Corporations Unite to Support Carbon Tax: How Does It Stack Up?

Harold Hedelman

Director of Engagement - Business Climate Leaders at Citizens' Climate Lobby

BP, Exxon, GM, Johnson & Johnson, Procter & Gamble, PepsiCo, Santander, Schneider Electric, Shell, Total S.A., and Unilever.

What, you ask, has brought these companies together at just this moment? Clearly, they all recognize the need for the US to join the rest of the world in addressing climate change. But the the most likely proximal cause is President Trump’s withdrawal from the Paris Agreement, which has catalyzed a massive groundswell of voices at every level pushing for effective action on climate change. 

And so, on June 20, eleven major corporations joined together as Founding Corporate Members of the Climate Leadership Council to support its carbon tax proposal

The Council’s plan is quite similar to a proposal from the Citizens’ Climate Lobby (CCL). Both plans call for:

  1. A gradually rising and revenue-neutral carbon tax;
  2. Carbon dividend payments to all Americans, funded by 100% of the revenue;
  3. Border adjustments to level the playing field for American businesses.

The CLC plan includes two additional features:

  1. The elimination of regulations that are no longer necessary upon the enactment of a rising carbon tax whose longevity is secured by the popularity of dividends. Much of the EPA’s regulatory authority over carbon dioxide emissions would be phased out, including an outright repeal of the Clean Power Plan.
  2. An end to federal and state tort liability for emitters.

Although not directly necessary to reduce US GHG emissions, these business-friendly features clearly encourage the support of carbon taxation by fossil fuel companies.

Looking beyond their high level similarities, the following compares fundamental details of the two proposals. CCL's stats appear first:

Initial price per ton CO2e: $15.00 / $40.00

Annual increase per ton: $10.00 / 2% above inflation

Fee after 20 years (2017$): $205.00 / $59.44

Use of revenue: Return to households / Return to households

GHG’s covered: Many, including methane / Only CO2

Border adjustments: Yes / Yes

Impact on existing regulation: None / Rollbacks on GHG regulations

Tort liability immunity: None / Yes

Both proposals embody conservative principles of free markets and limited government. Both offer an equitable, popular and politically viable way forward, paving the way for a much-needed bipartisan climate breakthrough.

Unlike any other country in the world, climate change is highly politicized in the US. It is therefore very encouraging to see major Republican and corporate support for simple, market-based solutions that will encourage significant reductions in US GHG emissions. The leadership shown by these eleven companies sends a signal to other business leaders that they should seriously consider following suit.

Read about Citizens' Climate Lobby and its proposal here.

Authors Harold Hedelman and Sarah Macgregor are volunteers with CCL.

Healthy Climate News: Seven Technologies That Could Scale

By Peter Fiekowsky

physicist, business owner, member of Business Climate Leaders, and head of Citizens' Climate Lobby's 100 Year Plan

Last month I spent a delightful day at the Carbon Dioxide Removal / Negative Emissions Technology workshop at Berkeley, put on by Wil Burns, one of our original members. He had a crowd of 130 people there from all over the country, with presentations on various technologies for carbon dioxide removal (CDR).

The key take-aways were that we have lots of options now for CDR that can scale up to 50 GT / year, at a cost of less than 1% of global GDP.

Can your technology scale up to remove 50 GT CO2 / year?

  1. DAC- Global Thermostat, Inc. (Menlo Park): Yes
  2. DAC-Carbon Engineering, Inc. (Vancouver): Yes
  3. DAC-CDR trees (Ariz. State Univ): Yes
  4. Marine Permaculture Arrays (Brian von Herzen): Yes
  5. Ocean Alkalinization (Santa Cruz): Yes
  6. Ocean Iron Fertilization: Yes
  7. OTEC (Alan Miller): Yes

We spent the morning of the conference looking into BECCS (Bio-Energy and Carbon Capture and Sequestration). This is an area of CDR which is receiving a lot of attention in the last few years. Getting energy from biological sources, such a corn, switchgrass, sugar cane, and even trees has obvious appeal. In fact almost half of the US corn crop is now used for this purpose, growing corn for ethanol used to replace some usage of gasoline.

