The state Legislature appropriated $150,000 two years ago for “a study of carbon pricing, including whether and how a carbon pricing policy shall be implemented in Hawaii” (Act 122, SLH 2019). The study was released recently, and it examines different options for placing a tax on fossil fuels to reduce consumption. It also examines different options for using the tax revenue, including returning it to people in equal shares.
The following quotes are excerpts of the study:
>> “A carbon tax puts an explicit price on GHG {greenhouse gas) emissions and many prior studies have found it to be the lowest-cost way to reduce GHGs.”
>> “The price increase encourages industry and consumers to shift toward activities that result in fewer GHGs. Having an economy- wide approach, rather than a set of sector-by-sector policies, lowers the cost of reducing GHGs because it captures a range of GHG reduction opportunities while harmonizing sectoral interactions.”
>> “Returning the revenues to households has been shown in numerous studies to make taxing carbon a more progressive policy. This means it provides more than proportional benefits to lower-income households. Making the policy progressive can be done through dividend payments of equal shares across households or payments more specifically targeting lower income households.”
Among other things, the study examines a pricing scenario applied to all fossil fuels that would increase gasoline prices by 50 cents per gallon in 2025 and 60 cents per gallon in 2045. Electricity prices would not increase.
The study shows that this pricing scenario would be effective in reducing greenhouse gas emissions, with a finding that “In the year 2045, emissions are 13% below 2045 baseline levels and 40% below 2019 levels.” Furthermore, the economy would not be harmed, as there would be only “small impacts on Hawai‘i’s overall economy.”
If revenues are returned to households under this pricing scenario, each household would receive about $1,000 annually. For low-income households, after subtracting increased spending due to carbon pricing, “the lowest-income household by quintile sees a $900 and $700 gain in spending power in 2025 and 2045, respectively.”
The model of pricing carbon and returning all the revenue to people in equal shares is known as carbon fee and dividend. This model is supported by more than 3,500 U.S. economists, 28 Nobel Laureate economists, and four former chairs of the Federal Reserve.
It is not just theory because dozens of countries have adopted some form of carbon fee and dividend. The U.S. Congress is considering the Energy Innovation and Carbon Dividend Act for a national program, but Hawaii could be the first state to adopt the idea.
Several bills were introduced in the Hawaii Legislature that would have put a price on carbon, with various arrangements for returning money to people. Unfortunately, all of these bills died before the recent study was released.
The Legislature should consider a carbon fee and dividend bill in the 2022 session because it would substantially reduce greenhouse gas emissions and would work in conjunction with all other efforts to control climate change. while also financially protecting low-income households.
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ON THE NET:
>> Read the carbon-pricing study online at 808ne.ws/carbonpricing.
Susan Gorman-Chang is Oahu Chapter leader and Noel Morin is Big Island Chapter leader of the Citizen’s Climate Lobby Hawaii; Matthew Geyer chairs the Environmental Justice Task Force for Faith Action for Community Equity.
