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Peter Garrett, a retired groundwater geologist, is the state coordinator for Citizens Climate in Maine.
Carbon dioxide emissions are the principal cause of climate change. Knowing that, we can be proud that Maine already reduces emissions by taxing some carbon pollution, the portion caused by burning fossil fuels for electricity generation. That was when we joined the Regional Greenhouse Gas Initiative (RGGI) in 2009.
That taxation brings benefits to us, primarily through our Efficiency Maine Trust Fund. Anyone wanting to save some money on heating, cooling and insulation of homes or businesses can get free advice, and then apply for financial incentives to do what needs doing. The Trust also helps Maine industries improve process efficiencies. The net result is that RGGI’s CO2 emissions dropped faster than the rest of the country, our air is cleaner, and the economy has grown faster.
Canada has done something similar. The Canadian Parliament imposed a tax on carbon pollution caused by the combustion of all heating and transportation fuels, the fuels ordinary people use. However, Canadian citizens benefit by receipt of a rebate that counters the increased fuel prices. It incentivizes a money-saving change, for example by switching from gas or oil heating to heat pumps.
That rebate amounted to $600 per household per year at first, and has increased each year the carbon price increased. The majority of Canadian families receive more money back than their extra outlays, with low-income Canadians benefitting most.
Canada’s greenhouse gas pollution tax is “revenue neutral.” It doesn’t build government coffers. It’s popular. The Canadian electorate has twice voted for Justin Trudeau’s government that put this system into place. Furthermore, Canada’s Supreme Court also approved its legitimacy.
The tax is set to increase every year, from $32 per ton of pollution in 2021 to $135 by 2030. For comparison, RGGI’s tax rate amounted to just under $8/ton last year.
Other countries, especially those in Europe, also price carbon pollution. Some impose a tax on specific carbon fuels. Others, and the EU as a whole, use the “Cap and Trade” process. The government sets a cap on allowable emissions for industries. Industries whose emissions are lower than the cap can sell/trade the value of their unused allowance to others needing to improve their own emissions-reduction efforts.
However, there is risk for countries that place a rising price on carbon pollution. They could lose their industries to countries that don’t. Technically that’s called “carbon leakage.” Given that all countries share Earth’s one atmosphere, with increasing climate-changing carbon pollution, that’s clearly not fair. It disincentivizes doing the right thing, namely to decrease pollution.
Fairness can be attained using international trade agreements, in this case called “Carbon Border Adjustment Mechanisms.” The European Union and Canada are planning to put CBAMs in place to protect their industries in the next year or two.
That would involve a tariff on goods exported from countries with no carbon pollution penalty. For instance, if the US still has no equivalent price on carbon pollution then our exports would be subject to that tariff.
As our primary export markets are the EU and Canada that could hurt. Some of Maine’s largest exports are lobsters, airplane engines and integrated circuits. The price of each sold in the EU and Canada would be higher year over year, given those tariffs. Ouch!
You can see that it’s time to get into the virtue-multiplier game ourselves, by imposing a steadily rising price on carbon pollution. It’s the policy economists around the world are advocating as the fastest way to reduce pollution across the economy. It would meet President Joe Biden’s goal of 50 percent reductions by 2030. We also need to adopt Canada’s fair return of revenues to households like yours and mine.
Pretty soon the pricing of carbon pollution should go worldwide. Even China now has a national carbon price, low at below $10, like RGGI. There’s room for us all to do better.