The Center's work on 'Climate Change' Issues

The Center analyzes the potential effects of climate change policies on low- and moderate-income households and the federal budget. It also designs measures to ensure that the increased energy prices resulting from climate change legislation do not drive more households into poverty or make poor households poorer.

Need to Protect Low-Income Households Up in the Air Under EPA Climate Regulation

June 3, 2014 at 12:42 pm

In my latest post for US News & World Report, I previewed the Obama Administration’s proposal to reduce carbon pollution from existing electric power plants.  It was important to include robust low-income protections in the comprehensive national “cap-and-trade” proposal that Congress debated but failed to enact.  Should the new proposal also include such protections?

At this point, we don’t know.  The new proposal relies on the Environmental Protection Agency (EPA) to establish emissions-reduction goals for each state and approve state plans for meeting those goals.  As CBPP has explained, such a prescriptive regulatory approach will likely be less cost-effective (i.e., it will cost more to achieve a given emissions target) than a comprehensive market-based approach like cap-and-trade or a carbon tax that “puts a price on carbon” and lets market forces determine where emissions reductions come from.  But the consumer impact is likely to be smaller under regulation precisely because the price signal is weaker.

As I say in the US News post:

The Obama administration pledges to give states as much flexibility as possible to meet the new regulations on emissions from existing power plants, and there are several ways to do that, including some that mimic a carbon tax or cap-and-trade, achieving some of the cost efficiencies (but only within the existing power plant sector)…

One leading issue in designing market-based solutions is the impact on consumers, especially low-income households, of putting a price on carbon.  The comprehensive bills that Congress debated in 2009-10 addressed that issue by allocating some of the revenue the government received from selling emissions allowances to consumer relief.  EPA regulation is less cost-effective, but it also has a less adverse impact on household budgets.  But were states to choose more market-based solutions within the EPA’s requirements, such as joining regional cap-and-trade systems, both federal and state policymakers should be mindful of the possible harm to low-income households.

The EPA will issue final guidelines in about a year and states will have until June 2016 to submit plans.  In the meantime, CBPP will continue to urge policymakers to develop policies that are compatible with protecting both the environment and low-income households.

In Case You Missed It…

June 15, 2012 at 4:43 pm

This week on Off the Charts, we focused on the federal budget, state budgets, income inequality, health care, and food assistance.

  • On the federal budget, Richard Kogan explained that recent Bipartisan Policy Center estimates of the automatic cuts (“sequestration”) in defense funding scheduled for next January are based on questionable assumptions and do not present a realistic look at sequestration.  Hannah Shaw noted that a group of Northeastern states have raised more than $1 billion through auctions of carbon dioxide permits — a system the federal government should also consider to generate additional revenue and limit carbon dioxide pollution.
  • On state budgets, Michael Leachman commended North Dakota voters for voting down a constitutional ban on property taxes, which would have eliminated a key, stable revenue source, and Michael Mazerov emphasized the need for Congress to set rules that would lessen the damage to state and local treasuries and economies being wreaked by the Supreme Court’s Quill Corporation v. North Dakota decision (in light of the decision’s 20th anniversary).
  • On income inequality, Chad Stone highlighted recent Federal Reserve data showing that wealth is even more concentrated than income, with 75 percent of wealth held by the top 10 percent of families.
  • On health care, Edwin Park warned that a claim about lower-than-expected spending by the Medicare Part D drug benefit in a recent Heritage Foundation blog post relies on faulty calculations, and Shannon Spillane outlined three important opportunities that will be lost if the Supreme Court fails to uphold health reform. Shelby Gonzales also discussed the Center’s new toolkit, which provides states with guidance for approaching and implementing the eligibility changes in health reform and resulting changes in how families access SNAP and other programs.
  • On food assistance, Stacy Dean highlighted a Center video on the role of SNAP as the nation’s first line of defense against hunger — an important reminder as the Senate debates the farm bill, which authorizes the program. Zoë Neuberger pointed to new data from the Center and the Food Research and Action Center showing that the “community eligibility” provision in the 2010 child nutrition reauthorization law is helping to expand the reach of the school meals program. Zoë also stressed that Congress should resist pressure from the potato industry to force the Agriculture Department to add white potatoes to the limited list of foods it has approved for the Special Supplemental Nutrition Program for Women, Infants, and Children, commonly known as WIC.

Pricing Carbon Pollution Pays Off in Northeast

June 13, 2012 at 1:44 pm

Global warming may be off Congress’ radar screen for now, but a group of northeastern states have operated coordinated cap and trade programs to “put a price” on carbon pollution since 2008 through the Regional Greenhouse Gas Initiative (RGGI).  RGGI raised over $40 million last week in its sixteenth auction of permits to emit carbon dioxide; these auctions have raised more than $1 billion (see table).

RGGI is a useful reminder that we can raise revenue while achieving other important policy goals.

Each of the nine states participating in RGGI has set a cap on the pollution that electric power plants may release.  Electricity producers must hold a permit for each ton of carbon dioxide pollution they emit.  States distribute most of the permits through quarterly auctions.

States have used this revenue for a variety of purposes, including investing in energy efficiency and renewable energy, helping poor families pay their energy bills, and shrinking state budget shortfalls.

Furthermore, RGGI estimates that the coordinated programs will cut carbon dioxide pollution in the region by 10 percent by 2018.

At the federal level, too, raising revenues by limiting carbon dioxide pollution could help address two of our most pressing long-term concerns.  As we have discussed, federal policymakers should take a balanced approach to reducing long-term deficits that includes both spending cuts and revenue increases.  They should consider a carbon pollution tax or some other mechanism that puts a price on carbon pollution as a potential revenue source in this package.

Putting a Price on Carbon Can Be a Budget Policy/Energy Policy “Two-Fer”

March 29, 2012 at 3:02 pm

As my CBPP colleagues have been busy documenting, House Budget Committee Chairman Paul Ryan’s budget does more to sharpen partisan differences than to move us toward a credible, sustainable, and bipartisan deficit-reduction plan.   My latest post for US News & World Report discusses something that would be a step in the right direction:

Policymakers who are serious about addressing the nation’s long-term fiscal problems should look closely at the merits of “putting a price on carbon.” A carbon tax or similar policy is a “two-fer” that would give businesses and households a better price signal to guide their decisions about energy use, and that would raise revenue to reduce the budget deficit.

As our backgrounder on policies to reduce greenhouse gas emissions points out, market-based approaches to controlling pollution from fossil-based energy create incentives for businesses and households to conserve energy, improve energy efficiency, and adopt clean-energy technologies — without prescribing the precise actions they should take. It’s the solution that most economists prefer, including advisers to prominent members of both parties.

A carbon tax or other market-based approach to putting a price on carbon can generate revenue to reduce long-term budget deficits.  By itself, however, it is a regressive policy, since low-income households spend a larger share of their income on energy and energy-related products than better-off households.  To protect the truly disadvantaged — a key principle that the Bowles-Simpson deficit commission set forth — any comprehensive deficit-reduction package that puts a price on carbon should include appropriate protections for low-income consumers.

Happy Holidays from the Center

December 21, 2011 at 5:48 pm

Wishing you and your loved ones a happy holiday season. Off the Charts is going on vacation, but we’ll resume posting regularly and approving comments as soon as we return in the new year.