Taking Action on Climate Through Pricing Carbon
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Taking Action on Climate Through Pricing Carbon
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Learn more about how a carbon price works and the benefits of addressing climate change by pricing carbon. When it comes to climate change, business as usual is no longer an option. Studies estimate that the effects of climate change could cost the economy trillions of dollars before the end of the century. As global temperatures continue to increase, coastal communities will be at risk from sea level rise, wildfires will become more frequent, and extreme weather will be even more damaging. But, there are steps we can take to slow the effects of climate change and mitigate its most damaging impacts. A carbon price, a market-based solution to reducing greenhouse gas emissions while promoting investment and innovation, is the most efficient, business friendly way to take action.
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Taking Action on Climate Through Pricing Carbon
- 1. The Business Case for Carbon Pricing
- 2. Climate Change Presents Massive Threat to Economy • Unchecked, climate change could reduce global GDP by over 20% by 2100 • US GDP lost to climate change will likely equal $44 trillion by 2060 • By the end of the century, $280 billion will be needed to adapt roads and railways • Global sea levels are projected to rise another 1 to 4 feet by 2100
- 3. Businesses are leading on climate action • Nearly half of America’s largest companies have at least one climate or clean energy target • Climate Disclosure Project (CDP) found almost 1,400 businesses worldwide, representing about $7 trillion in annual revenue, have either already implemented an internal carbon price or will do so in the next two years • PwC found a majority of businesses (72%) are actively pursuing renewable energy procurement, and of those that aren’t (28%), 61% said it was because there was no mandate or they didn’t see it as strategic
- 4. What is a carbon price? • A carbon price internalizes the cost of greenhouse gas emissions by assigning a monetary value to each ton emitted • The price can be implemented at different points throughout the supply chain • Revenues can be returned to citizens and businesses through dividends to help offset higher prices and/or invested to further reduce emissions, promote resiliency, and create jobs
- 5. Benefits of a carbon price • Reduce emissions • Promote fair competition • Spur innovation and create jobs
- 6. Reduce emissions • A national, economy-wide carbon price could reduce emissions to 39% below 2005 levels • Significantly greater than the United States’ commitment under the Paris Climate Agreement (26-28% from 2005 levels by 2025) • Statewide bills set prices at different levels, but impacts will still meaningful
- 7. Promote fair competition • U.S. energy market does not accurately reflect fossil fuel costs and has distorted competitive market forces • Failed to account for the costly environmental damage of fossil fuels • Incentivized fossil fuel use through favorable tax treatments and subsidies • A carbon price would allow renewables to compete fairly $0 $10 $20 $30 $40 $50 $60 -100% -80% -60% -40% -20% 0% 20% 40% 60% 2015 2020 2025 2030 Projections of the effects of a $25 price on carbon in the electrical sector Carbon price Retail electrical prices Electricity Demand Coal Usage Natural gas usage Renewable usage Electricity sector CO2 emissions
- 8. Spur innovation & create jobs • By 2021, EVs could be cheaper by the mile than oil-fueled cars • The amount of deployed MWh of utility-scale battery storage capacity doubled in 2016 • Increasing demand for renewables will result in potentially game-changing innovation: • Floating turbines • Biophotovoltaic devices • A study on a national, economy-wide carbon price found it would create over 2 million jobs
- 9. Carbon pricing in action • 41 OECD countries and G20 governments have put a price on carbon, implemented a cap-and-trade system, or both. Together with state and local efforts, these programs cover 15% of the world’s carbon emissions • With the addition of China’s new system, the % of the world’s carbon emissions covered under an ETS should increase by 5-10% • Specific examples: • RGGI • California Cap and Trade • British Columbia
- 10. RGGI • Member states have reduced emissions by 15% more than other states and experienced 4.3% more economic growth • Emissions have fallen 40% since RGGI launched • Between 2008 and 2016, electricity prices in RGGI states have dropped by 6.4% • RGGI has created $2.3 billion in lifetime energy bill savings for over 160,000 households and 6,000 businesses
