Supreme Court Justice Louis Brandeis famously popularized the term “laboratories of democracy” to describe states’ unique ability to implement new laws and put new ideas to the test. In recent years, however, cities have taken up this mantle of innovation, proposing and enacting ambitious legislation in an effort to get states – and ultimately members of Congress – to follow suit.
Denver’s City Council has been pushing forward a much-needed pollution tax, priming the city to become a leader in the national carbon pricing conversation. City Council president Jolon Clark is leading this effort; earlier this month, he introduced two pieces of legislation that will help reduce Denver’s greenhouse gas emissions. One of the proposals puts a fee on electricity and natural gas, and funds a proposed Climate Action office.
Yesterday, August 26th, after pushback from Denver Mayor Michael Hancock and a slew of business groups, Clark and the city council agreed to postpone the bills for further study for a possible 2020 ballot question. The Council had been slated to vote on the initiative on Monday, which was co-sponsored by seven of 13 of its members.
What’s in the City Council bills?
The first bill establishes a new Office of Climate Action, Sustainability and Resiliency, tasked with coordinating the city’s efforts to reduce emissions and transition to a clean energy economy. While Denver Mayor Michael Hancock says a Climate office is in the works, Clark has stressed the importance of assembling this office with renewed urgency.
The second bill — largely referred to as a “carbon price”, though it’s not exactly that — proposes an energy tax on commercial and industrial buildings. The bill levies a fee of 0.6 cents per kilowatt hour of electricity and 7 cents per therm of natural gas; it is expected to generate about $43 million in its first year. Revenue would fund the climate action office and a slew of other emission-reduction programs.
The pollution-fee legislation is similar to the Resilient Denver ballot initiative introduced this spring, which ultimately failed to gather enough signatures to make the November ballot. The Resilient Denver initiative differs from the second bill in that it called for the pollution fee to be imposed on consumers; the City Council proposal conversely imposes the fee on businesses (which presumably will still pass the cost along to consumers).
Last week, Clark told Climate XChange in an interview that in March, he worked with about 150 people, including environmental advocates, labor group leaders, and a range of other constituencies who provided input to the proposal.
“We had to move pretty quickly to get the fee on the 2019 ballot,” Clark said. “I wish I had more time to have a broader stakeholder process, but given the fact scientists have told us that we now have a decade to significantly reduce emissions, we had to move as quickly as we could.”
What happened on Monday?
On August 13th, the Council’s Finance and Governance Committee voted 4-3 in favor of the pollution-pricing proposal, sending the bill to a full-Council vote. That was set to take place on Monday, August 26th. However, Councilmembers agreed to delay the vote and instead refer the initiative for a study.
On Monday morning, Mayor Hancock and the council sent out a joint news release stating that they had come to an agreement. As part of their agreement, the Office of Climate Action, Sustainability and Resiliency will be established. The mayor and members of the council will jointly lead a new stakeholder process to assess what steps Denver can take to further reduce emissions. The release also stated that Hancock intends to propose $8 million more in funding next year for climate mitigation.
In turn, Clark and the other Council Members agreed to table the carbon price until June of 2020.
The fee proposal was largely expected to pass, as it was sponsored by seven of the 13 councilmembers, including Council President Pro-Temp Stacie Gilmore, Councilman Paul Kashmann, and newly-elected council members Amanda Sandoval, Chris Hinds, Candi CdeBaca, and Amanda Sawyer. If all of the co-sponsors voted in favor of the legislation, as expected, it would have passed, in which case it would have been referred to the Mayor. The Mayor has the authority to veto the legislation, and that veto can only be overridden by a supermajority, which would have required the support of nine of the Councilmembers.
It’s very possible that Mayor Hancock, who wrote a letter to the Council urging them to delay action on the bills, would have vetoed the proposal had it passed.
“I cannot stress enough the importance of engaging all segments of our community in this conversation, including low-income families, small businesses, and those who may shoulder the burden of additional costs,” Hancock wrote in the letter, adding that the proposal has not “benefitted from a true community and stakeholder engagement process.”
Mayor Hancock released a Climate Action Plan last year, committing the city to reduce emissions by 80% below 2005 levels by 2050. The plan lays out a series of interim goals, such as a 15% emissions reduction by the end of 2020. However, Denver is unlikely to achieve that first target. In fact, the city’s emissions have remained flat for nearly a decade.
“As a city, we just aren’t meeting our carbon emission goals, and those goals aren’t even in line with IPCC reports and recommendations,” Clark told Climate XChange last week. “We have a lot of work to do to get close to there.”
What does this city-level policy mean?
No other US city has ever imposed a climate-focused fee on both electricity and natural gas usage, although Boulder, CO has a climate mitigation tax on electricity that does set some precedent for this proposal.
Boulder’s fee, known as the Climate Action Plan (CAP) tax, became America’s first voter-approved climate mitigation tax in 2006. Under CAP, the city’s only electric utility, Xcel Energy, charges residents and businesses a fee via their monthly utility bills. Like Denver’s proposal, the CAP tax is not a traditional carbon tax, as it is levied based off electricity usage (in kWh), not carbon content. However, because there is only one electric provider in Boulder, and because CAP exempts renewable energy consumers, it has in many ways, the same effect as a carbon tax. CAP therefore effectively imposes a $8.62 fee per carbon ton for residents, and a $1.52 per ton fee for businesses. Revenue from the tax is used to fund weatherization efforts, sustainability projects, and solar rebates, thereby helping to further reduce emissions.
The Denver proposal, which would have also taxed natural gas, goes even further than CAP. But Clark thinks Denver residents are ready to support ambitious climate legislation.
“Denver voters are eager to have bold proposals in front of them that provide real solutions,” Clark said.
Clark hopes that the introduction of this pollution-pricing legislation will inspire further action in Denver and other US cities.
“Unfortunately, this conversation has not been top of mind in Denver as it should have been for the last two years,” Clark said. “The introduction of these two bill is finally bringing that to the forefront, and I hope it’s just the beginning. We’ve opened the door and started a conversation that will lead to many more conversations and difficult decisions.”
Interested in learning more about municipal carbon pricing? Read our handout here.