Is it possible, with the stroke of a lawmaker’s pen, to cause a significant drop in carbon emissions in Massachusetts, with minimal or even positive effects on the state economy? This is exactly what backers of a revenue-neutral carbon fee say will happen. In January, 2015, Senator Mike Barrett filed a bill (SD 285) entitled: “An Act Combating Climate Change.” The bill calls for a phased-in charge on fuels in proportion to their carbon dioxide emissions, with the proceeds to be returned to residents and employers.
How does it work? A phased-in charge would reduce demand by causing prices of carbon-based fuels to increase. In order to protect businesses and households, especially low and moderate income households, the money collected would be given back to business and residents in the form of rebates. (Hence “revenue neutral.”)
Is this feasible? British Columbia has had a revenue-neutral carbon tax since 2008. By all accounts, it has been a big success – taxpayers are coming out ahead, and carbon fuel use is down 16%.
Here in Massachusetts, the Massachusetts DoER (Department of Energy Resources) commissioned a research study of the impact of a carbon tax here. The 156-page study published in December, 2014, “Analysis of a Carbon Fee or Tax as a Mechanism to Reduce GHG Emissions in Massachusetts,” came to a positive conclusion about the predicted effectiveness of a carbon fee and its neutral or even beneficial economic effects.
Here are some quotes from the report’s principal findings:
“Most households can be fully compensated for rising prices: fossil fuel cost increases will be relatively small, especially in the early years of a fee/tax. Under a system that gave equal rebates either per person or per household, or a mixture of these designs, on average low-and moderate-income households would have a net gain or come out about even.” (DoER study, p. 4)
“Positive impacts on employment: employment is forecasted to grow by 4,000 to 10,000 jobs by 2030 due to the tax/fee, primarily because the state would be spending less on importing fuels and energy. Households at the lowest income levels would see the greatest job gains. Carbon dioxide emissions would fall substantially: the greater the fee/tax rate, the greater the drop in pollution, with carbon dioxide emissions falling by 5% to 10%, larger than almost any of the state’s other greenhouse gas reduction policies are projected to achieve.” (DoER study, p. 5)
Washington, Oregon and Vermont are currently considering carbon tax legislation. In Massachusetts we can definitely expect some opposition to the carbon fee bill. And yet, warnings from scientists about climate change are getting more and more urgent. Stay tuned for more on this important legislation.
