The introduction of a flurry of bills calling for a carbon tax in the U.S. Congress is breathing some new life into a topic that has long been popular among economists but shunned by politicians.
In this edition of Columbia Energy Exchange, host Bill Loveless talks with Noah Kaufman, a Research Scholar at the Center on Global Energy Policy and economist specializing in carbon pricing, about this burst of activity on Capitol Hill and its implications for policymaking.
Before joining CGEP in 2018, Noah was a Deputy Associate Director of Energy and Climate Change at the White House Council on Environmental Quality during the Obama administration. He also worked at the World Resources Institute, where he led projects on carbon pricing, the economic impacts of climate policies and long-term decarbonization strategies.
Previously, he was a senior consultant in the environment practice at NERA Economic Consulting.
Noah and Bill discuss elements of the carbon-tax bills introduced by Democrats and even some Republicans in Congress and the circumstances under which they have cropped up now, as well as whether any of them stand a chance of much consideration as the U.S. approaches the 2020 presidential election year.
Noah also breaks down the thinking behind putting a price on carbon emissions, including the level to set it at and distribution of the revenue a carbon tax would raise.
How other climate policies – like incentives for renewable energy – match up with a federal carbon tax also comes up in the conversation, which Noah and Bill carried out by phone from their locations in New York and Washington, respectively.
A handy complement to this discussion is a new online resource from the Center on Global Energy Policy that illustrates what you need to know about a federal carbon tax in the United States.
View the transcript
Bill Loveless: Hello and welcome to Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. From Washington, I’m Bill Loveless. Our guest today is Noah Kaufman, a research scholar at the Center on Global Energy Policy and head of the Center’s carbon tax research initiative. Noah is a leading economist in the United States on carbon pricing, who has worked as a deputy associate director of energy and climate change at the White House consul on environmental quality under the Obama administration. While at the environmental think tank world resources institute, he led projects on carbon pricing, economic impacts of climate policies and long term decarbonization strategies. He has a long history too of studying the history and application of the social cost of carbon in the United States. I rang Noah up at his office at the center in New York. Here is our conversation. I hope, you enjoy it. Noah, thanks for joining us on Columbia Energy Exchange.
Noah Kaufman: Bill, every week, I listen to your excellent podcast and think maybe some day, he’ll ask me, so thanks for making me history and a reality.
Bill Loveless: Thanks. We’re out to a great start here, Noah. Now, we’ve seen a flurry of federal carbon tax proposals in congress lately with a number of democrats and even a couple of republicans sponsors. It’s a topic that’s been considered too toxic for many politicians to handle. So, what’s going on now?
Noah Kaufman: Well, yeah, I mean, I think it was pretty remarkable last week. On one day, we saw four bills proposed that’s on top of a few other proposals that we had seen earlier this year. So, I think there has just been a lot of discussion this year about the need for big federal action on climate change and this shows that some policy makers are getting that message and working behind the scenes to put meat on the bones and perhaps actual legislation for how we can really move the needle on the emissions reduction in this country. And I see these bills as the culmination of that work for a bunch of policy makers.
Bill Loveless: Yeah, it’s interesting. We’ve seen among the sponsors, senator Chris Coons of democrat of Delaware, representative Francis Rooney republican from Florida, representative Dan Lipinski he’s a democrat from Illinois, all of them introduced carbon tax bills in late July, late this month. The three boils joined two other bipartisan measures proposing carbon tax were introduced earlier this year in the house in senate. Is there a much difference among these measures?
Noah Kaufman: There are differences. Although, I have to say when I read through the bills, you also see remarkable amount of consensus. So, all of these bills that put a price on carbon across the energy system, all of them would include a board of carbon adjustment which is there to protect the competitiveness of U.S. industries. All would leave in place the major authorities that the government would need to surround the carbon price with sensible other policies. So, they’re alike in a lot more ways than they’re different. But the two major categories of differences, I would say are on the tax rates, contemplated by the bills and then, you know, each of the policies would raise hundreds of billions of dollars per year in new revenues and the policies have differences in how to spend that money. So, yeah, I can go into the details, if you would like.
