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New Legislation Shows How the US is Prioritising Carbon Pricing in Reaching its Climate Goals

by Shreyas Jagtap Americas Mar 3rd 20215 mins
New Legislation Shows How the US is Prioritising Carbon Pricing in Reaching its Climate Goals

When going about our lives, we usually go with the options that are convenient, but we don’t think about the underlying consequences to the environment. Google defines carbon footprint as “the amount of carbon dioxide and other carbon compounds emitted due to the consumption of fossil fuels by a particular person, group, etc.” Consumers consume the products on a large scale and hence the industries increase their production rapidly. So industries put out a high amount of emissions in this process of production. Since there is no cost/ fee charged to the polluters the industries are not that concerned with emissions going into the atmosphere. Electricity generation using fossil fuels is also responsible for this high amount of emissions. The Energy Innovation and Carbon Dividend Act is one of the best options in the US to put these industries in check and impose a price on pollution-causing polluters. This US legislation comes under the umbrella of the carbon pricing and dividend system, somewhat similar to the ones that have been adopted in Canada and Switzerland, to reduce greenhouse gas emissions and address climate change. 

According to the 2018 data from Emissions Database for Global Atmospheric Research (EDGAR), the CO2 emissions per capita in the US were 16.1 metric tonnes; in comparison to Palau’s 58 metric tonnes. Even after signing the Paris Agreement in 2015, the world is not on track to reducing GHG emissions. While some countries like Sweden, Switzerland, and Denmark are taking action to become greener, other major-emitting GHG countries like the US have made little progress in the fight against climate change. Thankfully, the incumbent Biden administration understands the urgency to fight climate change. In a speech last fall, President Biden said, “Hurricanes don’t swerve to avoid red states or blue states. Wildfires don’t skip towns that voted a certain way. The impacts of climate change don’t pick and choose. It’s not a partisan phenomenon, and our response should be the same.” 

The major sectors contributing to the GHG emissions in the US are transportation, electricity generation, and industries. The issue of climate change can’t be tackled by just a single consolidated solution. A collection of policies, regulations, and acts are required to mitigate and control the adverse effects if not eliminate the problem. Putting a price on carbon emissions would compel these sectors to invent and implement sustainable solutions and move towards a greener economy. 

You might also like: China Looks To Start Online Carbon Trading by June

us legislation carbon pricing

Image 1: U.S greenhouse gas emissions by gas and sector, 2017 (Source: Inventory of U.S. Greenhouse Gas Emissions and Sinks 1990-2017 (EPA, 2019)).

The Energy Innovation and Carbon Dividend Act (H.R. 763), introduced to the House in January 2019, is the first bi-partisan climate legislation in a decade to account for the hidden costs of burning fossil fuels. While it has yet to be implemented and will be reintroduced in Congress in the coming months, scientists and economists alike say it’s the best first step to reduce the impact of global warming in the US. This bill proposes imposing a carbon fee at the point of source, which would increase the need for innovation and implementing efficient practices. Imposing that price on pollution will steer the US toward cleaner options, slashing our harmful emissions across many areas of the economy at once. The revenue from this type of policy can even be given to Americans regularly—a “carbon cashback,” that would put money in people’s pockets while the country transitions to a clean-energy economy. 

The Canadian province of British Columbia implemented a similar kind of carbon tax and dividend policy in 2008. By 2014, as the tax went from CAD$10 to $30 per ton of CO2, their economy grew about 12%– higher than the national average — while carbon emissions per person went down almost 10%, twice as fast as the nation as a whole. 

Here is how the act would work- 

Dividend delivery- The fees collected from the polluters would go into the Carbon Dividend Trust Fund, administered by the Treasury department. After deducting the administrative overhead, the fund will get distributed to the recipients identified from existing tax records or by filling and submitting a special form for those who haven’t filed income taxes.

Administrative cost- The administrative costs of carbon fees are low, with reported costs between 0.1 and 1% of revenue. The Act’s administrative costs would be taken from programme revenues, so there is no additional cost to the federal government.

Thus a properly designed carbon policy would be good for the economy and well-being of the people if we consider the avoided costs of climate change and health benefits from reduced air pollution.   

A 2013 review by Resources for The Future stated that the impact of carbon pricing legislation on US GDP would be trivially small. In 2014, an independent study performed by Regional Economic Models Inc. (REMI), called the REMI study, examined the effects of a carbon fee and dividend policy, that is, a fair representation of the act. Apart from the emissions analysis, the study examined the economic impacts across the US and compared it to a business as the usual scenario where there is no carbon fee.

The results were as follows-

The takeaway message from this study is that a policy like the Energy Innovation and Carbon Dividend Act would strengthen the economy by creating jobs and providing monthly funds to American households while slashing CO2 emissions and improving American’s health. With the new president, Joe Biden, clearly committed to addressing climate change, and millions of Americans eager for solutions, now is the time to act. Congress should keep Democrat/ Republican politics aside and seize the opportunity thereby, giving a ray of hope to the future.


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