2019/20 Carbon Pollution Fee and Rebate Bills

Representative Jennifer Benson, “An Act to Promote Green Infrastructure and Reduce Carbon Emissions” (H2810)

Cosponsored by 95 representatives and 11 senators, this bill creates a carbon fee that starts at $20/ton of carbon dioxide equivalent (co2e) burned and rises to $40/ton over five years.  Seventy percent of revenues generated by the fee are returned to consumers and 30% is invested in a Green Infrastructure Fund.  The fund supports renewable energy, energy efficiency, clean transportation, and resilience projects sponsored by municipalities and the state.

This bill features strong equity provisions including:

• Rebates are structured to be higher for lower income households and for rural households.  On average, low income households should get back more in rebates than the increase in energy costs while middle income households with average energy costs should break even.
• Households with higher incomes and those who use a lot of energy will begin to pay a bit more for energy.  This slowly increasing cost is an incentive to conserve and to switch to cleaner energy options.
• Forty percent of the Green Infrastructure Fund must be used for projects that benefit low income households and low income communities.
• Ten percent of the revenue generated from the fee on home heating is set aside for Fuel Assistance, providing increased funding for households who need help paying their home heating bill.
• The bill includes protections for industries that may be highly impacted and a worker transition fund.

View the Bill

Senator Mike Barrett, “An Act Combating Climate Change“(S1924 )

Cosponsored by 40 representatives and 25 senators, this bill requires the Governor and his Administration to establish a market-based mechanism to reduce carbon emissions.  The market-based mechanism could be a cap and trade system or a carbon fee.  The bill sets deadlines by which the Administration must put in place the regulations for a new market-based mechanism.

This bill requires any mechanism to price carbon at $15/year in year one and $60 in year five.

Revenues may be used for rebates and/or placed in a carbon pricing trust fund.  Any money placed in a carbon pricing trust fund must be spent:

• 30% on education
• 60% on transportation
• 5% on electric vehicles
• 5% on environmental justice

Basic Principles for Design of the Massachusetts Carbon Fee and Rebate

The Massachusetts Campaign for a Clean Energy Future will use the principles below to decide whether to support particular carbon pricing proposals. It is essential that proposals meet these two principles:

1. Achieve, in combination with other policies, the state’s GHG reduction mandates;
2. Ensure that the vast majority of low-income, and most moderate-income, people come out ahead or even from the combination of carbon pollution charges and use of the resulting revenues for rebates/tax cuts and reinvestment.

Design Criteria

In addition, we support the following design criteria as necessary to achieve the two principles above:

1)  Sufficient fee rate or effective cap: The rate charged per ton of carbon emissions must be high enough and rise quickly enough so that, in combination with the state’s other GHG policies, Massachusetts will reach our GHG reduction mandates; or the cap must be set at or below the GWSA’s mandated emission limits. The fee rate or cap level should be regularly reviewed and adjusted if projections show that we are not on track to meet the GWSA mandates.

2)  Economy-wide: Preferably all major sources of GHG emissions should face a similar carbon price or a joint cap, but the systems may be integrated over time. For electricity, which is covered by RGGI at present, and for any other sector where an emissions cap is adopted, carbon fees should be reduced by the amount paid for emission allowances.

3)  Progressive use of revenues for people and communities:

a. Protection for low and moderate income households: Using rebates and targeted reinvestment, sufficient revenues must be allocated to ensure that the vast majority of low-income, and most moderate-income, households do not experience increases in their cost of living as a result of the policy.

b. Investment in low-income communities: Because low-income communities are disproportionately affected by and by climate change, they must receive greater than their proportional share of revenues set aside for green energy and resilience investment programs

c. Additional assistance for vulnerable households:  To the degree feasible, provide additional protection to low- and moderate-income households whose circumstances currently result in high carbon emissions. For example, rural residents (who must do more driving) and households with high-carbon heating fuels (e.g. fuel oil)

d. Rebates when needed: Ensure low- and moderate-income households receive their rebates before they must pay their fuel bills and other energy costs.

e.  Just transition: Provide transition benefits and training for workers and communities who are affected by shrinkage of fossil fuel industries.

4)  Protections for business and institutional competitiveness: Provide sufficient rebates to MA businesses which are energy-intensive or in competition with firms from other states or nations that do not have carbon pricing systems, so that MA companies are not disadvantaged in comparison to those based elsewhere.

5)  Investment to cut emissions: Substantial carbon revenues should be allocated to investments that reduce GHG emissions, while also meeting essential public needs and creating jobs. This includes projects that support renewable energy, energy efficiency, low-carbon transportation, and resilience to climate change impacts.  Such jobs shall be at union scale or prevailing wage levels.

6)  Regulations subsequent to legislation: We are open to policies that leave the state administration with options on how to use carbon pricing revenue, as long as low- and moderate-income households are protected. In such a case, we will advocate for preferred use of the revenues, including investment in clean energy and transportation, in regulatory procedures subsequent to passage of legislation.

7)  Integrity of emissions cap and carbon fees: The various design aspects of the program should be transparently constructed and evaluated in order to ensure the program’s effectiveness:

a. Offsets, if allowed, must meet the requirements currently used by the Regional Greenhouse Gas Initiative.

b. Baseline emissions must be transparently calculated and the initial cap must be stringent enough to avoid a future surplus of “banked” allowances.

c. Leakage (shifting of emissions to other states) must be prevented to the degree possible.

d. A price floor must be included that ensures stability of revenues and allowance prices in the range anticipated in the policy design.

e. If a price ceiling is included it must be sufficiently high that the emissions cap is exceeded only in extreme circumstances.