Connecticut Legislators Push for Economy-Wide Carbon Pricing

On March 14th, the Connecticut legislature’s Environment Committee held a hearing on HB 5363, a bill designed to expand the reach of carbon pricing regulation. So far, only Connecticut’s power sector is covered, through a regional cap-and-trade system– the Regional Greenhouse Gas Initiative (RGGI). Together with Massachusetts, Rhode Island, and Vermont, Connecticut is one of four New England states that have concerted efforts to introduce economy-wide carbon pricing.

Back in 2008, Connecticut passed the Global Warming Solutions Act, thereby committing to reduce greenhouse gas emissions at least 80 percent by 2050. Most economists agree that a market-based solution is the most effective way to pursue the deep reduction in carbon emissions that are necessary.

HB 5363 foresees the implementation of a dividend system under which a fee would be placed on the sale and usage of fossil fuels in Connecticut. These fees would be assessed at the first point of sale and would start at $15 per ton for the first year with a steady increase of $5 per ton each following year. Fifty percent of all funds raised would be re-allocated to residents and 45 percent to employers via equal dividends per resident and employee. The remaining five percent would go towards administrative purposes.

Climate XChange Policy Director, Marc Breslow, who traveled to Hartford to testify, reported that the first two hours was spent on a voting session, in which legislators considered several bills related to animals, including two that proposed the expansion of residents’ rights to hunt bears and deer. One legislator commented that by allowing folks to hunt deer on Sundays and by limiting the permit to bow hunting only, people would retain their much valued Sunday quiet.

The primary sponsor of HB 5363, Rep. Jonathan Steinberg, emphasized that Connecticut was not alone in seeking a price on carbon, but rather a part of the Carbon Costs Coalition, comprised of legislators pushing similar bills in nine states. “Carbon pricing puts an appropriate price on the actual impact of using fossil fuels,” Steinberg said. He acknowledged that one reason the bill is revenue neutral is that the state raided their energy efficiency funds last year, making it more difficult to credibly say that the state could be counted on to actually spend a portion of the revenues on clean energy programs.

State Representative McCarthey Vahey testified in favor of the bill, and asked Scott Thompson from Fairfield’s Clean Energy Task Force to join her on the podium. However, with a background in science, Thompson was not necessarily the right candidate to face the barrage of economic questions that Republican lawmakers had in store for him.

Representatives Mary Mushinsky and Patricia Dillon spoke strongly in favor of carbon pollution fees. Dillon noted that a lot of the state’s greenhouse gas initiatives begun under Republican Governor Jody Rell. “If not this, then what? I cannot agree that there is nothing we can do,” said Dillon.

A particular concern among some legislators was the possible impact of carbon pricing on manufacturing and agriculture. Rep. Douglas Dubitsky expressed strong concern that the fees would harm farmers in his rural district. Senator Craig Miner said that the paper company Kimberly Clark, which has a plant in his district, told him the bill would cost them $2 million in the first year.

In response, Breslow noted that in a service and information-oriented economy like Connecticut’s, most sectors, such as health care, education, retail, and professional services, will have low carbon fees, on the order of one-tenth of one percent of their overall operating costs, and don’t really need dividends. For that reason, legislation in Maryland gives rebates primarily to “vulnerable” employers, including energy intensive manufacturers and agriculture, which together make up a small part of the state’s economy; along with small nonprofits and government agencies. A refinement to HB 5363 would be to provide additional assistance to these sectors, said Breslow, who designed the Maryland bill and both bills in Massachusetts. Unfortunately, with a long list of witnesses, Breslow was only able to speak late in the hearing. Rep. Steinberg and Environment Committee Co-Chair Rep. Demicco requested Breslow to provide written recommendations on how to improve the current bill.

With carbon pricing bills currently pending in Vermont, Massachusetts, Rhode Island, New York, Maryland, Washington, D.C. and other states, Connecticut is already in good company. With an increasing number of states considering carbon pricing as a solution to climate change, the likelihood of national legislation to follow increases. The Committee will vote on the bill next week.