Carbon Pricing

Help us support Revenue-Neutral Carbon Pricing in Massachusetts:

General Statement

The USGBC MA supports the implementation of a revenue-neutral carbon charge to reduce the consumption of fossil fuels in Massachusetts through attaching a price on carbon emissions. Our Chapter encourages professionals to design, construct and operate buildings in a manner that is economically and environmentally sustainable. We support energy efficient design and the ongoing transition from fossil fuels to renewable energy sources. Fossil fuel prices do not reflect the consequent societal costs of global warming including impacts to human health, the economy, and the natural environment. A carbon fee and dividend policy is a conservative approach that provides a predictable, steady-rising price on carbon that rewards energy efficiency and helps to reduce our dependence on fossil fuels.

Background

What is a revenue-neutral carbon pricing?

A carbon price is a charge added to the cost of fossil fuels for the amount of carbon dioxide released to account for the external social, economic, and environmental costs of greenhouse gas emissions (GHGs). Humans burn fossil fuels such as coal, natural gas, and petroleum products to heat our homes and workplaces, fuel transportation and industry, and to generate electricity.  Consequently, these activities release vast amounts of carbon dioxide, methane, and other GHGs into the atmosphere.

Current greenhouse gas emission reductions set by the Global Warming Solutions Act of 2008 aim for a 25% reduction of 1990 carbon dioxide levels by 2020 and an 80% reduction by 2050. While initial reports suggested slow progress and an inability to reach these goals, the 2015 update to the Clean Energy and Climate Action plan for 2020 found that with continued effort these goals are achievable. A carbon price should be implemented to further reduce fossil fuel use, ensure the state meets these lofty emission goals, and improve the well-being of communities throughout the state.  Long-Term GHG Reductions by Sector*

Legislation

Bill S.1821: An Act combating climate change (Presented by Michael J. Barrett and 62 others)

This bill incents individuals and businesses to reduce fossil fuel use by adding a carbon charge to the wholesale price of each fossil fuel in proportion to the CO2 released as a byproduct. The proceeds of the proposed pricing structure are credited back to residents and employers (private businesses and institutions) to minimize economic impacts. Residents would each receive an equal share with some additional compensation for residents of rural areas due to higher transportation costs. Business and institutions would receive a rebate based on the number of employees with additional compensation allotted to energy-intensive businesses. The pricing structure starts at $10/ton, rising annually by $5/ton until the rate of $40/ton with an evaluation on the merits of the program in year six and thereafter every two years.  Since fossil fuels used to generate electricity are already being reduced under a similar incentive program, the Regional Greenhouse Gas Initiative (RGGI), those fuels would be exempt from the program.

Economists from across the political spectrum have agreed that this approach is cost-effective, provides a strong incentive to reduce use, while allowing each consumer the freedom to decide how to reduce their fossil fuel consumption with most benefits accruing to the most energy efficient consumers. Other benefits include less environmental pollution and improvements to human health and associated costs.

The bill was sent to the Joint Committee on Telecommunications, Utilities, and Energy on January 23, 2017. Representative Michael J. Barrett has argued that the expected $350 million to $400 million generated in the first year alone will be revenue neutral due to its redistribution of revenues back to the people of Massachusetts. The bill is expected to generate between $1.6 billion and $2 billion annually after roughly seven years of the gradually increased carbon price.

Bill H.1726: An Act to Promote Green Infrastructure, Reduce Greenhouse Gas Emissions, and Create Jobs (Presented by Representatives Jennifer Benson, David Rogers, Carmine Gentile, and 56 others)

The focus of this bill is to help implement the Global Warming Solutions Act of 2008 which sets reduction goals for greenhouse gas emissions of 25% by 2020 and 80% by 2050 from a 1990 benchmark. Last year, the Massachusetts Supreme Judicial Court ruling on an appeal, overturned a lower court decision dismissing a lawsuit brought by two conservation groups and four high school students. The SJC decision determined that the MA Department of Environmental Protection had failed to create any emission standards to enforce the law, and compelled the DEP to adopt regulations that will ensure volumetric reductions in greenhouse gas emissions, and that those limits decline on an annual basis.