- 11. California cap and trade • Since November 2012, state auction revenue has equaled nearly $4.4 billion • The California Air and Resource Board estimates the program will save the average family $200 per year by 2030 • Projected net economic impacts to reach nearly $123 million, with 945 jobs created and $5.5 million in additional tax revenue in the Inland Empire
- 12. British Columbia • Ranked first among Canadian provinces for GDP growth in 2016 • Clean energy sector has developed with over 200 businesses, generating almost $2 billion in annual revenues • Between 2007 and 2014, British Columbia’s real GDP increased by 12.4% • Over 160 businesses called for a carbon price increase after it hit it’s statutory limit in 2012
- 13. SIPA Study • A $50/ton carbon price would reduce emissions 40% from 2005 levels by 2030 • Increases in gas prices & electricity rates do not exceed 10 year peak • Reinvesting funds had better overall economic effect
- 15. Ways to take action on carbon pricing • Join our coalition of businesses supporting a national price on carbon • Sign an op-ed supporting carbon pricing in your state • Support state-based policies – currently looking for businesses in NH, VT, MA, NY, CT, RI, NJ, MD, WA • Host a business roundtable luncheon to educate other business leaders on carbon pricing For more information, go to carbonprice.asbcouncil.org
Editor's Notes
- ASBC is a network of businesses and partner organizations with a reach of 250,000 business leaders nationwide. Our mission is to empower and mobilize triple bottom line business leaders to create policy change in support of an economy that works for all. ASBC is building a coalition of business leaders to support carbon pricing at both the state and federal level. To learn more about our work on carbon pricing, visit carbonprice.asbcouncil.org. Talking points: The following presentation lays out the economic threat posed by climate change and makes the business case for carbon pricing as the solution. Businesses are already leading climate action through internal carbon pricing mechanisms, transitioning to 100% renewable energy, and reducing their environmental impacts throughout their supply chains. But their action alone is not enough. States need to encourage economy-wide changes if we are going to meet our goal of staying below 2 degrees of warming. Businesses support market-based policies because they align incentives, provide flexibility in how to approach emissions reduction goals, and spur investment in innovation and technology.
- Bullet 1: https://www.brookings.edu/blog/planetpolicy/2015/12/09/the-global-economic-costs-from-climate-change-may-be-worse-than-expected/ Bullet 2: https://www.cnbc.com/2015/08/18/cost-of-not-acting-on-climate-change-44-trillion-citi.html Bullet 3: https://www.nytimes.com/2018/02/10/climate/trump-infrastructure-climate-change.html Bullet 4: https://nca2014.globalchange.gov/report/our-changing-climate/sea-level-rise Talking points: Climate change presents a massive threat to the global economy. With warming arctic temperatures speeding ice melt and increasing the likelihood of severe cold weather storms, the east coast could see some of the most severe coastal community devastation. A recent study found that a mid-century global sea level rise of 20 inches, with an additional 6 inches of localized rise along the northeast U.S. coast, could jeopardize assets worth close to $7.4 trillion. - https://www.worldwildlife.org/press-releases/climate-change-puts-trillions-of-dollars-in-assets-at-risk-along-u-s-coasts
- Bullet 1: We Are Still In, https://www.wearestillin.com/businesses-investors Bullet 2: CDP, https://b8f65cb373b1b7b15feb-c70d8ead6ced550b4d987d7c03fcdd1d.ssl.cf3.rackcdn.com/cms/reports/documents/000/002/738/original/Putting-a-price-on-carbon-CDP-Report-2017.pdf?1508947761 Bullet 3: https://www.pwc.com/us/en/sustainability-services/publications/assets/pwc-corporate-renewable-energy-procurement-survey-insights.pdf Talking Points: Businesses are taking action on climate whether prompted by risk created by climate change, opportunities they see for new business, shareholder pressure, or positive public relations. Two of the most prominent actions businesses are taking are creating internal mechanisms to price carbon and shifting to 100% renewables. The graph to the right shows the growing demand for renewable energy procurement as well as the drivers for actively or not actively pursuing this course. While many businesses have sustainability goals and see the attractive ROI, there is still a sizeable chunk that don’t see it. Specifically interesting in this finding is the lack of a mandate/strategic payback. If businesses aren’t internally incentivized to take action on climate, they need to be prodded by state action. A carbon price will shift the market toward renewables, making cleaner energy a more strategic choice for all businesses.
