State Sen. Jerry Sonnenberg expresses deep concerns about the prospect of a tax on carbon (i.e., a tax of hydrocarbon production as a means of reducing the amount of carbon dioxide emitted to the atmosphere). He is concerned about the impact of such a tax on personal budgets and on rural and lower-income communities. These concerns need to be addressed, because the risks of not addressing climate change are very high for all Coloradans. We are already seeing the effects of warming in forest die-offs, reduced snowpack, and erratic rainfall. These and other effects have significant economic consequences, with the agricultural sector particularly vulnerable to climate disruption — crops are vulnerable to stress from heat, pests, irrigation shortages, and extreme weather. To leave our environment as unperturbed as possible for future generations is a conservative approach to the world.
A carbon tax need not be punitive. A revenue-neutral approach to constraining carbon dioxide emissions would return the monies collected to individual households, allowing them to offset the cost increase in energy produced from hydrocarbons. Low- and middle-income households would be better off economically than without such a tax. (The National Association of Manufacturers study that Sen. Sonnenberg cites to the contrary is not revenue-neutral; that is, the study assumed taxes collected were not returned to the public). The experience of British Columbia with a revenue-neutral carbon tax shows the approach works.
This “pass-through” approach to taxing carbon shifts the scene from a regulatory approach to a market approach, in which purchasing decisions by consumers and businesses are governed by cost considerations. A carbon tax can be phased, starting modestly and increasing annually, geared to the timeframe of investment decisions. Major oil companies, including ExxonMobil and BP, favor a carbon tax, and large corporations, including Google, Walmart and Coca-Cola utilize internal carbon pricing.
Colorado stands to benefit economically from a shift in energy sourcing. In fact, alternative energy is surging, even in the presence of low oil and gas prices. The National Renewable Energy Laboratory sets testing standards and conducts fundamental research for wind and solar. Manufactures of wind turbines have chosen to locate in Colorado, and researchers at Colorado universities collaborate with major utilities to improve generation, transmission, and storage of new energy sources. Yes, hydrocarbon production will wane over the coming decades, but the structural transition will produce new companies, new jobs and even new exports of technology. Let Colorado entrepreneurs show the way. Technological innovation will play a key role.
Innovation will also play a key role in softening the localized impacts of a shift away from hydrocarbon production, a major concern of Sen. Sonnenberg for the town of Craig. For this, we need political innovation as well as technological innovation. Time after time, the Colorado Legislature has provided innovative political solutions to difficult problems. We are confident they can examine the many possible methods of relieving localized economic distress and come up with good solutions.