Now that the global climate strikes — the largest in history — are over, it’s crucial that this momentum doesn’t fade away, because the climate crisis sure won’t. Having captured public attention, now is the time for activists to propose concrete policies that would be enacted as the nuts and bolts of a clean energy transition.
In particular, now is the ideal time to address a key criticism of bold proposals like the Green New Deal: how it all will be paid for. As it turns out, there’s a straightforward solution: carbon pricing.
Carbon pricing means we pay the social cost of our emissions before we suffer the full consequences, rather than after. The term describes several methods that tax major emitters of greenhouse gases (GHGs) for each unit of carbon dioxide-equivalent they emit. This is done either through a hard tax per unit of emissions (“carbon tax”) or through cap-and-trade.
Under the latter, the government sets a “cap,” or limit on emissions across an entire economy or a particular sector, which gets stricter over time, as described by the Environmental Defense Fund. The government then sells a fixed number of permits, each of which allows the holder to emit one unit of emissions, to major polluters in regular auctions. The cumulative number of permits “on the market” adds up to the cap. If buyers have some left over, they can sell them to other emitters (the “trade”).
Putting a price on GHGs reduces emissions for three reasons: Producers of emissions-intensive goods are incentivized to lower emissions to avoid paying the price, consumers are encouraged to shift to greener options due to emissions-heavy goods becoming more expensive and government revenue raised can be used to further promote a green economy and shield consumers from increases in the price of goods.
Carbon pricing is considered a common-sense, efficient response to climate change by economists across the political spectrum, according to The Wall Street Journal.
But don’t take their word for it: We already have an example of successful GHG emission reductions through cap-and-trade.
California’s cap-and-trade program of six years, which regulates around 450 businesses responsible for about 85 percent of the state’s GHG emissions, according to the Center for Climate and Energy Solutions, was developed following the passage of the California Global Warming Solutions Act in 2006.
This law sets a goal of reducing GHG emissions to 1990 levels by 2020 — and the state met that target two years early, according to the California Air Resources Board.
Contrary to Republican fearmongering about the economic damage of carbon pricing, California has the highest GDP of any state, and has consistently outpaced the U.S. in annual GDP growth, according to Bloomberg.
California is adding jobs at a faster annual rate than the country, according to the LA Times. Five California cities were in the top ten metro areas with the highest personal income growth in 2017, as reported by The Wall Street Journal.
But what makes California’s cap-and-trade especially beneficial is that the revenue it generates is reinvested back into the economy for those who need it most. Under SB 535, passed in 2012, 25 percent of cap-and-trade revenue is reserved for economically disadvantaged communities (identified through the online tool CalEnviroScreen).
This is where carbon pricing is most relevant to the Green New Deal: Revenue raised can be invested to prompt the transition proponents aspire to — in a fiscally neutral manner.
Carbon pricing revenue can be spent to reduce upfront costs of transitioning to zero-emissions consumer goods (like solar panels and electric vehicles), shielding ordinary citizens from price increases on emissions-heavy goods.
California is spending its cap-and-trade money on a wide array of projects ranging from electric car rebates and clean energy research to fire prevention and wetlands restoration, as reported by Mercury News.
These actions not only further reduce GHG emissions, but create jobs in economically depressed communities. For example, the UC Berkeley Labor Center found that California’s climate policies have, when accounting for the multiplier effect, brought over 73,000 jobs and $14.2 billion in economic activity to the Inland Empire from 2010 to 2016.
These programs have one thing in common: They all require a steady revenue stream that carbon pricing can provide.
California’s example of using carbon pricing to simultaneously achieve GHG emissions reductions and economic stimulus fits the vision of the Green New Deal like a glove. But among the Green New Deal’s most fervent proponents, there doesn’t seem to be much discussion of carbon pricing as a way to achieve our goals.
It’s time for that to change.
Ben Reicher PO ’22 is from Agoura Hills, California. He joined his high school newspaper in ninth grade because he loved to argue, and hasn’t stopped since.
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