Putting a Price on Carbon, in Massachusetts and Beyond

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On April 18, 2017, MIT hosted a public panel discussion on state-level carbon pricing, looking specifically at Massachusetts (the home of MIT) and two “fee-and-dividend” bills currently before the MA state legislature.

With fee-and-dividend, a tax or fee is collected on carbon-emitting fuels at their point of sale or point of import. Fees collected are returned to citizens and businesses on a per-capita basis, with varying policy details. In its “revenue-neutral” form, 100% of fees collected are returned. In the “revenue-positive” form, a portion of fees collected are reinvested in renewable infrastructure, low-income communities and justice initiatives, with the remainder returned as dividends. Low emissions behavior leads to more net money in your pocket, while high emissions behavior means you’ll be paying more. In other words: “polluters pay."

Organized and moderated by Curt Newton from MIT Office of Digital Learning, the panelists included (in order of their initial statements):

  • MIT energy economist Prof. Chris Knittel made the fundamental case for why and how a carbon price is the most efficient and effective way to reduce emissions — so long as the price is high enough, currently estimated at about $40/ton. Furthermore, carbon fee and dividend has been proven to work, notably in British Columbia since 2008.
  • MA Rep. Jennifer Benson, sponsor of H.1726 “An Act to Promote Green Infrastructure, Reduce Greenhouse Gas Emissions, and Create Jobs,” talked about the importance of investing in community clean energy and resiliency, especially for low-income residents. Her bill would set aside 20% of fees collected for a Green Infrastructure Fund.
  • Sam Anderson, legislative director for MA Sen. Mike Barrett, sponsor of S.1821, “An Act Combating Climate Change,” acknowledged the long process, beginning in 2012, to develop these bills, backed by increasingly rigorous analysis, and bring them to the point of broad support
  • MIT graduate student Emil Dimantchev pointed out that to meet strong emissions reduction targets, carbon pricing is not by itself sufficient, but must be complemented by energy efficiency and renewables investment programs. Furthermore, political compromises on the “ideal” policy will need to be made to win support from various powerful forces.
  • Cindy Luppi, coalition coordinator of the Massachusetts Campaign for a Clean Energy Future, spoke about how over 50 groups have come together in MA around this issue, with hope that state action will be effective in its own right, a powerful signal to other states, and a stepping stone toward future national action.

This panel was part of the MIT Day of Action, where over 40 events made a call for renewed civic engagement, open dialogue, and action on the political, economic, and social challenges we face.

Coincidentally, yesterday (June 20, 2017) these two bills had their first committee hearing at the State House. A packed house gave hours of nearly unanimous supportive testimony, ranging from the analytical to the impassioned. It’ll be very interesting to watch how the politics unfold here, and we’ll be sure to keep you posted.


State Carbon Pricing Background

On ClimateX we've talked about the role that cities, states, businesses and other entities will play in an era of U.S. federal inaction and reversals on climate action.

Among economists, policy makers, businesses and civic leaders, there’s an overwhelming consensus that putting a price on carbon is among the most viable and effective ways to accelerate the transition to a low-carbon future.

The MIT community has stated emphatically that policies to fairly price carbon are an essential tool in the fight against catastrophic climate change: for instance, in the July 2015 Climate Change Conversation report, October 2015 Climate Action Plan, and a May 2016 statement and video upon joining the Carbon Pricing Leadership Coalition.

Various carbon pricing schemes are active now in 40 countries around the world. The number is growing as they find success in reducing emissions, and without the feared negative impacts on economies and jobs.

In the US, carbon pricing has long been proposed at the national level, with support from groups like Citizens Climate Lobby and the Climate Leadership Council. And while these national-level efforts will continue, states are also getting into it. With a bigger reach than cities, but without the obvious political challenges of federal policy making, perhaps states are the right place to focus now.

According to the ClimateXChange State Carbon Pricing Network, there are currently 17 active state-level campaigns, with California, Massachusetts, Rhode Island, Oregon, and Vermont standing out with specific bills in current legislative sessions.