IPCC – Solution Consensus: A Price on Carbon Is Required

John and Katharine Gage

Climate Science and Politics

The recently released (August 2021) Sixth Assessment Report from the UN’s Intergovernmental Panel on Climate Change (IPCC) provides the most definitive statement about global warming science can offer. It is unequivocal that the consequences of human-caused climate change are widespread, rapid, and intensifying. The Earth’s surface has warmed 1.1˚C since 1900 and will reach or exceed 1.5°C in the next two decades. What we do now (business as usual or rapid emissions reductions) will be discernible in global temperatures in that timeframe. The report identifies a path to limit warming to 1.5˚C as needed for a relatively safe future: reduce global carbon emissions to net-zero by 2050.

On a wave of public concern due to escalating natural disasters, costs, and national media that has started connecting the dots, President Biden made addressing climate change a national priority and set goals in line with IPCC recommendations. Work on federal climate legislation is now underway. But will it pass, be durable, and effective?

Projected emission reductions of climate policy alternatives under consideration for the reconciliation package. Hafstead, Marc, et al. “Emissions Projections under Alternative Climate Policy Proposals.” (Resources for the Future, 16 Sept. 2021, www.rff.org/climate-proposals)

Experts Agree: Carbon Pricing is Required

A price on pollution “incentivizes” people and businesses to reduce it. Economists agree that a carbon tax paid by fossil fuel producers and importers where coal, oil, and natural gas enter the economy offers the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary.

• In the Special Report on Global Warming of 1.5˚C, the IPCC notes, “Explicit carbon prices remain a necessary condition of ambitious climate policies.”

• Richard Newell, president of Resources for the Future, said, “A price on carbon, such as a carbon tax, provides the economic incentive for the quickest, cheapest and most comprehensive emission reductions across the entire economy.”

• US Treasury Secretary Janet Yellen said, “We cannot solve the climate crisis without effective carbon pricing.”

The price matters. A study in Nature finds a carbon price rising to $100 per ton of CO2 emitted by 2030 will put the U.S. on a net-zero by 2050 path. That aligns with global targets from the IMF ($75), World Bank, and UN High-Level Commission on Carbon Pricing. The U.S. is one of just two developed economies not already pricing carbon. Many countries’ prices are too low, but the EU and Canada are on track to exceed $100 by 2030.

“Fee and dividend are essential for rapid phaseout of CO2 emissions. Without it, we are in an unwinnable game of whacka-mole, trying to stop new uses, somewhere, of cheap, dirty, fossil fuels.” – Dr. James Hansen

Citizens’ Climate Lobby and Carbon Fee and Dividend

For over a decade, the grassroots organization Citizens’ Climate Lobby (CCL) has worked to create the political will to enable Congress to legislate a carbon pricing policy that nearly all leading U.S. economists agree uses the most cost-effective and equitable emissions-reductions approach. CCL’s Carbon Fee and Dividend with Border Carbon Adjustments policy has three parts:

• Carbon Fee: A fee is placed on fossil fuels at the source (well, mine, or port of entry). This fee starts at $15 per ton of CO2 equivalent emissions and increases steadily each year by $10;

• Household Dividend: All of the money collected from the carbon fee (minus administration costs) is rebated each month to all households on an equal, per-capita basis; and

• Border Carbon Adjustments: Like a tariff, the carbon price is applied on imports and rebated to exporters in trade of energy-intensive goods with countries that do not have a matching price on carbon. This keeps U.S. businesses on a level playing field in competition both at home and abroad.

This fee schedule drives carbon emissions down in line with the goals of President Biden and the IPCC, and when combined with complementary policies puts us on a path to net-zero by 2050. The cash-back dividend protects family budgets from temporarily higher prices from the fee, making the policy durable. Two-thirds of all households will receive more money in their dividend checks than they will pay in higher prices due to the fee, and low-income families will disproportionately benefit due to their smaller carbon footprints.

Border carbon adjustments strongly incentivize trading partners to match the carbon price. The EU will be the first to implement border carbon adjustments, starting in 2023. Canada, the UK, and Japan are considering them also. If the U.S. is not pricing carbon soon, our businesses will begin paying other countries for our free pollution in trade, putting them at a competitive disadvantage in those markets.

Two Paths Through Congress

The Carbon Fee and Dividend policy has been introduced in Congress as the Energy Innovation and Carbon Dividend Act, a standalone bill with over 80 cosponsors.

When Congress decided to group major climate priorities into the budget reconciliation package this year, CCL made an effort to get carbon pricing included there. The idea got traction in the Senate. On the House side, although proponents of energy efficiency and a Clean Energy Payment Program dominate, these measures alone don’t meet U.S. goals without adding carbon pricing. Both chambers are drawing up their versions of the bill, and will merge them in the hopes of presenting a final version to President Biden soon.

Time for Serious Climate Solutions

It is time for effective climate action, and we cannot afford to leave carbon pricing out of the mix. It is reasonable to say that COP26 will not be considered successful unless it achieves a commitment for a global base-level carbon price. The US can help by implementing the necessary price and working with the EU and other countries to create a border carbon adjusted trade zone. This would re-establish our position as a global leader in climate solutions, and strongly encourage global compliance.

Dr. James Hansen, one of the U.S.’s leading climate scientists and the former head of NASA’s Goddard Institute of Space Studies, said, “Fee and dividend is essential for rapid phaseout of CO2 emissions. Without it, we are in an unwinnable game of whack-a-mole, trying to stop new uses, somewhere, of cheap, dirty, fossil fuels.”

Congress needs to hear from citizens, leaders, and businesses to help them do what is required. We can each make a difference in whether the U.S. will take the necessary step of including carbon pricing in its efforts to address climate change. Citizens can email Congress at cclusa.org/write and the President at cclusa.org/white-house. Businesses can include asking for carbon pricing to be in the reconciliation package when they lobby, and endorse the Carbon Fee and Dividend bill at energyinnovationact.org/endorse.

John Gage is the State Coordinator for Citizens’ Climate Lobby in New Hampshire. Katharine Gage is co-leader of a Citizens’ Climate Lobby chapter in New Hampshire.