How to put a price on carbon? Current bills offer lots of ways

carbon pricing bills

The Save Our Future Act is the latest carbon pricing bill to be introduced in the 117th Congress. It and other bills take creative approaches to putting a price on carbon.

Current bills offer lots of ways to putting a price on carbon

By Steve Valk

As talks heat up on climate legislation, the big question is whether such legislation will include a price on carbon and what that might look like. Volunteers and supporters of Citizens’ Climate Lobby are familiar with the Energy Innovation and Carbon Dividend Act, which offers a steadily rising fee on carbon, distributes all the net revenue to households, and puts in place a border carbon adjustment.

But there are lots of ways to approach putting a price on carbon. Several bills have been introduced in the 117th Congress that bring other interesting, valuable ideas to the table for consideration. (Note that all the bills discussed below would also put a border carbon adjustment in place.) Let’s take a closer look at the unique features of these other bills to get some insight into what may eventually find its way into legislation.

Save Our Future Act

Introduced this week by Sen. Sheldon Whitehouse (D-RI) and Sen. Brian Schatz (D-HI), the Save Our Future Act offers a unique approach to pricing carbon. The senators reached out to marginalized communities and other stakeholders to craft the policy so it reduces emissions while meeting the needs of a wide range of constituencies.

In a statement, CCL Executive Director Mark Reynolds praised the breadth of the bill, noting that it “would place an ambitious price on carbon to reduce America’s emissions, but it doesn’t stop there. This legislation would also address long-standing environmental justice concerns by directly pricing emissions of fossil fuel co-pollutants in frontline communities, and it would invest in coal communities to support them through the transition to a clean energy economy.”

Pollutants covered, price and rate of increase: For carbon dioxide, a fee of $54 per ton would be imposed on coal, oil and natural gas at the source beginning in 2023. The fee would increase 6% above inflation annually. The bill prices fluorinated gases used in refrigeration and air conditioning and also methane leaked from the extraction, transportation and storage of fossil fuels. This bill also applies a steep fee — priced by the pound, not the ton — to fossil fuel co-pollutants that make people sick and lead to hospitalizations, things like sulfur dioxide and fine particulates. By pricing these types of pollutants, this bill aims to address the concerns of environmental justice communities who have historically suffered the most at the hands of polluting industries.

How the revenue is used: Attention to the needs of diverse communities is also reflected in the allocation of carbon fee revenue. For starters, individuals would receive $800 per year with $300 for each dependent, distributed through a refundable tax credit. Grants would be given to states to assist low-income and rural households to reduce energy expenses. In coal country, miners who lose their jobs would receive a generous compensation package. Communities that lose revenue due to mine and power plant closures would also be compensated. The bill would also protect American households by providing regular rebates and funding for further emissions reductions through weatherization, EV credits, and more.

“This creative, inclusive policy shows that carbon pricing can be a win for the climate and a win for Americans who need one the most,” Reynolds said.

America’s Clean Future Fund Act, S. 685

Introduced March 10 by Senate Majority Whip Dick Durbin of Illinois, America’s Clean Future Fund Act also takes a thorough approach to carbon pricing by pairing it with other measures to ensure a fair and efficient transition to a clean energy economy — grants for frontline communities, transition assistance for fossil fuel workers, and financial support for farmers and foresters to reduce their emissions. 

Starting price and rate of increase: The Durbin bill sets a price of $25 per ton that would start in 2023 and increase $10 per ton each year. The fee is applied upstream when the fossil fuel enters the economy.

How the revenue is used: To protect people from the economic impact of the carbon price, 75% of the revenue would be used to provide direct quarterly payments to low- and middle-income households. Providing direct payments is not the only way this bill helps people. It also targets the needs of specific areas like environmental justice communities and communities transitioning from fossil fuels by supporting job creation and climate change adaptation projects. This legislation also acknowledges that other tools besides a carbon price are needed to bring emissions down in all sectors of the economy. To that end, it provides funding to help farmers transition to practices that sequester carbon rather than releasing it.  

America’s Clean Future Fund Act has a companion bill in the House, sponsored by Rep. Marie Newman (D-IL-03).

MARKET CHOICE Act, H.R. 3039

Currently the only bipartisan carbon pricing bill in the 117th Congress, the MARKET CHOICE Act (Yes, it’s an acronym*) was reintroduced in the House on May 7, sponsored by Rep. Brian Fitzpatrick (R-PA-01) and Rep. Salud Carbajal (D-CA-24). Having a Republican as lead sponsor points to the bipartisan potential of carbon pricing. With revenue dedicated to infrastructure, this bill also shows the versatility of carbon pricing and how it can be used in conjunction with other national priorities. 

Starting price and rate of increase: The fee would start at $35 per ton and rise 5% above consumer price index annually. The price could go higher if emissions benchmarks are not met. The fee would be imposed on sources of pollution — power plants, steel and cement factories, etc.

How the revenue would be used: With infrastructure and how to pay for it currently near the top of the national agenda, this bill attempts to tap into that priority and the momentum surrounding it. “We are at a crossroads with regard to infrastructure and climate change,” Rep. Fitzpatrick said when introducing the bill. “This Congress has the unique opportunity to come together to forge bipartisan consensus on both of these critical issues.”

The legislation is uniquely designed to meet two critical needs: Reducing greenhouse gas emissions and providing funding to repair America’s crumbling infrastructure. Revenue from the carbon fee would replace the federal gasoline tax that pays for the Highway Trust Fund. Money would also be provided for low-income households to cover rising energy costs. The remainder of the revenue would fund a number of projects and programs — coastal flooding adaptation, assisting displaced energy workers, weatherization and abandoned mine reclamation to name a few.

The Benefits of Carbon Pricing

As you can see, there are numerous ways of putting a price on carbon, depending on the objectives you’re trying to achieve. And as we know, the benefits of a well-designed carbon price are myriad: it will put us on track for net zero emissions by 2050, generate affordable clean energy, save lives, create jobs, and more.

CCL wants to see Congress set a price high enough to get the emissions reductions necessary to limit global warming and to make sure households — especially low- and middle-income — are protected economically.

The fact that several carbon pricing bills are under consideration bodes well for negotiations this year and increases the chances that a price on carbon could be included in climate legislation that moves forward. These diverse and thoughtful policy designs show that putting a price on carbon is more possible than ever. 

*Modernizing America with Rebuilding to Kickstart the Economy of the Twenty-first Century with a Historic Infrastructure-Centered Expansion Act.

Ready to make change? Join our cause and help us enact a price on carbon now!

Steve Valk
Steve Valk is Communications Coordinator for Citizens' Climate Lobby. Steve joined the CCL staff in 2009 after a 30-year career with the Atlanta Journal-Constitution. Follow him on Twitter at @valklimate.
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