Talking About Carbon Cashback

Talk with friends and family. Write letters, editorials and articles. Make presentations and interviews. Tell your climate stories.

  • The burning of fossil fuels has added such a large volume of greenhouse gasses to the atmosphere that it is threatening the livability of the planet. Greenhouse gasses cause the Earth to warm, which in turn causes storms, floods, heat waves, wildfires, and droughts to be more frequent and more extreme.

    Carbon dioxide is the major greenhouse gas, and the concentration of atmospheric carbon dioxide is rising. It reached 420 parts per million (https://keelingcurve.ucsd.edu/) recently, 50% higher than it was prior to the Industrial Revolution. After carbon dioxide is emitted into the atmosphere, it stays there for 300 to 1,000 years, according to NASA. What we do now—or fail to do—will have impacts for many generations.

  • The latest report of the Intergovernmental Panel on Climate Change reinforces the need for action and reminds us about what is at stake. When it comes to action the IPCC report says: “Pricing of greenhouse gases, including carbon, is a crucial tool in any cost-effective climate change mitigation strategy, as it provides a mechanism for linking climate action to economic development.” For more on what the latest IPCC says about carbon pricing, please click this link.

    Hawaii has declared a climate emergency and set a goal to be carbon negative by 2045. If we are to do so, we need to reduce our emissions economy-wide. We need a policy that addresses emissions in all sectors. A price on carbon would achieve a market-wide reduction of fossil fuel consumption.

  • Carbon pricing would complement and strengthen other policies aimed at reducing emissions. In the 2022 legislative session, a multitude of bills were introduced that were dedicated to mitigating climate change, including a faster transition to clean, renewable electricity generation, a faster transition to electric vehicles, buildings that are more efficient, and adopting agricultural practices that effectively sequester carbon. Pricing carbon would magnify the impacts of these policies while ensuring a more equitable transition for low to moderate-income households.

    In fact, all households on average would do better financially if 80% to 100% of the tax revenues are returned to people. According to the UHERO study, the majority of Hawaii’s families would experience a net financial gain, as their refundable tax credits would more than compensate for the increase in prices resulting from the carbon tax.

  • A gradually rising price on carbon pollution would allow for predictability so businesses can better plan for the future. Knowing that prices for energy and fuels would rise in a measured way each year would allow business leaders to plan and budget for measures that increase efficiency and reduce consumption. It would offer flexibility in their response—they can maximize resources by implementing energy efficiency measures, deploying renewables, and cutting fuel consumption.

  • Existing mechanisms can be used to implement carbon pricing with tax revenues distributed to people in equal shares, as considered in the UHERO study and as outlined in a recent Tax Review Commission Report. The existing Environmental Response, Energy, and Food Security Tax (commonly known as the “barrel tax”) can be used to put a price on carbon. Refundable tax credits, which already exist, can be used to distribute the tax revenues to people in equal shares. Using existing methods and processes would be efficient and not grow the government.

  • British Columbia implemented its carbon tax in 2008, and it is currently at $45/ton. Studies have shown that it has had a minimal impact on the economy, while reducing emissions per unit of gross domestic product between 5 and 15%. The carbon tax has been so effective in British Columbia that the entire country of Canada has adopted it.

    Sweden implemented a carbon tax in 1991 and has the highest price globally, at $137/ton. It reduced its emissions by 25% by 2000. At the same time, its economy grew by 60%.

    Carbon pricing would encourage investment and innovation in clean energy solutions. The EU’s carbon price has been cited as one of the main reasons electric vehicle penetration in Europe far exceeds that of the United States (Climate Now podcast 2/22/2022). Furthermore, Metcalf and Stock find that the EU’s carbon price has had a very negligible impact on its overall economy.

  • Placing a price on carbon pollution has been endorsed by thousands of economists, including 28 Nobel laureates, four former Chairs of the Federal Reserve, the US Chamber of Commerce and Business Roundtable, religious groups, Pope Francis, and many prominent individuals and businesses. Two-thirds of Americans favor taxing corporations based on their carbon emissions, according to a recent Pew Research Center Survey.

  • Short term impacts on price fluctuations aren’t relevant. People aren’t making lifestyle decisions based on a few months of high or low gas prices. Only a long term commitment from the government to pricing gasoline substantially higher would push the entire economy to shift how it operates.

  • EV purchases would increase with long term price signals. A $60/MT of CO2 tax would mean an increase of about $200/yr for someone who drives a 25 mpg gasoline powered vehicle (or about $2500 savings over the life of the vehicle if one purchases an EV). This is one part of the large puzzle. Corporate decisions will also change as they move to avoid increased carbon prices. Companies could allow remote work to offset gasoline prices for commuters. They could move to a 4-day work week to avoid AC costs 5 days a week.

  • People could start using the bus/biking/walking instead of driving.

    There would be fewer trips to far away parts of the island.

    Commuting by bus, rail and car-pooling would be more attractive alternatives

  • People could use less energy during peak times.

    People could purchase batteries to store energy during mid-day times ($0.28/kWh Mid-Day compared to $0.55/kWh On-Peak currently).

    People could purchase solar panels and avoid HECO altogether. That’s what induced the first solar boom, when HECO prices were well above the opportunity cost of solar panels. As battery prices decline, it will make that decision that much easier.

Photo: Aaron Yoshino - appeared in Hawaii Business Magazine

  • The carbon tax would help to eliminate a loophole that private businesses have to use diesel-fired back up generators to avoid the RPS.

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