jim Hansen has proposed the best system of Carbon Tax that I know of called Tax and Dividend but despite it being an election winner for any party that proposes it (who could resist getting a dividend in their bank account every month from 'the man'), no party would dare anger their financial masters by proposing it." I will discuss this proposal in more detail in Part 3, but I just wanted to clarify, there not great evidence that this is such a political winner. The dividends do soften public opposition (from voters) to carbon pricing (relative to using revenues for general budget purposes) but two things to keep in mind: 1) it's not a dividend "from the man," it's a refund from taxes we would each pay ourselves. As a per capita dividend, it would be a progressive redistribution of carbon revenues, but it's still something we all have to pay, and the initial hit to our pockets is where the public opposition arises. 2) the dividends do nothing to blunt industrial opposition to the proposal, as they don't get any money back. This is a key difference between the cap and dividend proposals (100% of revenues go back to citizens via equal per person dividends) and other "tax shift" propoposals which would use revenues to reduce income and usually corporate taxes as well (as in BC and Australia). Anyway, stay tuned for Part 3. How the revenues from a carbon pricing policy are used can be more important than the price itself, but I'm not convinced rebates, dividends, or tax shifts are the best use for such funds. See part 3 on what I see as a much superior proposal, politically, environmentally, and economically...

July 24, 2014    View Comment    

On When Politics Constraints Carbon Pricing, Part 2: 6 Tips for Improving Climate Change Policy

Thanks for following the series Joris. 

July 24, 2014    View Comment    

On Why Does Politics Keep Getting in the Way of Pricing Carbon? - Part 1

Actually, part 2 got quite long, so I split it up into two more. Part 2 goes up Thursday AM, but it only touches on the revenue neutral proposal briefly. Part 3 will deal with it -- and alternative uses for revenue that appear to perform even better politically, economically, and environmentally -- in much more detail. Stay tuned for Part 3 on Monday!

July 23, 2014    View Comment    

On Why Does Politics Keep Getting in the Way of Pricing Carbon? - Part 1

Bob, stay tuned for part 2...

July 23, 2014    View Comment    

On Why Does Politics Keep Getting in the Way of Pricing Carbon? - Part 1

Hi Schalk and thanks for the comment,

"Skepticism" of climate change is indeed one factor in public opposition to strong carbon pricing policies. However, I personally believe the role skeptics play in climate policy debates is a bit overblown. The more fundamental economic interests are more powerful I believe, and I think the public opinion evidence would support that interpretation, as in most nations I've looked at, and particularly in the United States, we see strong majorities believe that climate change represents a problem to be addressed, but fairly weak support for expenditures or costs associated with confronting that challenge. Yes, there are more skeptics among the conservative portions of the US (and other) populations. I'd recommend the "Six Americas" series of studies for more on that. But I also think that this expression of skepticism may also be a case of "motivated cognition" - that is, if the idea of confronting climate change creates cognitive dissonance with your beliefs, worldview, or personal interests, one has a strong motivation to develop a rationale and understanding of the problem that reduces or eliminates that cognitive dissonance. This can easily manifest as skepticism of the underlying science or risk. Anyway, the role of "skeptics" in climate politics is a very interesting topic, and one I'd love to hear more informed views on from those who may have spent time researching this topic. Cheers,

Jesse

July 21, 2014    View Comment    

On Why Does Politics Keep Getting in the Way of Pricing Carbon? - Part 1

Indeed! Stay tuned for part 2...

July 21, 2014    View Comment    

On Climate Change and the American Economy

Echoing Eli here, EP, please keep the discussion civil. It's been a great and substantive back and forth so far in this chain. No need to assert what others have or have not "studied" or "know," which treds into the realm of personal attack which we don't tolerate here at the Energy Collective. Thanks!

Jesse

June 9, 2014    View Comment    

On Renewable Wood Fuels, Part 2: Environmentally Beneficial or a Chronic Problem?

On a related note, EIA notes today that U.S. exports of wood pellets doubled this year, primarily to meet growing European demand for biomass...

May 22, 2014    View Comment