Climate-wrecking carbon pollution can no longer be free


Addressing the life-threatening climate crisis through an air pollution fee would a be simple act, one would think. Hm, think again. Turns out it’s not that simple at all. But here’s the real challenge: We still need the thing, and it is urgent.

It is known to instantly lower society’s emissions, the same way that a fee on sugar, alcohol or cigarettes lowers the consumption and consequently the health damage caused by it. When London introduced a special pollution tax in 2003, it reduced the number of cars by 15 percent. And with the air pollution fee, it can be done in such a way that would leave around three-quarters of us financially better off. So what are we waiting for?

Why aren’t we already doing it? – making it cost to pollute the atmosphere. As we have learned from science report after science report, our atmosphere is not an open sewer after all. It has limits to how much carbon we can spew out there.

Well, for a start: some of us are already doing it. Globally, over 45 national and 25 subnational jurisdictions have put a price on carbon – already today. This covers an estimated fifth of global emissions. And because these prices are set to rise, it means they will make that fifth of emissions drop gradually over time.

The method is based on simple logic: When you let the polluter pay for emitting carbon pollution, it means that the non-polluting solutions can gain ground.

Nevertheless, over the three decades, since international climate action talks started in 1988, most governments have deliberately been refusing or avoiding solving the problem with our air pollution and greenhouse gas emissions by using a fee or taxation system – a misconduct of their responsibilities which, as we have seen, has resulted in continuous and escalating heating of our planet.

Politicians could have spared us from this mess, of course – simply by regulating society’s air pollution the same way other types of pollution are being regulated by law. They could have solved the climate crisis before it even became a crisis, by introducing an air pollution price – ideally: a global, border-crossing pollution price – and by making that price slowly rise slowly, year by year.

Had they done that, back then, the world would have been a safer and climatically much more stable place today. But as we know: most of them chose not to, or they did it half-heartedly, like in the EU, because everyone knew from the start that a proper and rising price on carbon would be the ultimate death sentence to the extremely lucrative businesses in the energy and agriculture sectors.

So instead, life on our planet is now beginning to pay a very heavy price for these governments‘ failure to protect us: extinction of species, loss of human lives in the millions. Life-threatening instability.

Sorry kids, when you grow up you will be facing risks of both economic and ecological collapse at an unprecedented scale, possibly the end of civilisation as we know it, and yes, you can blame your parents and grandparents for that.

That is not to say we should just sleepwalk into making our planet unlivable. The time has come to fiercely demand that our governments implement proper regulation that makes the polluters pay for the damage they do.

However, as we have seen: there’s more to it. The lesson from Australia’s abolished carbon tax and France’s cancelled petrol tax is that it is extremely important that it is done in such a way that is reasonable and fair, and is carefully explained so that it is also perceived by the wider public in that way.

Could it be that things haven’t been moving in this direction because too few of us, the voters, have understood how it could work? Because we haven’t seen how it could become a stable policy, protected by an overwhelming support in the population, ensuring that the legislation wouldn’t become and election issue that would lead to the overturn of the government that implemented it?

In Australian politics, the concept of a ‘carbon tax’ is perceived as unthinkable – a dirty word to be feared and avoided. It has been that way since 2013, when Tony Abbott proved he was able to win a federal election on a promise of scrapping the carbon tax which was in place at the time.

In American politics, however, leading economists, scientists and groups such as Citizens’ Climate Lobby and the Climate Leadership Council have brought forward new policy frameworks which appear to make sense both to the right and the left side of Congress.

“Climate change is a known failure of the economic system. Pricing it provides a straightforward adjustment to address this.”

~ World Economic Forum

“Return all the money raised directly to citizens in the form of equal monthly dividends. This would transform an unpopular carbon tax into a popular and populist solution.”
~ Ted Halstead

At a TED-conference in April 2017, American policy entrepreneur Ted Halstead, founder of the Climate Leadership Council, proposed this transformative carbon dividends solution based on the conservative principles of free markets and limited government.

Correcting the market

“As long as fossil fuels remain artificially cheap and profitable, their use will rise. Correcting this market failure requires their price to account for their true social costs.”
~ Citizens’ Climate Lobby

“It is a dirty lie that CO2 emissions from fossil fuels have so far come with no cost – they cost us human health, damage to our climate, and billions of dollars in subsidies worldwide. Putting a clear price-tag on CO2 emissions means finally telling the truth. Pricing CO2 is key to climate stabilisation.”
~ Ottmar Edenhofer, Potsdam Institute for Climate Impact Research


A climate dividend for America

Internalising the costs of burning fossil fuels

The ‘Carbon Fee and Dividend’ is a policy proposal created by the American organisation Citizens’ Climate Lobby to internalise the costs of burning fossil fuels. According to Citizens’ Climate Lobby, it’s the policy that climate scientists and economists alike say is the best first-step to reduce the likelihood of catastrophic climate change from global warming.

