Niina Heikkinen, E&E reporter
Copyright 2014, Environment and Energy Publishing LLC. Reprinted with permission.
Last week, the Massachusetts Institute of Technology Center for Collective Intelligence announced the winners of the 2014 Climate CoLab, a project that uses crowdsourcing to develop effective proposals to mitigate the effects of climate change.
Contestants from around the world have proposed hundreds of ideas that were evaluated and voted on by judges and Climate CoLab members, eventually narrowing the field to 34 winners in 17 categories. One of the more politically contentious categories was a prompt to design a national carbon price in the United States. The judges selected two winning proposals in the category, one that would create a carbon tax, and the other, a cap-and-trade program with a twist.
Adele Morris, a fellow and policy director for climate and energy economics at the Brookings Institution, developed the carbon tax project as a way to not only reduce carbon emissions but also to cut the national deficit.
“The price you pay for fossil energy right now does not reflect its environmental cost,” Morris said. “The idea of taxing carbon is you internalize the prices associated with environmental damages.”
Before working at the Brookings Institution, Morris was the senior economist for environmental affairs at the president’s Council of Economic Advisers during the development of the Kyoto Protocol. She also worked for the Treasury Department as its chief natural resource economist.
Under Morris’ proposal, the carbon tax would start at $16 per ton of carbon dioxide with a 4 percent increase above the inflation rate each year. The anticipated revenue from the tax would be $1.1 trillion in 10 years and $2.7 trillion after 20 years. If other greenhouse gases like methane were included, the revenues could be even higher. Overall, the tax would reduce emissions by 9.3 billion tons over 20 years.
“As emissions go down and the tax goes up, the net effect is that the revenue goes up linearly in the near term,” Morris said.
Eventually, she said, much of the revenue from the tax would go into reducing the national deficit. She estimates that the deficit could be reduced by as much as $200 billion in 10 years, and by $600 billion after that. Low-income Americans living at or under 150 percent of the federal poverty level would be exempt from the tax, and 15 percent of the tax revenue would go toward supporting services to the poorest fifth of the U.S. population.
In addition to taxing carbon, her proposal suggests cutting the corporate income tax rates from 35 percent to 28 percent. She would also get rid of a number of incentives designed to encourage more alternative energy use, including repealing the renewable fuel standard and eliminating $6 billion per year in tax incentives and direct spending for clean energy. Her plan would also suspend the Clean Air Act’s rulemaking on greenhouse gases for eight years or would consider greenhouse gas emitters compliant with clean air standards if they paid the tax.
Both the corporate income tax cuts and the elimination of incentive programs for clean energy are favored by Republicans, she said.
Not only that, but the government incentives would become redundant if a carbon tax was implemented. Consumers and businesses would voluntarily switch to lower-carbon energy sources because they would become cheaper than dirtier fossil fuels, according to Morris.
While the Clean Air Act’s carbon rules could take many years to get started, her tax plan could go into effect comparatively quickly. Emissions cuts will be implemented by U.S. EPA gradually, and it will take time for carbon from various sources to be eliminated from the economy.
“I think a 10-year timeline is optimistic [for EPA]. I think it’s superior to have a price on carbon now,” she said.
A carbon tax would put the United States on stronger footing as it works to persuade nations like China to embrace stricter emissions guidelines, according to Morris, who in 2000 worked as the lead U.S. negotiator in the international climate change treaty process for the U.S. Department of State.
“I think the carbon tax is far easier to explain to other countries than the Clean Air Act regulations, it’s a very straightforward policy,” Morris said. “It’s just so much more transparent about what we are doing.”
Morris said she had positive feedback from business groups that liked that the tax would have a predictable effect on the economy.
One of the competition judges anonymously commented on her proposal on the Climate CoLab website: “This has the potential to get some conservatives thinking about what they could ‘get’ out of climate action, even if they aren’t convinced (or can’t say they’re convinced) by the science of climate change. As such, it’s a very helpful proposal.”
Another judge had a similar assessment. “Overall, excellent job of thinking both about the design of a carbon tax policy as well as the politics of implementing this policy,” the judge said. “Welcome attention to how policy design can manage the different needs of economic constituencies.”
A second winning U.S. carbon price proposal took a much different approach. Instead of relying on the federal government to implement a new law, James D’Angelo and other collaborators proposed an independent “people’s” carbon cap-and-trade system.
“Every other proposal ever made has always been government controlled,” D’Angelo said. “The very cool thing about this is you have a decentralized network, no one can control it.”
Under the cap-and-trade system, which they called Sno-Caps, every individual who signed up would start off with his or her own carbon share worth $0. Companies interested in proving their commitment to sustainability would initially make a symbolic gesture of buying shares, eventually giving them value. Trading would happen on an online platform, and all transactions would be published in a public ledger, much as how Bitcoin works, D’Angelo said.
Eventually with enough buy-in to the system, companies would feel pressure from consumers to buy shares in order to stay competitive with their peers. For instance, competitors to Whole Foods would buy carbon shares to prove to consumers that they too were committed to sustainable food production.
“If I can show people my commitment, more people will shop there,” he said.
His proposal has provoked plenty of confusion, D’Angelo said, and even now he is still refining how to explain his idea so that people can better understand it.
While the judges liked the concept, they were also skeptical that public perception would be enough to drive companies to buy carbon shares.
A comment from one of the judges read, “Will this proposal have an effect or will it simply create a social phenomenon that doesn’t shift carbon pollution levels? Workability could also be thought through more. Can you practically implement a proposal of this sort? However, it’s outside-the-box thinking that deserves to be explored and developed much more thoroughly.”
An earlier comment from one of the judges also questioned whether the “digital divide” would dissuade less technically savvy people from buying in to the cap-and-trade program because they would not understand how the system worked.
Although the crux of the idea is that the carbon share market would be outside the influence of a particular nation or governing body, one judge wanted to see some sort of oversight in place to prevent abuse of the system.
“What makes these proposals unusual is that they weren’t hashed out in oak-paneled conference rooms at elite international meetings,” Thomas Malone an MIT professor and principal investigator for the Climate CoLab, said in a statement. “These proposals were conceived and developed by people from many different backgrounds from all over the world, and then selected as sound ideas by respected science and policy experts.”
What started out as a competition of a few thousand students and researchers in 2009 has grown rapidly since then to a Climate CoLab membership of more than 30,000. This year, the 34 winners were selected in 17 categories from 100 semifinalists and nearly 600 proposals.
Last year, the organizers followed the example of the Intergovernmental Panel on Climate Change reports and broke down the competition into different categories such as industry, land use, urban resilience and waste management.
Almost 14,000 votes were cast to select the 34 winners, tripling last year’s record. The number of Climate CoLab members also doubled to more than 30,000 from last year, said Laur Fisher, a spokeswoman for the MIT Center for Collective Intelligence.
The overall winner of the competition will be announced at the Climate CoLab’s 2014 conference “Crowds & Climate: From Ideas to Action,” held Nov. 6 and 7 in Cambridge, Mass. The winning individual or team will receive a grand prize of $10,000.