Bill Loveless: Yeah, I would like to go into a little detail. But you know, I’m starting to think, maybe we should also make sure everyone is understanding what putting a price on carbon means. You know, something that not everyone necessarily understands, although, they hear the term a lot. You know, what it means and how it would be done. What’s this concept all about?
Noah Kaufman: Sure. So I think there is two ways to think about a carbon price. First, you can think of it as the fee that we charge for each ton of carbon dioxide emissions, to account for the cost of those emissions related to climate change. So, we know, those climate change cost are much higher than zero. So the carbon price should be much higher than zero too. And the other way to think about it is that if we just start with the premise that we need to reduce our emissions, our carbon price is just a policy tool that enables us to achieve a lot of emissions reductions at a very low cost. So, there is a lot of different ways to do it. As you know, at Columbia we have a research initiative on carbon pricing, essentially to help people understand how to design carbon pricing policies and the implications of different design issues.
Bill Loveless: Yeah, and it might mention there the center has just put out this week, a new online resource that explains what you need to know about federal carbon tax in the United States and it compares comparisons of existing carbon tax bills. You can find it on the center’s website at energypolicy.columbia.edu. What do you think about when you talk about setting a price, Noah? Where do you start, I mean, because we’ve seen a wide range of prices on carbon in the bills that have been introduced so far in congress?
Noah Kaufman: Yeah, so I mean, first of all, thank you for plugging our work and there are a bunch of different reasons for tax rates, so you can say tax rates to achieve specific emissions targets. You can set them to raise a certain amount of revenue and there is pretty, pretty stark differences between the tax rates contemplated by these proposals. So, they range from representative Rooney’s bill where the tax rates rise to about 50 or 60 dollars a ton by 2030 all the way up to senator Coons bill which you mentioned earlier, the tax rates rise to over a $160 a ton by 2030. And a lot of these bills also include mechanisms that call for the tax rates to increase more rapidly if the country isn’t achieving sufficient emissions reductions. So, a lot of times, you hear, you know the idea that carbon tax leads to a lot of uncertainty in what the emissions outcomes will be. And that’s true but you can have these mechanisms and to reduce that uncertainty.
Bill Loveless: Yeah, and you need to take into consideration the so called cost of carbon. Tell us about that.
Noah Kaufman: Sure, well the social cost of carbon is just, is metric that economists have used to try to quantify the damages that are caused by a ton of carbon dioxide emissions. So, when I mentioned earlier that you know, one way to think about the carbon price is the fee that we charge for, you know, the emissions to account for the cost of climate change. The social cost of carbon is an estimate of that, of those costs. But you know, I think, it’s used in terms of setting carbon tax rates is isn’t so clear because it’s such a difficult question to answer that you know, the social cost of carbon could be $50 a ton, it could be $500 a ton. Just depends on the assumption that you put into your model.
Bill Loveless: What was the consideration there during the Obama administration?
Noah Kaufman: Well, so the Obama administration produced a social cost of carbon, not to set a carbon tax or anything like that. It was using it in their benefit cost analysis for regulations. So, it was okay to have a wide range of estimates and they did. They had a very wide range of what the social cost of carbon might be recognizing that it’s certainly not zero. And then they will put that range into sort of the range of benefits estimates. So, you know, you put a efficiency standard on new refrigerators and you want to know all the benefits of doing so. You incorporate the benefits of reducing carbon dioxide emissions into those estimates, using the social cost of carbon.
Bill Loveless: You know, I’ve watched your work closely over the past couple of years and you spent a fair amount of time still down here in Washington discussing carbon tax with folks, members of congress with congressional staff and with others. Popular topic among economists like yourself, not so popular among politicians. It maybe evident why that’s so, but how do you see it? Why, do you feel sometimes like Sisyphus pushing that rock up the hill?