It’s about being FOR something rather than AGAINST things, the group says.

The Energy Innovation and Carbon Dividend Act earned headlines calling it “the first bipartisan carbon tax bill in a decade.” The Act would create a $15 tax per metric ton of carbon dioxide, the main pollutant contributing to global warming. That tax would then increase by $10 per year.

In addition, it would create a tariff for “carbon-intensive imported goods” coming from countries without their own carbon tax. The bill’s sponsors claim that all the revenues collected would be rebated back to American taxpayers.

That is not just theory. In the US, this bill was introduced in the House on 27 November 2018, as ‘H.R. 7173’, by Rep. Ted Deutch.

Bipartisan Republicans and Democrats are both on board, co-sponsoring the bill together.

“The majority of Americans support Congress taking action on climate change, including more than half of Republican millennial voters. Solving climate change is too urgent to get caught up in partisan politics,” commented Citizens’ Climate Lobby.

» GovTrack – 6 January 2019:
Energy Innovation and Carbon Dividend Act of 2018
“Should America institute a tax on the main pollutant contributing to global warming?”

The following position statement was submitted by Citizens’ Climate Lobby on 3 December 2018:

“We fully support the Energy Innovation and Carbon Dividend Act of 2018. This policy will drive down America’s carbon pollution while unleashing American technology innovation and ingenuity. We support it because it’s:

Effective   This policy will reduce America’s emissions by at least 40% within 12 years.

Good for people   This policy will improve health and save lives. Additionally, the carbon dividend puts money directly into people’s pockets every month to spend as they see fit, helping low and middle income Americans.

Good for the economy   This policy will create 2.1 million additional jobs over the next 10 years, thanks to growth in the clean energy economy.

Revenue neutral The fees collected on carbon emissions will be allocated to all Americans to spend any way they choose. The government will not keep any of the fees collected.”

“Why collect money only to give it back? The intent is to change consumer behavior when it comes to energy use without creating a pot of money for elected officials to squander. Individuals who conserve would come out ahead, while those who drive gas-guzzlers with abandon would pay in more than they get back.

In this scenario, the tax would also replace the current regulations on emissions and energy use, dramatically reducing the role of government bureaucrats. ‘Less government, less pollution’ is the theme.”

» Chicago Tribune | Editorial – 3 July 2018:
A carbon tax that could put money in your pocket

Carbon fee: Revenue-neutrality versus raising funds

From listening to this podcast with Kyle Murphy, Executive Director of CarbonWA, you can learn about the various political fights of revenue-neutrality versus raising funds in carbon fee proposals:
» The Reversing Climate Change podcast:

A climate dividend for Australia

“A study entitled ‘A Climate Dividend for Australians’ offers a practical solution to the twin problems of climate change and energy affordability. It’s a serious, market-based approach to address climate change through a carbon tax, but it would also leave around three-quarters of Australians financially better off. It is based on a carbon dividend plan formulated by the Washington-based Climate Leadership Council.”

» The Conversation AU:
Fresh thinking: the carbon tax that would leave households better off

The inequality aspect of a carbon fee

“Pricing carbon represents another strategy for raising revenue, one that penalizes fossil fuel companies and raises the cost of consuming energy-intensive goods, like gasoline.

Depending on the carbon price’s design and its revenue allocation, the overall policy can be progressive. California’s first attempt at carbon pricing was a half-decent cap-and-trade approach. Working with progressives and environmentalists, leading state legislators wrote a bill, SB-775, that cleverly combines a cap on emissions with a backdoor carbon tax that would raise much more money, returning much of it to taxpayers in a left populist move.

In early July, Governor Jerry Brown scuttled that effort to instead update the status quo, with even more help from big oil.

Still, thanks to legislation passed in 2016 with support from the same broad coalition, California must spend 35 percent of ongoing carbon price revenues on low-income and racialized communities that have borne the brunt of prior pollution-driven growth. That progressive investment mandate remains an important left victory.

Similar initiatives have emerged in Massachusetts, New York, Rhode Island, and elsewhere. As in California, these proposals have wide support but run up against entrenched fossil fuel interests. Bigger fights loom. The issue of carbon pricing has taken center stage at even the federal level.

Climate-conscious Republicans and their allies want to levy a modest price on carbon and refund the revenue to all citizens in equal amounts, which would, in most cases, move wealth from the rich to the poor. In exchange, they want to slash environmental regulations.

