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What Oregon can learn from states with carbon pricing

Published: February 24, 2014 by Editorial Team

0.7 degrees Celsius. That’s how much the temperature of Earth has risen since before the industrial revolution.

It’s been enough to get us talking: Did climate change cause Hurricane Sandy? Typhoon Haiyan? Are we going to have more fires? Floods? Droughts? What’s going to happen to farms? Will we still be able to ski at Mt. Hood?

Now imagine the world at 2◦C; this is the temperature governments say we can’t surpass, the temperature at which we will no longer live on the same type of planet we grew up on. To prevent such drastic changes, states and nations around the world are discussing the merits of carbon pricing: putting a price on the damage that CO2 causes to our world. A few have already started to do this, and Oregon may be next.

Already widely recognized as a leader in sustainability, Oregon fortunately recognizes that the time to act on climate change is now. Discussion is now underway to determine how and when Oregon might start pricing its carbon emissions.

To inform this conversation, The Climate Trust examined five existing carbon pricing mechanisms using a set of four key indicators we felt would be important considerations to Oregon legislators: carbon reduction, economy, jobs and social equity. We learned a great deal from this analysis (you can download the full TCT report here), but the key takeaways are these:

Any carbon pricing policy should be thought of as one piece of an overall policy strategy to address carbon emissions. California’s AB32 is a notable example of this point. California has a cap and trade system which will cover about 80 percent of its economy starting in 2015, but this is only one piece of a bundle of legislation designed to help the state meet its emission reduction goals.

Similarly in Oregon, neither a carbon tax nor a cap and trade system is enough to meet our carbon reduction goals alone. Complementary policies such as those that address low-carbon fuels, energy efficiency, renewables and transit improvements are necessary and should link with, rather than contradict, the carbon pricing mechanism. Some countries have even found ways to use the two major carbon pricing mechanisms, carbon taxes and cap and trade, at the same time to enhance their benefits.

Both cap and trade and carbon taxes have the potential for positive gains in terms of carbon reduction, economy, jobs and social equity. In fact, carefully designed mechanisms can realize positive gains in all four indicators simultaneously, disproving the notion that environmental stewardship is in opposition to economic prosperity. The best way for Oregon to realize these gains is through targeted reinvestment of revenues, as the Regional Greenhouse Gas Initiative in the Northeastern US has done (RGGI, by the way, led to a $1.6 billion net economic gain to the region and the creation of 16,000 new jobs in its first three years). A few potential areas for reinvestment are carbon-reduction projects, energy efficiency, habitat restoration and social equity programs.

Design of a carbon pricing mechanism is crucial, and Oregon can learn much from the experiences of existing programs. First, social equity must be the lens through which any carbon pricing system is designed. Australia’s carbon tax, passed in haste during a time of political upheaval and now being repealed, was based on a flawed understanding of the impacts to Australia’s economy and particularly to low-income households. Every other system we studied, however, was able to overcome this obstacle by carefully designing, testing and revising legislation using collaborative networks of academics, policy makers, business representatives and other organizations. Second, so immediate is the need to reduce carbon pollution that the solution proposed must withstand short-term political pressure. In Oregon, it seems carbon taxation has more political will behind it than cap and trade. While this is perfectly acceptable, it is important for Oregon to consider how the design of its system might link with other systems regionally to minimize losses to our competitive position.

Finally, it is important to note that none of the systems we studied passed their carbon pricing policies on the will of government alone. It takes support from business and nonprofit leaders, academics and private citizens of all ages- all in the pioneering spirit Oregon is famous for.