- Talking points: A carbon price is a market-based solution to reduce greenhouse gas emissions and mitigate climate change. By setting a price on each ton of carbon emitted, incentives are realigned in the energy market. Fossil fuel prices have been propped up in the market for decades through taxpayer-funded subsidies. Additionally, the current price does not take into account the negative effects fossil fuels have on the environment. By pricing carbon, we would internalize those negative effects, making renewables more competitive with fossil fuels. A carbon price can be implemented at different points throughout the supply chain, but many support the idea that it should be put in place at the source, requiring less administrative work A carbon price generates revenue for the state, which can be returned to businesses and citizens through dividends to help offset any higher costs, or can be used to further reduce emissions, improve efficiency, and build more resilient communities through state projects. Typically, an initial price is set that rises with inflation plus an additional increase every year. By increasing the cost over time, businesses have time to adapt and look for alternative, more competitive energy.
- Talking points: While a price on carbon has many benefits, there are three main ones that make it the most efficient, business friendly way to mitigate climate change: 1) it is the most efficient way to reduce emissions across the entire economy, meaning it would have the biggest impact on slowing the effects of climate change 2) a market-based strategy promotes fair competition, meaning businesses can make more informed choices about the energy they purchase 3) by shifting incentives away from fossil fuels, the market will be prompted to further innovate, creating more jobs in clean energy as well as new technology and products that have less negative impacts on the environment
- Data comes from RFF study on 2017 American Opportunity Carbon Fee Act: http://www.rff.org/files/document/file/RFF-IB-17-09.pdf Talking points: A carbon price is the most efficient way to reduce emissions across the entire economy. For example, studies of a federal carbon price found it would be more effective at reducing emissions than the Clean Power Plan and would exceed our commitment under the Paris Climate Agreement If set at a meaningful level and raised steadily, fossil fuel purchasers will switch to cleaner, cheaper forms of energy instead of paying higher prices for dirty fossil fuels. Statewide bills have set prices at different levels, and research has found they will have meaningful impacts within the respective states.
- Chart comes from World Resources Institute, Kaufman, Obeiter, Krause, “Putting a Price on Carbon: Reducing Emissions,” January 2016, p. 13, https://www.wri.org/sites/default/files/Putting_a_Price_on_Carbon_Emissions.pdf Talking points: As most know, the US energy market does not accurately reflect the costs of fossil fuels. A carbon price would help fix this problem by internalizing their costly environmental damage. Data in the graph show EIA’s analysis of a federal carbon price on the electricity sector. This shows two really interesting things. 1) A carbon price significantly reduces emissions in the sector: 63% below baseline by 2030 (bottom row). This reduction comes both from decreased electricity demand and a shift to cleaner energy. Further, renewables see the largest increase in usage (41% increase over 15 years). Natural gas has played an important role in the transition to cleaner energy, but a carbon price would help us move away from natural gas as the renewable sector grows. Between 2025 and 2030, natural gas usage is estimated to drop 23% while renewables usage increases by 26%.
