The price we all have to pay: carbon pricing
“Among the most pressing issues of our time are climate change and the challenge of creating a sustainable future for people and our planet,” said the president of Stanford. Marc Tessier-Lavigne as he announced the new sustainability school in May 2020.
Overwhelming evidence has shown the accelerated impacts of climate change. Over the past year, we have experienced more frequent and extreme weather events than ever before, such as the record breaking 4.2 million acres burnt in california wildfires and devastating power outages in texas. In response to the growing threats of climate change, Stanford students and faculty have demonstrated their resolve to act. Various initiatives include the Fossil Free divestment movement, Faculty Senate resolution on climate change and, more recently, a carbon pricing petition and resolution.
At the federal level, awareness of climate change has sparked discussions for a comprehensive plan. the Biden administration is currently promoting investments in renewable energy infrastructure and standards in order to reallocate jobs and achieve net zero emissions by 2050. However, a key part of the solution to the climate puzzle is missing: carbon pricing .
Among the many approaches to reducing CO2 emissions, carbon pricing is a market-based mechanism that internalizes social cost of carbon and reduces emissions. Carbon pricing is a profitable policy favored by economists. In economic terms, CO2 emissions are an externality that imposes a cost on society in the form of climate change. In order to internalize the market failure, economists urged the need for a national carbon price through a carbon tax or a cap and trade system. A carbon tax imposes a levy on every tonne of CO2 emitted by fossil fuel power plants, while a cap-and-trade system sets an emissions cap and grants pollution permits to companies.
At both national and local level, carbon pricing can be implemented to reduce emissions in addition to other decarbonization measures. With the potential to advance Stanford’s mission, we call on the Stanford administration to make a public statement on the urgency of stronger climate policy, sign this letter in support of carbon pricing and crystallize its carbon neutrality commitments by setting up a system on campus. Beyond its own borders, the University should not be afraid to use its platform and voice to drive change by endorsing carbon pricing.
On the Stanford campus, the University is aware of its carbon footprint and has taken steps to promote sustainability. With more than 300 institutions of higher education, President Lavigne and Provost Drell are committed to making the transition to a low-carbon campus and signed the American Campuses Act on Climate Pledge in 2015. the administration has focused sustainable development on energy efficient buildings, ambitious targets for net zero emissions and waste and various committees dedicated to environmental issues. However, Stanford has yet to address or even quantify its Scope 3 emissions (i.e. emissions associated with goods, materials, transportation, waste disposal, and supply chains). . An example would be the life cycle carbon emissions of buying a Stanford hoodie. Scope 3 emissions are much easier to quantify and mitigate using carbon pricing rather than efficiency regulations. Therefore, carbon pricing remains an essential part of an effective mission of carbon neutrality at the university level.
A carbon price is an efficient and popular mechanism despite its simplicity. The International Monetary Fund called it “The most powerful and efficient tool” to tackle climate change, and a joint paper from the Environmental Defense Fund and the International Emissions Trading Association describes it as a key ingredient to achieve the goals of the Paris Agreement. For example, fees that start at $ 15 per tonne and increase by $ 10 each year reduce emissions by 40% by 2030. Over the years, bipartisan support for carbon pricing has grown steadily. Globally, 64 national and subnational carbon pricing policies have been implemented and cover 1/5 of CO2 emissions. More than 400 university student government presidents and 3,500 economists have supported carbon dividends. In a survey from the University of Chicago, 80% of the best economists agreed on the need for carbon pricing policies. Even the American Petroleum Institute recently approved carbon pricing.
Carbon pricing is not a silver bullet, and critics point to many implementation pitfalls. A low and limited carbon price that does not rise quickly enough will not significantly reduce emissions or change the investment landscape. Conversely, a high carbon price without concurrent stimulus payments will stress poorer households, who spend more of their income on gas and electricity, and worsen existing inequalities. Advocates of environmental justice argue that cap-and-trade systems worsen the quality of the environment, while others argue that a carbon price is less effective in reducing emissions than standards, regulations and renewable energy lawsuits. In practice, political feasibility is another major obstacle to implementing a carbon price at the national level.
Despite concerns, research has shown that market-based emissions policies did not exacerbate environmental inequalities. Econometric analysis has shown that California’s cap-and-trade program decreased exposure to pollution air pollutants in communities marginalized from any policy. Additionally, proponents of carbon pricing have argued that the fairness of politics depends heavily on income redistribution and have suggested a variety of solutions. A popular proposal calls for monthly carbon dividends: recurring cash payments to households per capita to offset rising energy costs. George shultz was an outspoken leader for a neutral income tax that redistributes income into the pockets of Americans. A study carried out in 2020 found that the poorest 70% of households would either be profitable or end up with After money than before with carbon dividends. The proposal carries a unique appeal during the COVID-19 pandemic, which revealed the incredible popularity stimulus payments to the American public. Others suggested that the income be used to reduce other regressive taxes or channeled into projects that benefit communities most vulnerable to climate change. Either way, gaps in the quality of the environment remain and environmental justice (EJ) should be a critical issue in policy discussions.
In addition, most proponents agree that a price must be associated with other decarbonization strategies, such as federal funding for clean energy R&D. A high carbon price will also be more effective if properly enforced, preventing fossil fuel companies from finding loopholes through tax breaks and legal immunity. No policy is perfect, but carbon pricing can be applied in addition to other policy approaches.
By experimenting with carbon pricing on the Stanford campus, students and faculty can advance research to address the previously mentioned concerns and inform broader policy decisions. While we recognize that the Stanford administration has already taken immense strides towards net zero emissions, the University should not be afraid to publicly support carbon pricing and potentially implement its own carbon pricing. For many years the professor Frank Wolak pushed the University to go further by introducing a carbon pricing system on campus. His proposal invests in real-time electricity consumption monitoring systems for residential halls, takes a Stanford emissions inventory to encourage individuals to reduce energy use, and creates a seminar for students to study. the campus pricing system.
Peer universities, including Yale, have taken the lead, becoming the first university to successfully pilot a carbon royalty program and the first academic member to join the Carbon Pricing Leadership Coalition. Since its initial implementation in 2016, the Yale pilot has produced an average 7.4% reduction in tCO2 emitted for each of the 25 participating administrative units. Yale’s system was revenue neutral by setting a reduction target of 1% for each building, then charging and reimbursing the buildings at a carbon price of $ 40 / tCO2. A pilot similar to Stanford would strengthen the University’s commitment to carbon neutrality, contribute to academic research on carbon pricing, and strengthen Stanford’s commitment to sustainability.
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