Can investments across hardware, software, transmission and generation flow faster from a federally-set price on carbon emissions?
Participants in the Financing and Deploying Clean Energy certificate program crack open such questions.
This showcase memo by a participant with lobbying expertise spells out how parties can unite, and investors can prosper, with a revision in carbon-price targeting.
The policy memos we publish distill what participants learn about stakeholders, terms and levers in the Policy module of the Financing and Deploying Clean Energy certificate program. We invite you to absorb the authors' thinking, reflect on how it clarifies issues in your own work, and consider applying or referring a colleague to join the next FDCE cohort. We're accepting applications here through March 13.
To: Senator Sheldon Whitehouse, Senator Brian Schatz
From: Katie Sarro, Yale Financing and Deploying Clean Energy Certificate Program
Re: Improving the Save Our Future Act to Garner Bipartisan Support
Climate scientists in the latest Report warned that without immediate, rapid and large-scale reductions in greenhouse gas emissions, climate change will cause devastating economic and human losses. The United States and the world can no longer afford the costs of inaction. Policymakers on both sides of the aisle must come together to implement a comprehensive climate change strategy in the United States.
The Save Our Future Act would significantly reduce U.S. emissions. However, the bill is politically unviable as written, particularly given Democrats’ tight majorities in both the House and Senate. I propose the following improvements to the bill to broaden its bipartisan appeal:
- Set the initial carbon price at $15 per ton
- Allocate a portion of the revenue to fund other bipartisan priorities
- Increase the focus on global competitiveness and developing and exporting clean technologies
- Extend and expand tax credits
Improving the Save Our Future Act
The Save Our Future Act has many critical elements of a comprehensive emissions reduction strategy. These include a steadily rising price on carbon, mechanisms for minimizing the burden on vulnerable communities, rebates to American households, and funding for the development and deployment of clean energy technologies. The following changes preserve the spirit of the bill and align with Democrats’ priorities, but they would make the bill more appealing to Republicans and therefore more feasible.
Set the initial carbon price at $15 per ton. The initial price of $54 per ton of carbon dioxide emitted is too high to garner any Republican support. A $15 per ton carbon price that rises 5 percent annually above inflation, which is currently being discussed in policy circles, is likely to be more palatable across the aisle and would help keep energy prices lower for consumers. Models indicate a price structured this way would reduce emissions by almost 30 percent from 2005 levels by 2025. This reduction exceeds the United States’ initial commitment under the Paris Agreement to reduce emissions by 26-28 percent from 2005 levels by 2025.
Allocate a portion of the revenue to fund other bipartisan priorities. All-time high government spending levels have caused concern among Republican and Democrat policymakers alike. As it is written, the carbon price in the bill would generate more than $2.4 trillion over ten years. Using some of the revenue to fund climate research and the development and deployment of clean energy technologies, for example, would contribute to further emissions reductions and alleviate concerns around paying for the needed investments in significant transportation electrification, grid modernization and resilience.
Increase the focus on global competitiveness and developing and exporting clean technologies. 73 percent of Republicans and Republican leaners favor providing a tax credit to encourage businesses to develop technology to capture and store carbon emissions. Investing in research and development of clean energy technologies that can eventually be exported benefits national security by ensuring the proliferation of U.S. technologies as opposed to those originating in China or Russia. This is a key priority for Republicans. It would also improve developing countries’ abilities to meet growing energy needs without significantly increasing emissions.
Extend and expand 45Q tax credits. The House and Senate have both seen numerous bills proposing to raise the credit amount. These bills also propose to extend or eliminate the expiration date for tax credits related to carbon capture, utilization and sequestration projects. This is a bipartisan priority that should be included in the Save our Future Act because would help garner additional support.
Republican members of the bipartisan Senate Climate Solutions Caucus and members of the House of Representatives' Conservative Climate Caucus have voiced an openness to advancing market-based policies to reduce greenhouse gas emissions. The suggestions above would make the Save Our Future Act more palatable to these key groups of climate-friendly Republicans. This group includes Senator Mitt Romney who has said he is open to a carbon tax, Representative John Curtis of Utah who founded the House caucus, and House Minority Leader Kevin McCarthy of California. McCarthy introduced a bill to improve and extend the 45Q tax credit in April 2021.
The changes proposed above would also help secure an ally in the business community, where leading organizations have advocated for a price on carbon that reduces emissions, fosters growth and maintains competitiveness. With the continued support of the environmental community, the added support of businesses and bipartisan commitment, this bill has the potential to gain traction in the House and Senate and to ensure durable, long-term action on climate in the United States.