- Talking points: A carbon price will help set us on a path to a more efficient, modern economy with new, clean jobs and unlimited growth EVs could be cheaper by the mile than oil-fueled cars by 2021 - https://www.bloomberg.com/news/articles/2017-09-21/how-electric-cars-can-create-the-biggest-disruption-since-iphone More battery storage capacity shows growth in the use of long-duration batteries and an increased confidence that the large energy storage facilities can be used to help manage peak demand - https://www.utilitydive.com/news/is-battery-energy-storage-at-a-turning-point-for-us-utilities/440055/ A carbon price will help create more demand for renewable energy and products that don’t rely on fossil fuels: Floating turbines use robust cable and connections to anchor wind turbines in the ocean. This means turbines could harness the power of any territorial waters, regardless of ocean floor depth - https://www.engadget.com/2016/09/09/7-cool-and-cutting-edge-innovations-in-renewable-energy/ Biophotovoltaic devices or devices that produce energy from photosynthesis have endless possibilities, but are currently way too expensive to really put to use. One example is using grass clippings and chemicals to make solar cells – this mixture can then be painted on roofs to power homes and buildings - https://www.engadget.com/2016/09/09/7-cool-and-cutting-edge-innovations-in-renewable-energy/ A REMI study of a federal carbon fee and dividend proposal found it would create over 2 million jobs https://www.dropbox.com/s/22lrokkdaf4a8fh/The-Economic-Climate-Fiscal-Power-and-Demographic-Impact-of-a-National-Fee-and-Dividend-Carbon-Tax-6.9.14.pdf?dl=0
- Data comes from 2017 CDP report: https://b8f65cb373b1b7b15feb-c70d8ead6ced550b4d987d7c03fcdd1d.ssl.cf3.rackcdn.com/cms/reports/documents/000/002/738/original/Putting-a-price-on-carbon-CDP-Report-2017.pdf?1508947761 Talking points: Carbon pricing mechanisms or emissions trading systems are growing in popularity around the world. 41 OECD countries and G20 governments have put a price on carbon, implemented a cap and trade system, or both. Together with state and local efforts, this covers 15% of the world’s emissions. The largest Emissions Trading System (ETS) was just established in China at the end of 2017. This should increase the percent of emissions covered by 5-10%. The US currently has two examples of an ETS: Regional Greenhouse Gas Initiative (RGGI, pronounced “reggie”) and the California Cap and Trade system. The following slides go into detail on these two systems as well as the price on carbon established in British Columbia in 2008
- Bullets 1, 2, 3 & chart: http://acadiacenter.org/wp-content/uploads/2017/09/Acadia-Center_RGGI-Report_Outpacing-the-Nation.pdf Bullet 4: https://www.rggi.org/sites/default/files/Uploads/Proceeds/RGGI_Proceeds_Report_2015.pdf Talking Points: RGGI was the first mandatory, market-based system in the US to reduce GHG emissions. It is a cooperative agreement among Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont. Their combined economic output of over $2.5 trillion makes RGGI member states the sixth largest economy in the world. With the addition of NJ and VA, this would jump to nearly $4 trillion and propel RGGI members to the #4 slot. - http://acadiacenter.org/wp-content/uploads/2017/09/Acadia-Center_RGGI-Report_Outpacing-the-Nation.pdf RGGI is a cap and trade system. They set a regional cap for carbon emissions from power plants and then sell a tradable number of allowances. Through the end of 2016, RGGI has conducted 34 successful auctions, selling a total of 860 million CO2 allowances for $2.6 billion. - https://www.rggi.org/sites/default/files/Uploads/Market-Monitor/Annual-Reports/MM_2016_Annual_Report.pdf Overall, RGGI has been very successful at both reducing emissions from power plants and generating revenue for efficiency projects. In 2017, RGGI committed to an even stronger cap to further reduce emissions. Emissions have fallen 40% since RGGI launched and member states have seen 15% higher emissions reductions than non-member states, as well as 4.3% more economic growth Some may ask why would NE need a carbon price when it has RGGI? RGGI only covers emissions from power plants. Recently, transportation emissions overtook the electricity sector for biggest contributor to overall emissions levels. - https://www.vox.com/2016/6/13/11911798/emissions-electricity-versus-transportation While there has been amazing progress in the electricity/power plant sector, we need an economy wide policy in order to target transportation and all other emissions. NE policies need to be complementary to RGGI. For example, the CT bill allows power plants to offset their payments into the carbon pricing mechanism if they have already paid into RGGI.