Noah Kaufman: Well, I think unfortunately, all climate policies are at least have been somewhat taxing. That’s why emissions went up last year when we need them to be falling rapidly. But I don’t know, I mean, I think the idea that a carbon price is uniquely toxic, may just be a hold over from the time when the question was whether we should price carbon or do nothing at all. If instead, we are thinking about plans to get to a carbon free economy in a few decades and the question is whether a carbon price should be part of those plans, I’m not sure there is any evidence at all that a carbon price is toxic in that context. I think, you could argue policy maker just sound more knowledgeable when they call for a carbon price is part of their climate plan. And then I think that’s why you see all these new proposals coming in congress.
Bill Loveless: Yeah, yeah. It has been, it has been somewhat surprising, you know, to see these things, these things surface all at once. Now, maybe because in this latest batch came out just before congress went on their long August recess. That may have having to do with…
Noah Kaufman: They procrastinate just like the rest of us.
Bill Loveless: Right. But I also think, this may have been a last chance to really get some serious legislative proposals for discussion consideration, this year because when congress comes back in September, they’re gonna be faced with must do decisions like funding the government. And then after that, come fall, we’re more or less into the presidential election campaign. I guess, we already are certainly speed up with that. So, this may have been really one of the last chances to get out serious legislative proposals like these.
Noah Kaufman: And it’s just an issue that’s at the forefront, right now. There is a lot of, you know, it’s at the front of the policy debate which is a change from the past. So, I think policy makers are hearing some pressure from their constituents and other stakeholders to release actual proposals to reduce emissions. So, this shows that, they are starting to respond to that pressure.
Bill Loveless: Right. And speaking of new proposals, as we speak former energy secretary Ernie Moniz is scheduled to speak to the U.S. chamber of commerce for the new, she has on climate change. It’s something he’s calling the green, real deal. That sounds familiar. But it includes a price on carbon. He says, he wants to work across broad coalitions of environmental groups and business groups. I’m reading a piece on axios this morning in which they report Moniz saying, a carbon dioxide emissions price, it’s a good thing but not a panacea. He says, it needs to be structured in a way that doesn’t hurt the poorest people, the most and doesn’t replace policies that reduce emissions from certain sectors, especially transportation. Yeah. Would you agree with that?
Noah Kaufman: I agree with all of that. I mean, I think, all the policy makers who put out these recent heavy pricing proposals agree with it from the looks of their bills. If you look at their revenue uses, which I mentioned earlier, even though they differ, what they all share is using revenue to make sure that low income households are compensated for increases in energy prices. So, they do it in different ways. So, you know, for example congressmen Dutch proposal divides the money up into equal chunks and just sends it back to Americans, while other proposals just use a portion of the money to make sure, middle class households are compensated and then use the rest of the money for things like innovation and infrastructure. You know, helping communicates transition away from fossil fuels. There is a lot of different approaches but yeah, I think everyone has coalesce around the idea that you know, we need to avoid the types of outcomes where people see the energy price increases but they aren’t seeing the benefits at all of the revenue use. So, I would certainly agree with that aspect and then you know, his point that we need other policies as well. I think that’s widely understood also that if you’re talking about an overall climate policy plan or I guess a climate strategy, a carbon price is very helpful but there is all sorts of other policies that we need to overcome barriers to emission reductions that have nothing to do with the price. So, you know, things like support for innovation and public infrastructure, especially in the transportation sector. And then you know, addressing emissions, that probably won’t be covered by the carbon price. That it should all be part of a broader climate policy portfolio.
Bill Loveless: You mentioned congressman Dutch by the example. Tell us who he is.
Noah Kaufman: So congressman Dutch is a democratic congressman from Florida. He proposed late last year and then again earlier this year, this is a policy that is supported a group called the citizens climate lobby and congressman Dutch and actually congressman Rooney the republican from Florida, who you mentioned earlier co-sponsored this bill that now has, I want to say, 60 years or so co-sponsors in the house of representatives. And essentially what it does is puts a price on carbon and then as I mentioned, divides up the revenue into equal chunks and gives it back to Americans.