The fatal problem with the carbon tax as a comprehensive climate policy approach is the idea that market incentives alone could reshape the country’s infrastructure.”
Daniel Aldana Cohen in Utne on 11 January 2018

“You are taking money out of our pockets”
Jason Leblanc questions the Canadian Prime Minister Trudeau on carbon tax Published on on 11 January 2019

Carbon taxes’ disproportionate burden

“A carbon tax may a increase the price of products like gasoline, utilities, and even food, which is what makes it regressive. Statistics show that poor families generally spend a higher portion of their incomes on these basic necessities compared to middle-class and rich households. So, if the prices on products increase, poor families will be hit the hardest. In fact, a 2009 study by environmental economists Corbett Grainger of the University of Wisconsin and Charles Kolstad of Stanford University documents the distributional effects of a hypothetical $15-per-ton tax. They find that the burden of a carbon tax on households at the bottom fifth of the income distribution would be at least 1.4 times to 4 times higher than for households at the top fifth. What’s more, Grainger and Kolstad note that if a tax is also applied to other types of greenhouse gases, this disproportionate burden would only increase.”
Kavya Vaghul, Research Analyst, Washington Center for Equitable Growth

» World Economic Forum – 9 March 2016:
What is carbon inequality, and how do we tackle it?


Mechanisms for pricing carbon

This is what the World Economic Forum has to say about the topic of carbon pricing:

“Climate change is a known failure of the economic system. Pricing it provides a straightforward adjustment to address this. It is no surprise that one of the winners of the Nobel prize in economics, Professor William Nordhaus, was an early advocate of a carbon tax and wrote part of the US Clean Air Act, putting a price tag on the effects of climate change.

Carbon pricing mechanisms have been growing steadily over the last ten years. In April 2018, the Carbon Pricing Leadership Coalition reported that 45 national and 25 subnational jurisdictions are putting a price on carbon, covering an estimated 20% of global emissions already.

Based on government plans for emissions reductions, around 56% of emissions are covered by plans to put carbon pricing mechanisms in place.

Most smart companies that operate in jurisdictions with carbon pricing mechanisms are already factoring in the future cost of carbon to support their strategic and investment decisions.

Most significantly, China launched its national carbon trading scheme in 2017. Once this is fully up and running, it will be the largest carbon market in the world.

As the price of carbon increases, so does the cost effectiveness of low-carbon solutions. Accelerating this economic lever is critical to driving money to the right places.”

» World Economic Forum – 15 October 2018:
5 ways to fast-track the transition to a carbon neutral world

“A government can set rules like “40% of a board is made up of employees” or or “you can’t buy and sell little kids, guys.” Otherwise what is a society? What’s it’s point, purpose, and mission? Why bother being part of one?”
» Why Elizabeth Warren’s plan to save America is awesome


» State of Green – 13 December 2018:
Nine EU countries sign declaration calling for strengthened carbon pricing in Europe
“The green transition in Europe must accelerate. Therefore, Denmark is sending a clear signal to COP24 together with eight other EU countries. Let the polluter pay to emit CO2 so that the green solutions can gain ground.”


» The Guardian – 23 June 2017:
Exxon, Stephen Hawking, greens, and Reagan’s advisors agree on a carbon tax
“Nearly everyone other than science-denying Republican Party leaders understands the importance of a carbon pollution tax”


“How much do you have to pay to use the atmosphere as a dump for greenhouse gases? For most people and businesses, it’s totally free. Make polluting expensive, and it would cut the amount of greenhouse gases people spew.

It’s a pattern that runs throughout history. People assume they can pollute for free until the pollution builds up and becomes a serious problem. Then — under duress — they start paying for the trouble. Consider regular old trash. When neighbors live far apart from each other, they can toss garbage out the window without worrying about the consequences. But it’s a different story in cities.”
~ Nathanael Johnson


» Grist – 2 October 2018:
Carbon prices could save us … if we actually start using them


“A carbon price, properly designed, would be comprehensive and effective. It would go far toward correcting a horrifying market failure: that destroying the planet that gave rise to us and cradles us in the violent vastness of space … is profitable. ”
Peter Kalmus, climate scientist

» Yes Magazine – 12 July 2017:
The Trick to Make Capitalism Help Solve Climate Change



Investors worth $20 trillion call for climate action

“While the private sector can provide the investment required to build a secure, affordable and low emissions global energy system, we urge the G7 to set strong policy signals which provide the investment certainty needed to drive trillions of dollars into new clean energy investment opportunities,” Emma Herd, chief executive of the Investor Group on Climate Change (IGCC) in Australia said. They suggest a carbon price to do that, but a simple ban on any new climate-damaging projects would do the trick.”





World Bank: New carbon pricing opportunities

Carbon pricing watch: “This World Bank advance brief is a one stop shop for learning about key developments and prospects of existing and emerging carbon initiatives. 

A challenging international carbon market has not stopped the development of domestic carbon pricing initiatives. 

» Download the advance brief (PDF, 20 pages)