By Elsa Cuenca-Rubio
I am from California, but I got a taste of global carbon economics this summer through an internship with Feasta: The Foundation for the Economics of Sustainability. I was in Washington DC for the Cal in the Capital program, and was referred to Mike Sandler, the Chair of Feasta, who lives in DC, and is also a Cal alumnus. Joining Zoom calls, I got to meet people from all over the world, but ironically, a major focus of my work with Feasta was on California (a couple of times during the summer I wondered why did I come all this way just for that? But I guess it is called “Cal” in the Capital).
I am from Costa Mesa, California, and I knew about California’s AB 32 Global Warming Solutions Act, passed in 2006. I had read about California’s Cap & Trade program. In my Environmental Economics classes, they teach that a carbon price can do things economywide that other policies cannot. When gas prices spiked in California last year, people began looking at electric cars more than ever before.
But then I read about some of the environmental justice (EJ) concerns that had been raised about it. For example, when remote coal-fired plants are shut down and generation shifts to natural gas facilities located in urban centers, it negatively impacts those inner city communities. If there is going to be carbon pricing, the aim should be to reduce emissions and actively avoid further burdens on communities of color. The questions those communities were raising to California’s decision makers was: can we save the climate, while also protecting low-income and minority communities from significant pollution?
It is a good question, and it was addressed in a recent article, “Environmental Justice and Carbon Pricing: Can They Be Reconciled?” by Professor Jim Boyce and Michael Ash at the University of Massachusetts, and FEASTA Trustee Brent Ranalli. The authors state that a cap-and-permit system can achieve the economy-wide benefits of a carbon price while also protecting those communities from increased emissions. Notice the word “permit” instead of “trade.”
The Boyce article specifically mentions the following approaches:
- Mandating emissions reductions on a schedule. That means implementing a robust cap-and-permit system, not a tax-based system—though a rising floor price for permit auctions can act like a tax.
- Explicitly protecting vulnerable communities against co-pollutants. This can be built in, for example, by requiring low local co-pollutant levels, and including community- level monitoring and public data reporting.
- Setting ambitious carbon-reduction targets, and issuing dividends. Carbon prices are often too low to result in reduced emissions. Policymakers are worried about the impacts on poor and middle-income households. But there is an easy fix: 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. A climate dividend could become part of a basic income, similar to what Mayor Michael Tubbs of Stockton has been promoting through groups such as Mayors for a Guaranteed Income.
- Close loopholes. Carbon pricing policies also need to have a border adjustment mechanism so we aren’t just importing polluting energy from Nevada or Oregon. They should not allow offsets. The recent fires have shown that tree planting might not get us to the 2050 goals if they all burn down.
The article also suggests dropping the “Trade” from Cap & Trade. That’s why Feasta calls it Cap & Share or Cap & Dividend. There might not be any need to trade permits. Trading opens up opportunities for gaming and profiteering. As long as permits are distributed by auction, there will be no need for trading.
Since I was in Washington DC, I should mention a recent Federal bill “The Healthy Climate and Family Security Act of 2022” introduced by Senator Chris Van Hollen (D-MD) that incorporates key features mentioned by Boyce et al in their article. His proposed bill has:
- A hard cap with no price ceiling.
- An environmental justice guarantee.
- No trading or offsets.
Some Feasta members will be promoting that bill and comparing it to others being considered in Congress at their website for Dividends for America.
Although my internship has come to an end, I will be returning to California (after a few months studying abroad in London), and I hope to learn more about how to support the EJ community in California. Although California policies have good intentions, to be truly sustainable, they need to support minority and disproportionately impacted communities, while also combating climate change. The article discussed above, and the bill introduced by Senator Van Hollen, could provide an avenue to do that.
Note: Feasta is a forum for exchanging ideas. By posting on its site Feasta agrees that the ideas expressed by authors are worthy of consideration. However, there is no one ‘Feasta line’. The views of the article do not necessarily represent the views of all Feasta members.