Bill Loveless: Now, you were talking a minute ago what revenue distribution, is that really the linchpin for drawing bipartisan support around a carbon tax and if so what kind of dividend programs do you think would work best politically?
Noah Kaufman: I mean, I don’t know what the linchpin is for bipartisan support, right. We have been looking for that for a long time. Yeah, I mean, there is always been this idea if we combined the carbon price with another objective that will increase its support and the revenue is one way to do that. So, you say, well, you know, maybe if the republicans care about tax reductions, you can use all the revenues for tax reductions or deficit reductions or things like that. And now, what you’re seeing is a push on more on the democratic side of things to say, well, why don’t we use the revenues for policy objectives that we care more about. So, let’s use it for, you know, whether it’s innovation or infrastructure or health or all these things that you see in, you know, for example, the green new deal resolution, you know, the revenue just gives you a lot of flexibility. It’s hundreds of billions of dollars a year, that’s used to accomplish whatever goals that you want. But you know, we all don’t agree on how the government should be spending its money. So, of course, we don’t all agree on how we should spend carbon pricing revenue.
Bill Loveless: Yeah, but you think there is room there for discussion and perhaps potentially maybe an opportunity to find some sort of compromise at some point?
Noah Kaufman: Sure, I mean, that’s definitely the idea and the revenue should help you get there. Right now, you know, support is low. I sort of, I try to avoid saying that, you know that these bills aren’t going anywhere. You know, because I used to say things like in these polarized times, nothing will pass congress and then I would go talk to policy makers in Washington and the most common answer I hear from them was sure, these are good policies but why we would move forward on this because in these polarized times, nothing they will pass congress and I kind of realized that was contributing to this self-fulfilling prophecy where by nothing would ever happen. So, who knows. I’m skeptical about saying what the prospects of compromise or passage of these bills are but policy makers can wake up tomorrow and decide that put in place good climate policies.
Bill Loveless: That’s what keeps you going on this topic.
Noah Kaufman: That’s right, and I think it’s important and I think probably in particular as I mentioned earlier, it’s really such a no-brainer, I mean, you can achieve a whole lot of emissions reductions for such a low cost and combine it with other important policy objectives. So, yeah, that’s why we are working on it in Columbia.
Bill Loveless: You know, the green new deal doesn’t have a specific policies associated with it. But that said, does the green new deal help build the political case for carbon tax.
Noah Kaufman: They could. As you said, I mean, I think the green new deal is a way to achieve a bunch of different goals, you know, decarburization, good healthcare for everyone, environmental justice, carbon price, certainly isn’t going to do all of that but it’s an important part of the decarburization goal and it can raise a whole lot of money to help with the other goals. So, you know, whether it’s a green new deal, helping pass a carbon price or a carbon price helping pass a green new deal, I think they go hand in hand with each other.
Bill Loveless: And as we speak where the democratic candidates for president are in the midst of their second round of debate, they are talking about climate change. We heard a little bit in the first round in Detroit when congressman or former congressman John Delaney pitched for a carbon price came up with. For the most part, they didn’t talk carbon price so much as they talked about their concerns over climate change. I mean, generally speaking, what do you make of their positions on climate change?
Noah Kaufman: Well, as you said, just the fact that the major candidates are talking about climate change and putting the time and effort to create these climate plans is really encouraging. I mean, if you just look at Joe Biden’s plan, you know, Joe Biden is supposed to be this moderate candidate and you know, it’s just a different universe in terms of the ambition and the comprehensiveness of a climate plan compared to where we were four years ago. So, I find it really encouraging that the issue is front and center now.
Bill Loveless: You know. No, you’ve often talked about how a carbon price is an important part of a package of greenhouse gas policies. What other regulation and measures do you think we need to see?