While the objectives and pricing structure of this bill are similar to SD.1821, but there are differences in the initial rate and in the distribution formula of the proceeds.

  • The carbon pollution fee starts at $20/ton of CO2 emissions and then similarly rises $5 annually until it reaches $40/ton.
  • 20% of the funds would be directed to a Green Infrastructure Fund (GIF) to be used for investments in transportation, resiliency, and clean energy projects that reduce emissions, prepare for global warming impacts and support local economic development.
    • One-third of the GIF is allocated to municipalities or neighborhoods with income levels in the lowest third of the statewide median income.
    • 85% of the GIF is specifically directed to individual or groups of municipalities and the remaining 15% is directed to energy efficiency projects for rental units to reduce costs for the occupants of these units.
    • The GIF shall be governed by a Board as established by the legislation and administered by the MA Clean Energy Center funded by no more than 5% of the funds allocated to the GIF.
  • The remaining 80% is allocated to a greenhouse gas pollution charges fund to be proportionally split between residential (households) and business (employer) sectors in the same proportion as the generation of funds.
  • The residential funds are allocated as follows.
    • Initially, 25% is divided as follows:
      • 10% of the residential funds goes to the bottom fifth of households based on median income,
      • 10% to the second fifth and
      • 5% to the middle fifth.
    • The remaining 75% is proportionally split between fuel used for transportation and fuel used for heating.
    • Rural households travel more miles and lack access to mass transit, Therefore, rural households get a 30% larger rebate from the portion of household funds derived from vehicle fuel.
    • Similarly, 10% of the funds derived from sales of residential heating fuels goes into the state’s fuel assistance program for low-income households.
    • All residential funds are distributed equally to each adult in MA and each minor allotted half of the adult rebate.
  • Within 3 years, the DOER is to determine the significance of emissions occurring during extraction, refining, processing, transportation, and disposal should be subject to the fee and report these findings to the legislature.
  • The business sector funds are distributed on the basis of the number of full-time equivalent employees in MA. The DOR is authorized to proportionally adjust the distribution as may be needed to mitigate energy intensive business sectors or sub-sectors.
  • Emissions from farm animals and crops, public mass transportation, and production of electricity are exempt.

Complexities

Studies found that the overall impacts of similar legislation would lead to positive economic and job growth in the State, in addition to reducing the CO2 emissions drastically. Regional Economic Metrics, Inc (REMI): In July 2013, an economic study was prepared by REMI, which examined the complex interrelationships between energy, the environment, and the economy. Most households would be compensated and most businesses would be relatively unaffected. However, the construction industry has a relatively high ranking with 4.5% energy costs as a percentage of overall expenses and may experience greater costs from the proposed bill. While this may be a necessity of reducing climate change, companies will need to face in order to transform their negative environmental impact into more energy efficient and clean alternatives.

Resources

Recommendation by USGBC MA

The USGBC Massachusetts Chapter believes that the state government should take a leadership role in the United States by supporting carbon fees to reduce greenhouse gas emissions. Both S.1821 and H.1726 provide frameworks for revenue-neutral carbon fees that have been shown to contribute to significant reductions in greenhouse gas emissions as required by the Global Warming Solutions Act of 2008.  We will continue to work with our colleagues in the building, environmental, and allied communities to advance these legislative initiatives.

We are currently developing draft letters to be sent to legislators in support of NZEB legislation. Please take a moment to look at the below document and send any comments or suggestions to advocacy@usgbcma.org.

*From: Beaton, MA (2015). “Massachusetts Clean Energy and Climate Plan for 2020: 2015 Update.” Massachusetts Executive Office of Energy and Environmental Affairs. Retrieved from http://www.mass.gov/eea/docs/eea/energy/cecp-for-2020.pdf.