Environmental Justice and Carbon Pricing

In the face of conservative denialism, U.S. climate activists have generally presented a united front: we’ll take what we can get, and we won’t let the perfect be the enemy of the good.

But a fault line has opened up, with the Environmental Justice (EJ) community taking a hard line against carbon pricing. This is significant, as the EJ community is an important player at the table and carbon pricing is considered by many a core element in the climate policy toolkit. Already used by 70 jurisdictions worldwide, carbon pricing—which generally takes the form of a carbon tax or a system of carbon permits—harnesses market forces (that is, it imposes higher prices) to limit carbon emissions and encourage households and businesses to shift to better energy solutions. 

The EJ critique of carbon pricing is one that deserves serious attention. EJ advocates argue that current carbon pricing programs place undue burdens of combustion-related diseases on low-income communities and communities of color, and this is true. In California, for example, where carbon pricing mandates have led energy companies to shift from remote coal-fired plants to natural gas facilities located in urban centers, harmful co-pollutants disproportionately affect disadvantaged communities. EJ advocates also argue that carbon pricing programs in place today—the 70 programs operating around the world—have a dismal track record. This, sadly, is also true. Carbon taxes are rarely set at levels that produce meaningful reductions in carbon emissions, and carbon permit systems often have a lot of slack, and they also sometimes—when permits are given out for free, and when they are traded on the open market—enrich entrenched interest and middlemen.

So what is to be done? A new article in Global Challenges, authored by Jim Boyce and Michael Ash at the University of Massachusetts, and myself at The Cadmus Group, proposes that carbon pricing is still the best way forward, but that EJ concerns must be taken into account. EJ advocates are right that “taking what we can get” is no longer good enough. Climate policy must be more than window dressing, and it must not leave any communities behind. Happily, it is possible to formulate a carbon pricing policy that overcomes the major objections raised by the EJ community (including the two this blog post focuses on, and others as well). 

Major elements of a just and effective climate mitigation policy will include:

  • Mandating emissions reductions on a schedule. That means implementing a robust cap-and-permit system, not a tax-based system—though tax advocates could perhaps be satisfied by turning their schedule of rising taxes into the rising floor price for permit auctions.
  • Explicitly protecting vulnerable communities against co-pollutants. This can be built right into the decarbonization policy—for example, by requiring energy companies to ensure that local co-pollutant levels fall at a rate commensurate with carbon reduction goals, and backing that up with community-level monitoring and public data reporting.
  • Setting ambitious carbon-reduction targets, and issuing dividends. Most carbon pricing programs in the world today are not very effective at reducing carbon emissions because they are not very ambitious. Policy-makers are reluctant to raise carbon prices very high, for fear of the effect this will have on poor and middle-income households. But we already know how to address this: take the income from the carbon pricing program (i.e., from the sale of permits at auction) and recycle it back to households as equal per-capita dividends. Since the wealthy use the most fossil fuels, poor and middle-income households will come out ahead, even as fossil fuel energy prices rise.
  • Close loopholes. There are lots of ways to ruin a carbon pricing policy, and they must be closed off. Have a robust border adjustment mechanism. Don’t allow offsets. And maybe the biggest shift in how many of us think about carbon pricing: don’t allow trading of permits. Carbon permit systems around the world today typically allow trading of permits in secondary markets, but trading opens up opportunities for gaming and profiteering. As long as permits are distributed by auction, there will be no need for trading.

The EJ community is right that just any climate policy isn’t good enough. We need one that is just and effective, one that actually achieves its stated goals and actively protects the most vulnerable. We think the policy outlined here will get the job done. For the full open-access article at Global Challenges, click here. 

Additional posts by Brent on climate policy include primers on carbon pricing and carbon permit auctions.


Featured image: protest at Crawford Coal Plant:chesapeakeclimate, CC BY-SA 2.0 , via Wikimedia Commons

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