Noah Kaufman: Well, this gets to the quote, you mentioned from secretary Moniz’s earlier. Right, I think there is a lot of regulations you can put in place that are really good complements to a carbon price and to shamelessly plug our work again. We put out a report earlier this year called interactions between a carbon price and other climate policies that proposes a framework that policy makers can use to figure out what policies fit really well alongside carbon price and which don’t fit as well. And this is an issue that’s all black and white but you know, I think in general, the types of policies that are good complements are those that address the issues that a price, you know, I guess, if you think of the price, the carbon price as addressing the difference in price between the low carbon technology and the high carbon technology, there is a lot of other reasons why we are not reducing emissions especially in sectors outside the power sectors. So, you mentioned transportation earlier. Public infrastructure would help a lot in transportation just to help us get off, you know, internal combustion vehicles. In the building sector, certainly the prices isn’t the only barrier to getting consumers to install more energy efficient or electric appliances. So, policies that address those emissions are important too. You know, and then there is also policies that are more substitutes to carbon price than complement. So, you think about mandates that say emissions reductions have to come from a specific sector or from a specific technologies. Those maybe really useful if you want to reduce emissions but you don’t have a carbon price, but they are probably less useful, if you have the carbon price that you want.
Bill Loveless: Our subsidies, tax credits, enough of a bridge to deliver the climate action, that’s necessary before we can theoretically establish a federal carbon price?
Noah Kaufman: Well, I mean, I do think they play an important role for certain technologies if you look at helping to make wind and solar energies mature, the way they are today. So, I do think tax credits have an important role to play going forward too even alongside carbon price. So, you know, in the early stages of commercialization of new technologies, it’s really hard to expect them to compete or even playing field with the fossil fuel technologies that have been around for decades and decades and have all sort of the engrained advantages that come along with that. So, using these types of subsidies and tax credits to get technology on its feet and then using something like a carbon price to sort of account for the, you know, cost of climate change as I mentioned earlier, make a nice combination.
Bill Loveless: You know, you mentioned infrastructure a moment ago and then the headlines this morning that sort of blew me away in the Washington post was the senate transportation committee passed a transportation bill that addresses power substantially the concerns over the climate change and the resilience of the transportation infrastructure. I haven’t read details of it yet but that certainly strikes me as something that is worth spending some time digging into. This was in the senate not the house of representatives where the democrats were in control. So, once again, perhaps a greater acknowledgment of some of the concerns here.
Noah Kaufman: That’s right. I think policy makers are really starting to at least nibble around this issue on you know, whether it’s infrastructure or you know, R&D or subsidies for certain technologies, you know, in themselves they are not going to significantly move the needle on emissions but you know, as I mentioned before, I think, they are an important part of a broader package, if you combine it with policies and regulations that directly address our emissions.
Bill Loveless: Okay, now, so, you’re, let’s, let me, press you a little further here on this carbon tax notion. You know, you’re a strong advocate of doing something on a national level on the carbon tax and yet we’ve looked, we see most recently in the state of Washington where the proposal for a carbon tax has failed not once but more than once in the state that is considered to be rather progressive in its energy and environmental policies. You know, we also saw the push back in France with the demonstrations earlier this year, the yellow vest protests. Now the carbon tax there wasn’t the only thing that was causing concerns among the French. There was anger over repeal of France’s wealth tax and other measures. We really saw push back. So, in the light of that, how, what are the, how do you overcome those sort of public obstacles, public perceptions even resistance to this notion publicly on a public level?
Noah Kaufman: I wish I had the answer for that but you know, I just don’t think we’ve figured it out yet. I mean, I mean, I’m not the first in the climate change, it seems like it’s the problem that was specifically designed not to solve, right like it’s and the benefits that we get from taking action on climate change largely go to future generations and they largely go to, you know the most vulnerable people in the world in developing countries. And the cost of taking action are largely on being industries with a ton of political power. So, yeah, I think it’s really, it’s no surprise that it’s been so difficult to take serious action to address the problem. Every so often, you see, some really encouraging signs, you know, if you think of what New York state started to do a few weeks ago or you know, in passing a big landmark climate policy. But as I mentioned earlier, emissions went up last year in the country and in the world. So, you know, whether it’s carbon pricing or really any other serious climate policy, we have ways to go before we figure out what works.
