1. Urgent effective action on climate change is needed to maintain the livability of our planet

The burning of fossil fuels has added such a large volume of greenhouse gasses to the atmosphere that it is threatening the livability of the planet. Greenhouse gases cause the Earth to warm, which in turn causes storms, floods, heat waves, wildfires, and droughts to be more frequent and more extreme.  

Carbon dioxide is the major greenhouse gas, and the concentration of atmospheric carbon dioxide is rising. It reached 420 parts per million (https://keelingcurve.ucsd.edu/) recently, 50% higher than it was before the Industrial Revolution. After carbon dioxide is emitted into the atmosphere, it stays there for 300 to 1,000 years, according to NASA. What we do now—or fail to do—will have impacts for many generations

2. Carbon Cashback benefits low- and middle-income households

If carbon tax revenues are given back to households in equal shares as in Carbon Cashback, a carbon tax is progressive—meaning this revenue recycling scheme benefits lower-income households more than proportionately. This progressivity occurs because higher-income households tend to consume more fossil fuels and more goods and services overall and thus contribute directly and indirectly more to the carbon tax revenues.  The Ummel study estimates the impact on households if the US were to implement a $15/MT CO2 tax and return all the revenues back to households in equal shares.  The study finds 61% of US households and 68% of individuals in the U.S. end up receiving more than enough in monthly dividends to offset increased costs.

3. Carbon cashback delivers emission reductions

TBD

4. Carbon cashback strengthens and complements other emission reductions programs

Carbon pricing would complement and strengthen other policies aimed at reducing emissions because it adds a price signal to existing policies providing an additional incentive to conserve energy, transition to cleaner technologies, and operate existing technologies more efficiently.  In the 2022 legislative session, a multitude of bills were introduced that were dedicated to mitigating climate change, including a faster transition to clean, renewable electricity generation, a faster transition to electric vehicles, buildings that are more efficient, and adopting agricultural practices that effectively sequester carbon. Pricing carbon would magnify the impacts of these policies while ensuring a more equitable transition for low to moderate-income households.

5. Carbon cashback is good for the economy

A gradually rising price on carbon pollution would allow for predictability so businesses can better plan for the future. Knowing that prices for energy and fuels would rise in a measured way each year would allow business leaders to plan and budget for measures that increase efficiency and reduce consumption. It would offer flexibility in their response—they can maximize resources by implementing energy efficiency measures, deploying renewables, and cutting fuel consumption.

The same advantages apply to households.  In addition, all households on average would do better financially if 80% to 100% of the tax revenues are returned to people. According to the UHERO study, the majority of Hawaii’s families would experience a net financial gain, as their refundable tax credits would more than compensate for the increase in prices resulting from the carbon tax.

6. Carbon cashback is easy to implement

Existing methodologies can be used to implement carbon pricing with tax revenues distributed to people in equal shares, as considered in the UHERO study and as outlined in a recent Tax Review Commission Report. The existing Environmental Response, Energy, and Food Security Tax (commonly known as the “barrel tax”) simply needs to be increased to account for embodied carbon in various fossil fuels so no new tax mechanism is needed.  As for returning the revenues to people, refundable tax credits already exist and can be used to distribute the tax revenues to people in equal shares.

7. Carbon pricing is efficient - it would pay for itself and not grow the government

Carbon cashback would achieve emission reductions at the lowest cost.  Using the existing regulatory infrastructure and processes would be efficient and not grow the government. (Carbon Cashback is revenue neutral.)

8. Carbon pricing has been successful elsewhere

British Columbia implemented its carbon tax in 2008, and it is currently at $45/ton. Studies have shown that it has had a minimal impact on the economy, while reducing emissions between 5 and 15%. The carbon tax has been so effective in British Columbia that the entire country of Canada has adopted it.

Sweden implemented a carbon tax in 1991 and has the highest price globally, at $137/ton. It reduced its emissions by 25% by 2000. At the same time, its economy grew by 60%.

Carbon pricing would encourage investment and innovation in clean energy solutions. The Europoean Union’s carbon price has been cited as one of the main reasons electric vehicle penetration in Europe far exceeds that of the United States (Climate Now podcast 2/25/2022). Furthermore, Metcalf and Stock find that the EU’s carbon price has had a very negligible impact on its overall economy.

9. Carbon cashback brings along visitors to be part of the solution (or helps tourists address Hawaii’s environmental issue)

Existing economic studies and data suggest carbon cashback would increase costs on a typical Hawai‘i visitor by about $1.40 per day, or $12 per visit. These costs reflect the approximate environmental cost of carbon emissions for which the typical Hawai‘i tourist is responsible.

10. Carbon pricing is effective and has broad support

Placing a price on carbon pollution has been endorsed by thousands of economists, including 28 Nobel laureates, four former Chairs of the Federal Reserve, the US Chamber of Commerce and Business Roundtable, religious groups, Pope Francis, and many prominent individuals and businesses.  Two-thirds of Americans favor taxing corporations based on their carbon emissions, according to a recent Pew Research Center Survey.

The World Bank asserts that carbon pricing is the most effective way to reduce climate pollution, and thousands of economists, including twenty-eight Nobel Laureate economists, four former Chairs of the Federal Reserve, and fifteen former Chairs of the Council of Economic Advisors (see https://www.econstatement.org/), have said that "a carbon tax offers the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary." The Group of 20 (G20), which includes the United States, the European Union, China, and India, representing ninety per cent of the world’s economy, encourages the appropriate use of carbon pricing when used among a wide set of tools to control climate change.

The report of the Intergovernmental Panel on Climate Change reinforces the need for action and reminds us about what is at stake. When it comes to action the IPCC report says: “Pricing of greenhouse gases, including carbon, is a crucial tool in any cost-effective climate change mitigation strategy, as it provides a mechanism for linking climate action to economic development.” For more on what the latest IPCC says about carbon pricing, please click this link.

Carbon pricing “would help equalize the market environment between electric end uses and fossil fuels and could be the single most impactful policy to drive building electrification forward on the federal and state levels.” (Cohn, C., and N. W. Esram. 2022. Building Electrification: Programs and Best Practices. American Council for an Energy-Efficient Economy. ACEEE Report)

11. Carbon cashback implements a top recommendation of Hawaii’s 2020-2022 Tax Review Commission

The 2020-2022 Tax Review Commission undertook a comprehensive review of the State’s tax system and made eight recommendations to improve it. After considering the UHERO study, which it commissioned in part, the Commission put Carbon Cashback at the top of its recommendations:

Impose a carbon tax to incentivize moving away from carbon-based fuels and adopting clean energy. We recommend that the majority of the proceeds be rebated as a cashback to the residents of Hawaiʻi, with a disproportionate distribution to low-income households

As to how to implement such a policy, the Commission recommended that:

The state government implements an upstream carbon tax by making use of the existing administrative infrastructure surrounding the barrel tax. This approach limits the administrative burdens of establishing a carbon price in Hawai‘i …”