With all that positive attention, the downside of BECCS is that it cannot scale beyond about 2 GT CO2 / year—just 5% of what we need. In addition, achieving even that CDR potential requires giving up large areas of agricultural area to energy production—potentially at the cost of growing food for the world’s expanding population. The fundamental reason for the limitation is that plants are at best 1/100 as efficient, per acre, at producing energy as are solar panels. And solar panels don’t require water, fertilizer, planting, and harvesting.

Another popular technology, biochar got an excellent mention from Brian von Herzen (one of the Healthy Climate founders). Biochar, like BECCS has great potential in certain situations, especially for reducing pollution by shifting the burning of rice chaff from in the fields, to biochar ovens which are clean, produce energy, and then provide biochar (sort of like charcoal) which is used as a very effective soil enhancer. Biochar doesn’t make it on the list above because its global potential is about 1 GT / year of CO2.

In summary, we have seven excellent candidates for doing CDR at scale. Yet the two CDR technologies now getting the most public attention, BECCS and Biochar, are valuable and attractive, but simply don’t scale, mainly because they are limited to the amount of the earth’s surface area that we’d be willing and capable of committing to that purpose.

We are making great progress—just in the last month!

Our Tendency NOT to Act on Climate Change

JIM TOLBERT

Business climate leaders

Originally appeared in LinkedIn

Climate models have uncertainty, and when you link these to economic models, the uncertainty only increases.  Some people have argued that we should wait until we are sure about our future projections before we implement policies to shift away from fossil fuels and carbon dioxide emissions.  This is like driving 80 mph through downtown, while speeding up and arguing that I believe there is uncertainty in my estimate that I will get hurt if my car hits another car, so I think I will wait a bit to touch the brakes until I can be absolutely certain I would get hurt if I didn't slow down - because I don't want to be late for my appointment.

Economist William Nordhaus has constantly contributed sound analysis to the discussion on climate change, challenging the discount rate used in the Stern Review.  And he continues his contribution in a December 2016 Working Paper,  "Projections and Uncertainties about Climate Change in an Era of Minimal Climate Policies."  The reality is that most nations have postponed taking truly transformational policies to shift away from fossil fuels, and now the window for action has decreased and this causes the required policies to be more aggressive.

From Dr. Nordhaus' conclusion, "It is worth emphasizing one further point about the impact of uncertainty on policy.  The future is highly uncertain for virtually all variables, particularly economic variables such as future emissions, damages, and the social cost of carbon.  It might be tempting to conclude that nations should wait until the uncertainties are resolved, or at least until the fog has lifted a little.  The present study finds the opposite result."

The time to act is now.

How Could Trump Spend a $1.2T Climate Dividend?

Harold Hedelman

Director of Engagment - Business Climate Leaders at Citizens' Climate Lobby

Originally appeared in LinkedIn

Each episode of the 1950s TV series, "The Millionaire," follows the life of an everyday citizen who receives an anonymous $1,000,000 gift.  As kids, we watched and asked each other,"what would you do?"  It was fun speculating how to spend the money.

I'm reminded of this as my colleagues and I ask businesses to engage in the federal carbon pricing debate and explain that in addition to catalyzing innovation and a clean energy economy, an effective price on carbon will generate a LOT of revenue.  Business leaders pay attention to this because they know that if they’re not at the table, they’ll be on the table and while economists agree that a carbon tax is the most economically efficient way to reduce CO2 emissions, there’s little agreement on what to do with the revenue.

If you think a Trump carbon tax is a pipe dream, consider some of his advisors and likely cabinet appointees.  Rex Tillerson first praised a revenue neutral carbon tax years ago[i] and is the front runner for Secretary of State.  Then there are those three Goldman Sachs executives. Goldman Sachs was one of 13 companies that were charter signatories of the Obama Administration’s American Business Act on Climate Pledge.  One of Trump’s economic advisors, Art Laffer, advised Ronald Reagan, and is also pro-carbon tax.  Then there’s Ivanka.  In this context, and with Paul Ryan itching to enact tax reform, the time is ripe for a national carbon tax.