Bill Loveless: Yeah. Well, another way of looking at it is maybe from a more positive perspective is you know, California as a cap and trade program and in the northeast, we have the regional greenhouse gas initiative. Could we make do with expanding their coverage to other states or do we absolutely need a federal carbon price to get in line with the needed emissions reductions?
Noah Kaufman: Well, I mean, it all depends on what your emissions objectives are. You really want federal action, you know both from the perspective of achieving emissions reductions because you know, so much of the emissions are in states that, you know, aren’t really taking action right now. And you want federal action just from a cost effectiveness stand point. But if we can’t get it, then you know, the best we can do is state policies, you know, it makes a lot of sense for states to be moving forward and not waiting for federal action.
Bill Loveless: Now, what are some of the issues, you’ll be researching going forward now as you refine your work on the subject and look to close some of the gaps in understanding?
Noah Kaufman: Yeah, so my work, I guess if you think about just the carbon tax initiative that we have, you know, first of all, we are looking at the different policy proposals that are out there and we are doing analysis with our partners including at the William group and another place is to say what are actually the impacts of these different policies, so that we can give policy makers and stakeholders a sense of what the trade offs are of different design decisions. So, we’ll be doing some of that. We are doing our own original research on specific policy design questions. So, just a couple of weeks ago I came out with a report with Adele Morris and Siddhi Doshi at the Brookings Institution that looked at the risk facing coal reliant communities in the country. And you know, how they could be exacerbated by climate policies and thinking about what types of measures could be put in place to mitigate those risks. So, just one example of many, sort of how we are gonna dig into specific policy questions that are of interest to policy makers while also trying to find new creative ways to disseminate our research. So, Bill have you seen our five-minute animated video on carbon taxes?
Bill Loveless: I have not. Well, let me put it this way, I have not seen it entirely. But I did begin to watch it, and I would recommend that others do so as well. That was the, well people need to go to our website, right? energypolicy.columbia.edu.
Noah Kaufman: That’s right, right that. And sorry to put you on the spot there. And that's just one example of how...
Bill Loveless: You caught me.
Noah Kaufman: We're trying to design products that aren't, you know, you mentioned the website and what we've just released. Earlier we had an interactive tool that looks at how carbon prices coexist with other types of climate policies. So, all an effort to try to reach a broader audience with our work.
Bill Loveless: Yeah, by the way, we have Adele Morris as you know on the podcast recently talking about that report that you and her and Siddhi Doshi at Brookings did on the dangers of fiscal collapse in coal reliant communities. It was a good conversation. And I imagine the timing is important here too. You’ve mentioned that you’re gonna be addressing coming up soon. The next year is an important year. It’s election time in the United States. So, I imagine timing matters that much more to you now.
Noah Kaufman: That’s right, that’s right. So, so, another project, we have underway is looking at the issue of setting carbon tax rates and how to set carbon tax rates that are consistent with different emissions reductions pathways that policy makers want to put us on. So, absolutely, we want this research out there and useful tool to the policy makers who are going to come out with these proposals over the next couple of years. Sort of with the eye towards, you know, action, you know, whether it’s 2021 or whenever.
Bill Loveless: Right, right, right. Well, Noah Kaufman, I’m glad that we finally got to you on the Columbia Energy Exchange. It’s a conversation that’s been long overdue.
Noah Kaufman: Thanks so much Bill. It’s really is an honor to join you and thanks for all the work that you do.
Bill Loveless: Yeah. Thank you as well. For more information about the Columbia Energy Exchange and the Center on Global Energy Policy, visit us online at Energypolicy.columbia.edu or follow us on social media at Columbiauenergy. For the Columbia Energy Exchange, I’m Bill Loveless. We’ll be back again next week with another conversation.