Clinton, Climate Action, & Carbon Revenues

Clinton, Climate Action, & Carbon Revenues
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<p><em>And… action!</em></p>

And… action! Wagner

The WikiLeaks releases of emails allegedly hacked from John Podesta, Hillary Clinton’s campaign chair, show that the campaign apparently explored the potential for a carbon tax and other climate policies in 2015. (Read the E&E story here.) It seems the campaign considered a few ideas for driving additional greenhouse gas reductions beyond the Clean Power Plan (CPP), but, as David Roberts rightly pointed out over at Vox, missed the critical potential for using carbon revenues to advance broader climate goals.

A memo apparently written by campaign advisers (the campaign has not verified the authenticity of the emails) explores a “GHG Pollution Fee” set at the social cost of carbon (around $42 / ton) that would rebate almost all revenue to households, with the rest of the revenue dedicated to transition assistance for coal communities. The memo claims (reasonably) that such a fee would face strong opposition in Congress, though it posits that allocating some revenue to corporate income tax reform or linking the fee to approval of new oil and gas infrastructure could help. This fee did not make it into the Clinton campaign’s publicly released climate plans. According to the hacked emails, Podesta argued that the polling on a carbon tax “all sucks”.

The memo then explores a clean energy competition that rewards states for going beyond Clean Power Plan targets – an idea that did make it into the public climate plan. As part of a Clean Energy Challenge, Secretary Clinton has proposed a Climate Action Competition that provides “competitive grants and other market-based incentives to empower states to exceed federal carbon pollution standards and accelerate clean energy deployment.” Along these lines, the hacked memo suggests:

a reverse auction could be launched where states compete for federal block grants that cover the cost of CO2 emission reductions beyond what is required in the CPP. States could bid in a quantity of excess abatement (measured in tons of CO2e) and a price for that abatement (measured in dollars per ton). The federal government would use whatever resources were available in the program to buy the greatest amount of abatement at the lowest cost.

The memo then considers potential sources of revenue to fund such a program. It misses, however, the source of revenue it had just discussed – a carbon tax. As David Roberts at Vox put it: “So why not investigate a carbon tax where the revenue goes to the clean energy competition described above? Or to put it in a more politically potent way: Why not investigate an ambitious clean energy investment program funded by carbon revenue?”

Why not indeed.

There are two main reasons that the idea is worth investigating.

First, the polling on carbon taxes does not “suck” when the revenues are used to advance clean energy. This 2014 poll from the National Surveys on Energy and Environment shows that a carbon tax with revenues used to fund renewable energy R&D received majority support from Democrats, Republicans, and Independents – and more support than a carbon tax where the use of revenues is unspecified, where the revenues are used for rebates, and or where the revenues are used to reduce the federal deficit.

Second, and more pressing, there is an urgent need for serious action on climate change. As I argued this summer, climate science is painting a pretty dire picture these days, and we are nowhere near a trajectory to achieve global climate goals. It is at least conceivable (though, I grant, unlikely) that Congress could enact carbon pricing policies sometime in the near future, whether because companies and investors are increasingly backing such an approach, there are rising pressures for tax reform, or other reasons. However, any carbon price that makes it through Congress, given all the political constraints and the likely opposition the campaign advisers anticipated, is unlikely to be high enough to achieve the reductions necessary. This means a solid chunk of the carbon price revenues should go towards cost-effectively achieving additional reductions. As I said in my previous post:

Imagine that the carbon tax revenues are collected, put into a fund, and then a reverse auction is held, offering subsidies (equal to the difference between the cost of the reduction and the carbon tax level) to any emitter that wants to submit a bid for a way of achieving reductions. The subsidies would go first to the cheapest reductions beyond the price signal, working our way up the reduction cost curve until all of the carbon price revenues have been spent. The effect would be to massively increase the scale and rate of emission reductions.

This is pretty similar to what the Clinton campaign advisers allegedly laid out in the hacked memo, though since the advisers were not envisioning the block grants being funded by a carbon price, they apparently envisioned the block grants covering the entire cost of additional emission reductions, not just the difference between the carbon price and the abatement cost (which would be far more cost-effective).

Now, it is understandable that the campaign views pushing for carbon pricing as politically risky and as unlikely to succeed if Republicans control at least one chamber of Congress, but it is possible that at some point carbon pricing could gain viability. If it does, some revenues should certainly go toward offsetting the regressive effects of the carbon price on the poor and to helping coal communities transition, and some percentage may indeed need to go towards corporate tax reform to get enough political support. But Secretary Clinton has a reputation for being pragmatic and exceptionally well prepared, and the Clinton team should at least investigate the potential for carbon revenues to support many of Secretary Clinton’s goals, including modernizing clean energy infrastructure, promoting innovation, accelerating clean energy deployment, and driving additional greenhouse gas reductions.

Carbon prices will only go so far in achieving reductions. How carbon price revenues are used matters – a lot.

Dave Grossman is the Principal of Green Light Group consulting and is a Senior Advisor to the Climate Law & Policy Project.

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