Assume a bill passes in 2017 and takes effect in 2018.  A carbon tax of $10/ton, increasing $10/ton/year would generate 1.2 trillion dollars over the next seven years (see the figure) by the end of a two-term Trump presidency.[ii]  That’s HUUUGE!

The $1.2T "Climate Dividend" would be 32% of the 2015 $3.8T US Federal Budget; it would dwarf the Cold War "Peace Dividend," which Newsweek estimated at $260B [iii].

Before passage, as the legislation winds its way through the sausage-making halls of Congress, the feeding frenzy may be as crazy as the 2016 Presidential campaign.  Everyone will clamor for a share, and coming to agreement will be difficult.  

In the following, I’ve emphasized three keywords to point out that in principle a good carbon tax needs to be effective in reducing emissions, economically efficient, and equitable in including measures to reduce or eliminate hardships caused by the tax.

Efficiency

There are two main ways to price carbon:

  • Put a cap on emissions and create a market for buying and selling permits to create CO2 pollution.
  • Add a tax to the price of fossil fuels. This is like the familiar gas tax

A tax levied on all fuels is more efficient for at least a couple of reasons.  First, it avoids the inefficiencies of creating and running a market.  Second, it captures more emissions throughout the entire economy.  A cap can only effect the price of products created by those large entities who purchase permits to pollute.

Whether a cap or a tax is used to reduce emissions, legislators will struggle to agree on what to do with the revenue. A key concept they will discuss is Revenue Neutrality.  To be neutral, the government can’t use the revenue.  Generally, revenue neutrality is favored by Republicans who don’t want to see government grow, and less favored by Democrats who prefer investing the revenue. There are many flavors of neutrality.  Here’s a vanilla version: Give it all back!

Give It All Back!

In this scenario, all revenue from the carbon tax sketched above is rebated to American households. Such a proposal was studied by Regional Economic Modeling, Inc.  The study, commissioned by Citizens' Climate Lobby, shows that in year 10, a family of four would receive almost $300/month. That’s good because a carbon tax will raise prices and be otherwise regressive.  Estimating that over 50% of households would receive more from the rebate than they would spend due to higher prices, the study shows one way a carbon tax can be Equitable.  Another way to address regressivity—perhaps less comprehensively— is a tax swap.

Do A Tax Swap

A carbon tax might be built into a larger, revenue neutral tax bill that would reduce other taxes, exactly offsetting the carbon tax revenues.  Mentioned most often are personal, payroll, and corporate taxes.

Reduce The Debt

Another possible use of revenue is reducing our national debt.  While it’s not revenue neutral, this appeals to everyone who wants to reduce the debt. 

Sound like Xmas?  Maybe it’s time to write your wish list.

The Wishlist

Other non-neutral uses of carbon tax revenues include:

  • Job training for the discarded workers of globalization and a dying coal industry
  • Investments in communities who have suffered fossil fuel related environmental degradations
  • Climate change adaptation, e.g., helping America’s coastlines adapt to rising sea levels
  • CO2 removal and carbon sequestration
  • Funding clean energy technology innovation and infrastructure

But infrastructure deserves more than just one word…

Infrastructure

During their campaigns, Clinton and Trump proposed massive investment in infrastructure.  While Clinton had a proposal to pay for her plan, Trump did not.  A Climate Dividend might be just the ticket.

In fact, a lot of Making America Great Again won’t be cheap.  Think of the Climate Dividend as a way for Trump to address some of the maladies he trumpeted and vowed to fix.  Here’s a homebrew remedy for three of them:

  • 1/3 to households.  Remember those angry jobless blue collar workers?  Let’s send equalized monthly checks to every household as in the Citizens’ Climate Lobby proposal[iv].  Monthly checks will remind people of who to thank and prevent eventual repeal of the tax, which is what happened to Australia’s carbon tax as the result of backlash against rising costs.
  • 1/3 to infrastructure.  This will create blue collar jobs, and— if it includes creating a smart grid— a smoother transition to a clean energy economy.
  • 1/3 to reduce the national debt, corporate, personal, and payroll taxes.

Imagine a Trumpian fireside chat kindling speculations around every hearth.  How would you spend the Climate Dividend?  Business leaders will want tax cuts.  Clean energy advocates will want green infrastructure investment.  Blue collar families will remember that Trump need not use the Climate Dividend to pay for walls in the desert because Mexico will pick up that tab.

