The Debate about Carbon taxing vs. Cap and Trade I.Cap and Trade: What is it and how does it work? II.Carbon tax: How does this work and what is the intended incentive to businesses that emit too much CO 2 ?

Costs of fossil fuel use are not included in the current price Hurricanes (Sandy $65b), drought, health costs, sea level rise Social Cost of Carbon estimates from $37 to >$400/ton CO 2 e Fossil fuels are artificially inexpensive Put a price on carbon emissions so users pay the fair price Fossil fuel use will decrease; CO 2 emissions will decrease Alternatives become more affordable and grow The economy can also grow Carbon Pricing 101 Putting the Market to Work PriceonCarbon.org ©

1.Tradable emissions permits (cap and trade) policy Tradable emissions permits are permits or licenses to emit limited amounts of pollutants that can be bought and sold by polluters. Permits are issued to polluting firms based upon a formula that reflects their polluting history. Firms facing different costs of reducing pollution can engage in a mutually beneficial transaction: those that find it easier to reduce pollution can sell some of their permits to firms that find it more difficult. The ideal end result is that those with the lowest cost will reduce their pollution the most, while those with higher costs will reduce their pollution the least. Where is this policy practiced? Does it really reduce carbon emissions?

Pricing Carbon is not a new idea Figure from World Bank report, 2014 ©

How Do You Price Carbon? © Carbon Pricing Elements Pricing Mechanism Carbon Tax or Fee Cap and Trade Emissions Included Revenue Use

Pricing Mechanism © Both mechanisms have been tried; both can be effective.

Linda Swift © 2015 Declining Cap Set by Government Maximum Emissions Allowed Cap Year 1 Year 2Year 3Year 4 Company A Cap and Trade ©

Linda Swift © 2015 Permits Auctioned by Government Company A emits above cap, needs more permits Company B buys more permits than needed Company B Cap Cap = 100 units Company A EmissionsPermits EmissionsPermits © Cap and Trade

Company B sells permits to Company A Company B Company A EmissionsPermits EmissionsPermits © Cap and Trade

Linda Swift © 2015 Company B sells permits to Company A Company B Company A EmissionsPermits EmissionsPermits © Cap and Trade

Emissions Included: which industries? © EIA

The EU ETS and data on reducing emissions since implemented. The European Union Emissions Trading System (EU ETS) as a model on which to evaluate effectiveness of this policy

II. The Carbon Tax: An Illustration of its practice in Boulder Colorado

BOULDER’S CLIMATE ACTION PLAN: HOW WE GOT HERE 2006:  Climate Action Plan Committee shepherds CAP toward completion; adopted by city council in June  Council determines carbon tax is best revenue source for implementation, places tax on November ballot  Measure passes, 60.5% in favor, 39.5% opposed

BOULDER’S CARBON TAX: SPECIFICS  Tax on electricity consumption 15%

2005 EMISSIONS BY SECTOR

BOULDER’S CARBON TAX: SPECIFICS  Maximize voluntary emissions reductions through:  Education, outreach and marketing  Reducing barriers to energy efficiency and renewable energy  Connecting residents a nd businesses with available rebates and tax credits

1.Increase energy efficiency 2.Switch to renewable energy and vehicle fuels 3.Reduce vehicle miles traveled Maximize voluntary emissions reductions through:  Education, outreach and marketing  Connecting residents and businesses with available rebates and tax credits  Providing services not offered in the Boulder market CLIMATE ACTION PLAN STRATEGIES

BOULDER’S CARBON TAX: SPECIFICS  Applies to all electricity customers in the city  No tax charged for green power customers  Rates set in direct proportion to expected program sector expenditures  Rates can be re-set depending on program needs  Rates can be increased by 20%  Sunsets in 2012  Will raise approximately $1 million per year

GHG EMISSIONS REDUCTIONS PER SECTOR BY 2012 (MTCO 2 E) Sector Energy Efficiency Renewable EnergyTotal Residential 30,22816,91447,142 Commercial 30,85232,08862,940 Industrial 10,89621,00031,896 City Operations 4,2484,0028,250