- Bullet 1: http://www.lao.ca.gov/reports/2017/3553/cap-and-trade-021317.pdf Bullet 2: http://www.sacbee.com/news/politics-government/capitol-alert/article161904813.html Bullets 3 & 4: http://laborcenter.berkeley.edu/cap-and-trade-system-an-economic-net-positive-for-inland-empire/ Chart from CARB: https://arb.ca.gov/newsrel/newsrelease.php?id=933 Talking Points: CA’s Cap and trade system was implemented in 2012. While emissions were on a downward trend, there is a significant downward turn after AB32 is implemented, showing the success of the program on reducing emissions without harming GDP growth. In 2015, the cap and trade system was expanded to include the transportation sector. This led to a modest gas price increase of 11 cents per gallon. While some have seen short term increases in costs, CARB estimates the program will save the average family money by 2030. The program has also successfully helped CA reduce emissions despite a growing population. It has also created additional jobs and tax revenue as evidenced by the projected impacts on the inland empire and san joaquin valley
- Bullets 1: http://www.conferenceboard.ca/hcp/provincial/economy/gdp-growth.aspx Bullet 2: http://pubdocs.worldbank.org/en/759561467228928508/CPLC-Competitiveness-print2.pdf Bullet 3: https://www2.gov.bc.ca/gov/content/environment/climate-change/planning-and-action/carbon-tax Talking points: British Columbia implemented a price on carbon in 2008. It started at $10 (Canadian) and rose yearly until it hit $30/ton (Canadian) in 2012. During that time, BC ranked first among the provinces for GDP growth and saw their real GDP increase. Additionally, BC saw the creation of a thriving clean energy sector, showing how new jobs can be created. BC also saw significantly higher emissions reductions compared to the rest of Canada. The drop in BC’s per capita emissions for 2008-2013 vs. 2000-2007 was three-and-a-half times as pronounced as the decline for the rest of Canada. - https://www.carbontax.org/where-carbon-is-taxed/british-columbia/ BC’s tax is fully revenue neutral, meaning all of the revenue is returned to businesses and citizens through tax cuts or credits for the lowest income families. While many argue a carbon tax is regressive, BC has been able to offset its effects through their revenue distribution mechanisms. Over 160 businesses called for the BC government to increase the price on carbon after it hit its statutory limit to continue helping the economy, growing the clean energy sector, and incentivizing business to reduce emissions - http://www.pembina.org/bc-carbon-tax
- Talking points:
- Talking Points: Businesses support a price on carbon. Over the last year we have seen large American companies, including oil companies, come out in favor of a national price on carbon. - https://www.clcouncil.org/founding-members/ Over 200 US companies report to CDP that they are either currently pricing carbon internally or they plan to by 2019. - https://b8f65cb373b1b7b15feb-c70d8ead6ced550b4d987d7c03fcdd1d.ssl.cf3.rackcdn.com/cms/reports/documents/000/002/738/original/Putting-a-price-on-carbon-CDP-Report-2017.pdf?1508947761 In ASBC’s network over 150 of our companies have signed on to support a federal price on carbon. Businesses support market-based policy solutions and want to see action on climate. A price on carbon is the best way to mitigate climate change and create a modern, efficient economy for the future.
- Talking points: A carbon price is the most efficient, business friendly way to reduce greenhouse gas emissions. Economy-wide action is the only way we will see meaningful reductions in emissions and the incentives necessary to spur innovation in green technology. For more information, go to carbonprice.asbcouncil.org Questions?