Our hypothetical carbon tax would reduce US CO2 emissions to 50% below 1990 levels in 20 years, well beyond our COP21 commitment.  How supremely ironic that Trump—who proclaimed and then disclaimed his belief that climate change was a Chinese hoax— could become a mega-climate hero while using his Climate Dividend to pay for campaign promises!

For a reality show celebrity like The Donald, remaking the Millionaire and casting himself as the benefactor who funds making America Great Again just might appeal to his sense of career continuity and presidential legacy. A carbon tax might be just the beginning…

For more about the carbon tax proposal sketched above and its economic effects, see this summary of the REMI study[v].

If you’d like to work with me and others to encourage Congress to enact a price on carbon, look into Business Climate Leaders[vi] as well as Citizens’ Climate Lobby[vii].

For more in depth discussion on general carbon pricing policy, see the World Resource Institute’s Carbon Pricing Handbook for Policy Makers (April_2015), an excellent survey of carbon pricing policy literature.

[i] https://youtu.be/Jb-9_rcMq7I

[ii] http://citizensclimatelobby.org/remi-report/

[iii] http://www.newsweek.com/peace-dividend-169570

[iv] http://www.citizensclimatelobby.org/

[v] http://businessclimateleaders.org/docs/REMI-Report-4-page-summary.pdf

[vi] http://www.businessclimateleaders.org

[vii] http://www.citizensclimatelobby.org

Coal Miner's Grandson

Bruce Hagen

Director, Clean Energy Business Engagement at Citizens' Climate Lobby-Business Client Leaders

Originally published by Enphase Energy in 2014, where Bruce worked as a Program Manager.

One evening, one hundred years ago, Anton Griglak stepped out of the elevator at West Leisenring #2.  He thanked God for another safe day in the mine.  Then he walked past the row of beehive coke ovens, across State Route 1051, and toward a row of company-built houses.  In one of those houses his family awaited him, and supper.

Anton had left the familiar of his faraway home to build a better life in the New World.  There were good jobs in coal country.  For two million centuries, time and tectonics transformed the steamy swamps of Pennsylvania into fat seams of concentrated sunlight.  Anton and his fellow miners blasted and shoveled that ancient energy into the engine of America.  Coal and oil powered the forces which twice pushed back the tide of global tyranny.  It built the foundations of prosperity that you and I still enjoy.

Anton didn’t know about atmospheric CO2.  He didn’t know that those smoking coke ovens were helping to push CO2 concentrations past 300 PPM on that chilly March night.  No one did.  When I learned about the “greenhouse effect” in college – and began my work supporting renewable energy – CO2 had reached 325.  It was already well past the “safe” level of 350 when my son entered the world.

In 2012 I was hired by Enphase.  CO2 had crossed 400 PPM frontier, breaking a three million year old record.  My son and I had travelled to Washington DC in June; we lobbied congress for carbon fee and dividend legislation on the same broiling day President Obama gave his climate address. Then, in August, I heard about Matt Reuscher, the coal miner turned solar installer… and it all came together.  The son of Grandpa Griglak’s daughter had grown up to be a foe of fossil fuels.  I was a “coal miner’s grandson.”

So, what would Grandpa Griglak think about my climate advocacy, my challenging the industry that provided food and shelter for his family (and, ultimately, me.)  Ingrate?  Hypocrite?  No, I think he’d see that fossil fuels are now things of the past.  They made it possible for renewable energy to power a modern industrial society… possible, and now because of their climate impact, necessary.  Perhaps he would recognize how his emigration to America is like America’s emigration to non-polluting energy. Stay with the familiar and stagnate, suffocate… or journey into a new world of promise and potential.

Matt Reuscher: from coal mine to sunshine

Matt Reuscher: from coal mine to sunshine

Matt Reuscher was a young coal miner in southern Illinois.  His job was killed by climate change – not from regulation, but from the drought that dried up the water needed to process coal.  He too emigrated, to St. Louis, where he got a job as a solar installer.  After reading about Matt’s journey (the full story is here), I reflected on how Matt’s story intersects with my own.  His family migrated from the mine to the rooftop – from coal to sol -- in a matter of months.  For me, that journey took two generations.  And you know what else?  Matt installs Enphase!

