A little over a year ago, 195 countries signed on to the historic Paris Climate Accord to limit global warming pollution. This year, the United States pointed a loaded gun at its own foot, and President Trump pulled the trigger, announcing he will withdraw from the agreement. But the rest of the world is moving ahead with carbon pricing programs that will give other countries a head start in the race to a clean energy economy. Notably, The United States’ neighbors to the north and south are adopting national carbon pricing programs in 2018, and the European Union and China are allying to become global leaders in the transition to a low-carbon economy.
Nations and regions making progress
Click map to enlarge.
Forty countries and 24 sub-national regions (states, provinces, etc.) have already or are scheduled to soon make polluters pay with a national or regional price on carbon. Together, these carbon pricing initiatives cover about 7 gigatons of carbon dioxide equivalent (GtCO2e), or about 13 percent of annual global GHG emissions. Roughly two-thirds of covered emissions are covered by a cap-and-trade program, about one-third are covered by a carbon tax, and about one-quarter of the jurisdictions use both.
Several new or expanded pricing programs have come online in the past few years—these are highlighted with an orange outline in their first year in the animated map above.
In 2015, Portugal launched a carbon tax, and South Korea implemented a cap-and-trade program. California expanded its cap-and-trade program, initially launched in 2012, to cover 85 percent of it GHG emissions.
After abolishing its carbon price in 2014, Australia launched a new “safeguard mechanism”—a modified form of cap-and-trade—in 2016. In addition to its carbon tax, which has been in place since 2008, in 2016, British Columbia put a limit and price on pollution from industrial facilities (especially targeting coal-fired power plants and liquefied natural gas facilities). In 2018, BC will expand its carbon tax to cover fugitive emissions and forest slash-pile burning and raise the tax by $5 per year.
The United States-shaped hole in the fight against climate change is increasingly conspicuous. In 2017, Ontario, Canada, launched a cap-and-trade program, and Alberta, Canada, launched a new carbon tax for transportation and heating fuel emissions. Canada’s federalist experiment around carbon pricing paid off: four different provinces are running four different programs, and now the federal government is ready to implement a national price in 2018. But the federal requirements leave plenty of room for each province to tailor its own solution. Mexico will also launch a national carbon price in 2018.
Chile’s carbon tax, in the works since 2014, took effect in 2017. South Africa expected to launch a carbon tax in 2017, but delayed the implementation. China is scheduled to start its much-anticipated national carbon price in July 2017. Although nine (of 33) Chinese regions have run cap-and-trade programs for several years, the national plan will double the global amount of carbon pollution globally that has a price tag attached to it. Starting in July, more than one-quarter of global emissions will be priced.
Paris opens the door for international pricing
In December 2015, 195 nations signed on to the Paris Climate Accord, agreeing to try to limit global warming to no more than 2 degrees—or maybe just 1.5 degrees!—celsius (3.6 or 2.7 degrees Fahrenheit, respectively). The signatory nations—accounting for more than 95 percent of the world’s GHG emissions—are drawing up plans, and many are already putting them into action.
Article 6 of the Paris Accord lays the groundwork for an international carbon pricing regime. Most countries want in: nearly 100 nations, accounting for 58 percent of global GHG emissions, submitted initial plans saying they are interested in participating in international carbon pricing to help them meet their pollution reduction goals.
Several are already implementing domestic or regional prices, as shown in the map above. Add an international program to existing progress, and a price could soon be in effect across much of the globe, covering about two-thirds of global emissions.
North Americans are warming to dividends
The carbon prices already in place were worth about $50 billion in 2016, and international action coordinated by the Paris Accord could generate a new stream of revenue in participating nations in future years. Nations and states use the revenue to reduce other taxes, fund clean energy projects, and fill budget holes. And some jurisdictions give some revenue back to the people. The idea of carbon dividends, making polluters pay, and then writing people a check (similar to what Alaska does with taxes on oil production) is gaining ground in North America.
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Author and entrepreneur Peter Barnes has long advocated for the idea that we all have an ownership share in common assets. More than a decade ago, he asked, “who owns the sky?” More recently, he asked, if Thomas Piketty is right that those who make money by owning things keep making more while those who make money by working keep making relatively less, how can we sustain our middle class, our democracy, and our planet? His answer to both questions is: we all have a share in the world’s natural resources, and, like shareholders, we all should receive dividend checks.
Canadians like the idea: Alberta’s carbon tax includes a small rebate, and the federal plan will send some money back to individuals. For nearly a decade, British Columbia has used carbon tax revenue to give money back to people in the form of income tax credit—not as transparent as dividend checks, but a similar idea. Now, BC plans to increase and expand its tax and use the new revenue to deliver rebate checks to ensure a majority of British Columbians are better off financially.
In the United States, California’s cap-and-trade program has always included a dividend in the form of a “climate credit” on everyone’s utility bill. But dividends are the heart of the new proposal for a revolutionary upgrade to California’s program. Between 50 and 90 percent of carbon revenue would go right back to individuals, so everyone in the state would get a check in the mail every quarter. Even if oil corporations ginned up fear that the carbon price was getting too high, everyday people would cheer because their checks would get bigger.
Many working on the California bill see dividends as critical to the bill’s success. California requires a two-thirds majority to pass new taxes, and Chevron sponsored an under-the-radar campaign to pass Prop. 26 in 2010, changing the definition of “tax” to ensure it applies to cap-and-trade too. As a result, California climate advocates must attract some conservative support for the new bill.
Californians’ hope that a carbon dividend might bridge the partisan divide that has stymied progress in the United States may be well-founded. After all, a few months ago, a group of prominent Republicans released the Conservative Case for Carbon Dividends, complete with a TED Talk and meetings with White House officials.
Advocates in Washington DC are also pushing a carbon fee and rebate.
The US hangs back, but the world moves forward
Countries and regions continue to march forward with carbon pricing. China, after years of experience with nine regional carbon pricing programs, is almost ready to institute a national program. Canada and Mexico are also set to roll out national programs. Meanwhile, the United States the United States lags. But California’s trailblazing climate efforts, and some conservative thought leadership on dividends, is laying promising groundwork for US action.