Implementing carbon tax and tradeable permit programs can be done by individual US states or through cooperative mechanisms such as interstate compacts. Here’s a breakdown of how states can implement these programs and examples of existing initiatives:
Carbon Tax
A carbon tax is a fee imposed on the production, distribution, or use of fossil fuels and other activities that emit greenhouse gases. States can implement a carbon tax individually, as follows:
- State-level carbon tax legislation: States can pass laws establishing a carbon tax rate and defining the scope of taxable activities. For example, Washington state has enacted a cap-and-invest legislation that took effect in 2023.
- Revenue allocation: States can decide how to allocate the revenue generated from the carbon tax. Options include using the funds for climate change mitigation and adaptation projects, reducing other taxes, or returning the revenue to citizens.
Tradeable Permit Programs
Tradeable permit programs, also known as cap-and-trade systems, set a limit on the total amount of greenhouse gas emissions allowed within a certain sector or geographic area. States can implement tradeable permit programs individually or through cooperative mechanisms:
- State-level cap-and-trade programs: States can establish their own cap-and-trade programs, defining the emissions cap, sectoral coverage, and permit allocation rules. For example, California has a multi-sector cap-and-trade program, while Massachusetts has implemented a cap-and-trade program for its power sector that runs in parallel with the Regional Greenhouse Gas Initiative (RGGI).
- Regional Greenhouse Gas Initiative (RGGI): RGGI is a cooperative effort among 11 Northeast states to reduce greenhouse gas emissions from the power sector. Participating states have implemented a regional cap-and-trade program, which has been successful in reducing emissions.
- Interstate compacts: States can use interstate compacts to cooperate on environmental issues, including climate change. For instance, the Regional Air Quality Interstate Compact allows states to collaborate on pollution control plans. While not specifically focused on carbon pricing, this compact demonstrates the potential for cooperative mechanisms to address environmental challenges.
Cooperative Mechanisms through Interstate Compacts
Interstate compacts can facilitate cooperation among states on climate policy, enabling them to address common challenges and share best practices. Here are some ways interstate compacts can support carbon tax and tradeable permit programs:
- Coordination on carbon pricing: States can use interstate compacts to coordinate their carbon pricing efforts, ensuring consistency and avoiding duplication of efforts.
- Shared infrastructure and resources: States can pool their resources to develop shared infrastructure, such as emissions tracking systems or permit registries, to support their carbon pricing programs.
- Knowledge sharing and technical assistance: Interstate compacts can facilitate the exchange of knowledge and expertise among states, helping them to design and implement effective carbon pricing programs.
Examples of states cooperating on climate policy through interstate compacts include:
- Regional Air Quality Interstate Compact: This compact allows states to collaborate on pollution control plans, demonstrating the potential for cooperative mechanisms to address environmental challenges.
- RGGI: While not an interstate compact per se, RGGI is a cooperative effort among 11 Northeast states to reduce greenhouse gas emissions from the power sector. Participating states have implemented a regional cap-and-trade program, which has been successful in reducing emissions.
Net-Benefits
Common net-benefits to states counterplans include —
Politics and elections. State action would not burn the President’s political capital and it would have an unlikely impact on an election, as it the action would not be tied to a current President.
Federalism/states rights. States play an important role in environmental and economic policy. The federal government also has significant authority in this area, making the link marginal, but a small link could be enough if the counterplan solves all of the affirmative advantages.