The future will belong to the people and the nations that recognize the potential of smart and simple solar energy.  Today, solar already employs nearly 80% more people than coal mining.  Solar jobs doubled from 2009 to 2011, to over 100,000.  As of November 2013, there were 142, 698 solar jobs. By comparison, coal mining jobs peaked at 91,698 in 2011, employed 88,962 in 2012, and are now down to 80,000.  With solar yet accounting for a small fraction of energy production, there is vast potential for growth in solar jobs – skilled work that can support a family in every community across this land.

You and Matt and I ride an unstoppable wave.  Sun energy, in one form or another, has always powered our planet, and always will.  When we create and use simple and safe solar products like the Enphase system, we open the door to all coal miners and their children to join the renewable recovery.

Working Without a Net

Bruce Hagen

DIRECTOR, CLEAN ENERGY BUSINESS ENGAGEMENT AT CITIZENS' CLIMATE LOBBY-BUSINESS CLIENT LEADERS

Originally published by Enphase Energy in 2013, where Bruce worked as a Program Manager.

Twelve years ago, on a bright November afternoon, workers threw the switch on Westridge Knolls Unit #1 in Petaluma, California.  The meter disc, surprised by this abrupt paradigm shift, ceased its lazy westward drift, and settled into a vigorous counter-spin.  For the first time, my home and my neighborhood felt the pulse of power from the sun.

“Watch your meter spin backwards,” the sales pitch appealed to anti-utility as well as environmental sentiments.  But I had worked for a utility in the energy-efficiency effort that helped California prosper while flattening power consumption.  I knew utilities were capable of being on the right side of the green power curve.

Net metering was then, and still is, a large variable in the incentive equation for going solar. And as more homes and businesses hook their arrays to the grid, utilities feel the bite in their business model as well as their system operations.  Mine was the first installation in a 100 home subdivision.  Today we have over a dozen, and solar canvassers are a common weekend sight on my street.  The drop in the bucket is now a splash, and in states like HawaiiCalifornia, and Arizona, it’s becoming a wave.

If the utilities’ challenge with net metering isn’t clear, here’s a “down-to-earth” analogy.  Mr. P-H used to buy all his potatoes from large chain grocer “MegaBites.”  They weren’t especially healthy or tasty, and they came with a big carbon footprint.  Now, Mr. P-H grows his own.  He stores enough yummy organic potatoes to supply his family over the whole year.

If Mr. P-H produces surplus ‘tates at the right price, everyone benefits when MegaBites buys the extras and sells them to his neighbors.  MegaBites becomes a potato broker.  But if too many neighbors do this, MegaBites is challenged to efficiently handle storage and distribution.  If MegaBites' price is regulated below their total cost for this brokering, they charge more to their non-growing customers to make up what they lose to the home-growers.  Or they go broke.  Neither scenario is sustainable, much less fair.

The analogy isn’t perfect.  Electricity is harder to store than potatoes, yet it can be moved quickly over great distances by a centralized control.  Utilities are heavily regulated, but not necessarily in ways that seem fair to the utilities or their customers, including the micro-generators.  Yet, in a fundamental way, spuds and sparks are the same: “cheap” conventional potatoes and power carry a cost that doesn’t show up on anyone’s grocery or utility bill – the impact on personal and global health.  Two-thirds of the electricity in America is fossil-based, generated at incalculable risk to the present and future inhabitants of our earth.  The push toward net-metering and other distributed generation incentives is in part an attempt to account for and balance these costs.  With full accountability, we can more readily invent and embrace the technology for making the leap to light-power.

The question that many of you smart people are working to answer is this:  what institutions and protocols will most quickly move us to this honest energy accounting, and how do we put them in place in time to save our climate?  The return to healthy food and power is not inevitable— there is no safety net protecting us from our collective ignorance.  But I think we are smart and compassionate enough to overcome these challenges… don’t you?

All this writing has made me hungry.  I’m going to microwave some of my Canella Russets, courtesy of Mr. Sol.