A Carbon Pollution Fee Would Strengthen Historic Climate Legislation

After being on the back burner for the last several years or more, climate policy is suddenly making headlines and headway on multiple fronts. As part of his participation in the international climate conference currently taking place in Glasgow, the President has released a long-term strategy for achieving emissions reductions needed to meet our climate goals. And Congress is finalizing details of the Build Back Better Act, a spending bill that will include $555 billion for programs to mitigate and respond to climate change in ways that further the President’s strategy — if passed, the largest ever climate action by Congress.

A fee on climate pollution

One major climate solution has been discussed but is not yet in the latest drafts of the Build Back Back Better Act — a fee on carbon emissions that would be levied on polluters. Adding such a fee would supercharge the already historic climate investments in the bill while generating revenue to help pay for them. While policy design is critical, analyses have shown time and again that such a polluter fee is a simple and effective means of curbing climate pollution, and can be implemented without major disruptions to low- and middle-income households.

One such analysis, published last month by Resources for the Future, found that a carbon fee placed on electricity generation was the most effective of three major policies at driving down emissions and spurring clean, renewable energy. A modest fee starting at $15 per ton of CO2 would achieve 71 percent clean power generation by 2030 and reduce cumulative emissions in that time by 5.47 billion metric tons. The 10-year clean energy tax credits contained in the Clean Energy for America Act (which has been merged into the Build Back Better Act) are similarly effective, reaching 69 percent clean by 2030. The two policies together, however, combine to very nearly achieve the President’s goal of 80 percent clean electricity in that time.

Clearly, a fee on climate pollution could be a lynchpin to achieving the transition we need in the power sector, but an economy-wide carbon fee could do even more by driving decarbonization in other sectors such as transportation and heavy industry. And when paired with a border adjustment carbon fee, this driving force could be spread globally without adversely affecting domestic industry.

coral bleaching
Corals require specific temperature ranges to survive —  when water temperatures become too high, stressed corals often expel the colorful algae they depend on, this is known as coral bleaching. By reducing our fossil fuel usage we can protect corals and other ocean inhabitants. Credit: Wendy Cover/NOAA

Also important, a carbon fee could use the revenue generated to re-invest in households earning less than $400,000 a year so they are less affected by any price increases that may be passed through by businesses and manufacturers on certain products. In actuality, systemic economic impacts are likely to be very limited or even non-existent. A recent study of the experience from carbon fees in Europe and Canada shows that these policies actually had slightly deflationary effects overall.

The National Wildlife Federation urges Congress to include the strongest climate and conservation measures possible in the reconciliation package. The science could not be clearer that we have run out of time to act before the worst climate outcomes become inevitable. Pairing the Build Back Better Act’s tax credits and other investments with a carbon fee would achieve the emissions reductions the President has committed to and that the science tells us are necessary to protect people and wildlife from disastrous climate effects.

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