Climate economists have determined a global carbon price of $100/tCO2 by 2030 is needed for our safety, as described in this study in Nature Climate Change. The Intergovernmental Panel on Climate Change warns "Explicit carbon prices remain a necessary condition of ambitious climate policies" (IPCC SR15, Chapter 184.108.40.206). The high carbon price required is viable and will be durable when we give all the money collected to the only group that can not pass down their higher costs (all citizens). The cash-back approach protects families and the economy.
No single climate policy can do everything needed, but cash-back carbon pricing is our best first step to address climate change. We can avoid wasting time and resources by also implementing complementary (rather than redundant) policies. Those policies are identified in studies such as this analysis from Columbia University, and policy interactions can be explored using the online En-ROADS interactive Climate Policy Simulator from MIT.
What can NH state legislators do with this information?
You can enable the towns, businesses, and citizens of our state to avoid future stranded costs by anticipating a price on carbon of $100 per ton CO2 from fossil fuels by 2030. Our state will better utilize the resources at our disposal by avoiding short-sighted energy decisions today (decisions based on the current market pricing of fossil fuels). When the currently-hidden costs of using fossil fuels are explicitly reflected in their market prices, infrastructure and equipment that use coal, oil, and gas will turn out to be increasingly expensive, bad choices. Those predictable stranded costs are avoidable based on decisions you make right now.
The State Legislature should get stakeholders together to consider how to prosper in a world with a price on fossil fuels of $100 per ton CO2 emitted by 2030. Our state can avoid making short-sighted decisions by including a proxy carbon price in the analyses of future infrastructure projects, as some other states and many businesses already do.
The state should also help citizens, businesses, and municipalities become more energy-efficient and accelerate the adoption of clean energy alternatives. Legislation that encourages energy efficiency, deployment of clean energy production systems, and electrification is already sensible, but will yield significant additional cost savings when there is an explicit price on carbon emissions from fossil fuels. As the Chamber of Commerce indicated, we can't leave it to the market to figure this out, because the market currently fails to account for the cost of pollution in the price of fossil fuels. The market does not see the writing on the wall, but we can, and we can benefit by acting on that insight.
How Does Cash-Back Carbon Pricing Work and How Would Congress Use It?
I've attached a one-page summary of the Carbon Fee and Dividend policy (#2). You can read more about that policy at citizensclimatelobby.org/basics-carbon-fee-dividend, and how a bill based on it will help the US achieve net-zero emissions by 2050 (and other benefits) at carboncashback.org/benefits. The bipartisan Energy Innovation Act uses this approach. The bill had 87 co-sponsors in the last session of Congress and will likely be reintroduced with bipartisan co-sponsors soon (#3 and #4).
Cash-back carbon pricing will be great for New Hampshire families and businesses. New Hampshire spends about $4 billion a year on fossil fuels - money exported from our local economies to Texas, Saudi Arabia, and elsewhere. That money will be retained in our local economy when we produce our own clean energy. Also, most families will break even or get more money in their cash-back dividend than they pay in trickle-down higher prices from the fee paid by fossil fuel producers, with the largest gains seen by low-income households because of their smaller carbon footprints. That progressive effect will help many families during this difficult covid-19 time and grow consumer spending - creating local jobs in services, healthcare, and construction, further benefiting the local economy.
How Can State Legislators Help Accelerate Cash-Back Carbon Pricing at the Federal Level?
This is good for New Hampshire, so our elected leaders should help make it happen as soon as possible. State legislators can endorse the bipartisan federal bill online as Prominent Individuals at energyinnovationact.org/endorse. It takes only a minute, but it will send Congress a clear message to act.
The NH Legislature can also pass a resolution of support for federal Carbon Fee and Dividend legislation. This will send a strong signal to Congress and the President that we support this bipartisan, cost-effective, fair climate solution that has a global reach. Other states and municipalities have already done so and are listed at energyinnovationact.org/all-supporters/?opentype=local-governments. I have attached an example municipal resolution on which you might model a state resolution (#5).
Thank you again for your service to our state!
12 Fordway Extension
This is the fifth in a series to help inform the NH state legislature about the best first step we can take to address the climate risks we face. There are many co-benefits to the carbon cash-back approach. See carboncashback.org/benefits for independent analyses. Previous "Why Price Carbon" letters are available.