Group of US States Considers Carbon Pricing Options

13 April 2017

A handful of US states are looking at the possibility of passing legislation aimed at slashing carbon emissions, including through the use of a carbon tax, with Connecticut, Massachusetts, and Rhode Island among those considering such a move.

The three states are already part of the market-based Regional Greenhouse Gas Initiative (RGGI), which also includes Delaware, Maine, Maryland, New Hampshire, New York, Rhode Island, and Vermont.

The RGGI is a mandatory programme geared toward slashing carbon emissions produced by the electricity sector, with carbon permits sold via auction and the revenue used to spur low-carbon energy initiatives.

State linkages

The proposed carbon tax aims to facilitate the New England region’s transition from oil, gasoline, and natural gas to local, renewable energy by levying a fee on various carbon-intensive fuels. Rhode Island, Connecticut, and Massachusetts have so-called trigger clauses in the bills under consideration, making the law only effective if the other states involved enact their own carbon taxes.

Vermont and New Hampshire, also part of the RGGI, are also considering signing onto the regional effort, proponents suggest. Massachusetts has attempted to pass carbon tax legislation repeatedly over the past several years, only for such bills to stumble in the state legislature.

Proponents say that the tax is designed to be revenue neutral, with money generated from the carbon tax largely redistributed to businesses and individuals, or fed back into state-funded projects, including those related to renewable energy and climate adaptation. They also argue that taking on further carbon reduction efforts at the state level could help make up for the lack of similar action at the federal level.

“Signals being sent from Washington, D.C. make it clear that it is up to the states to take the lead on climate action,” said Jeff Mauk, Director of the National Caucus of Environmental Legislators, earlier this year in a statement.

While regional support for pricing carbon is high, some fuel-intensive firms have expressed hesitation over the purposed legislation, citing concerns such as possible conflicts with other regional carbon pricing schemes, along with potential job losses and higher fuel costs.

California scheme survives legal challenge

In related news, a California judge ruled this past week upholding the state’s carbon cap-and-trade programme, which has been in place for five years and covers power plants, industrial facilities, and fuel.

The result has been welcomed by environmental groups and organisations which back carbon pricing efforts. “The court’s ruling will go a long [way] to increase confidence in the market,” said Dirk Forrister, the President and CEO of the International Emissions Trading Association (IETA), a non-profit business group.

The California scheme had faced a challenge by industry groups, which had alleged that the scheme was tantamount to an illegal tax. The court ruled against this claim, though this finding could still face appeal.

The California scheme is linked with the Canadian provinces of Quebec and Ontario. Canada plans to have a minimum national carbon price in place by next year, with provinces able to determine whether a carbon tax or emissions trading system is most appropriate for their specific circumstances. (See Bridges Weekly, 16 April 2015 and 15 December 2016)

ICTSD reporting; “Rhode Island Looks to be First State with Carbon Tax,” ECORI NEWS, 4 February 2017; “Biz, Environmentalists Square Off on $525M Carbon Tax,” HARTFORD BUSINESS, 20 March 2017; “Connecticut considers carbon tax on oil, gas,” CT POST, 14 March 2017; “Court Upholds California’s Cap-and-Trade Program,” SCIENTIFIC AMERICAN, 7 April 2017.

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