With progress at the Paris climate talks and the extension of the federal Investment Tax Credit, the solar industry should turn its political will to a bigger target: national carbon pricing.

More specifically, carbon pricing in the form of revenue-neutral fee and dividend legislation.

I’ve been an active supporter of the Investment Tax Credit (ITC) since I helped my boss, Oregon Senator Bob Packwood, first push it through Congress in 1979. But I’ve come to realize the limitations of technology-specific programs and subsidies. They are politically precarious and subject to sweeping changes.

They also carry the efficiency burden of free ridership. And too often, they are not enough to offset the “carbon discount” -- the price advantage enjoyed by fossil fuels not being held accountable for climate costs.

The ITC extension removes an immediate speed bump in the road to the solar economy. But our climate needs much, much more. Carbon emissions continue their skyward trajectory. The Paris agreements admirably aim to cap the global temperature increase at 1.5 degrees Celsius, but that would require completely decarbonizing global energy production over the next half-century. There isn’t yet a clear and reliable plan to do that.

Carbon pricing is critical. It’s the fastest, most efficient way to drive the adoption of low-emission strategies, from LED retrofits in smart homes to networked rooftop photovoltaics to gigawatt-scale offshore wind farms. It uses a dynamic distributed intelligence algorithm -- that is, “the market” -- to optimize energy behavior at all levels of the economy. It makes the clean stuff cheaper.

Support for carbon pricing is surging. The Carbon Pricing Panel, an A list of national and regional leaders including Angela Merkel, World Bank President Jim Yong Kim, and Jerry Brown, was formed last October. It “provides political momentum to complement the voices of government and industry leaders in the Carbon Pricing Leadership Coalition,” a 2014-formed group representing 74 countries and 1,000 companies.

How best to price carbon?

Cap-and-trade works in California, but its limitations as a U.S. policy option were clear as early as 2008. Even then, policy staffers from ExxonMobil and the Sierra Club agreed that the political and economic risks of emissions trading made it an inferior choice to a carbon tax-and-rebate program.

But the Waxman-Markey cap-and-trade legislation became the only train on the track, and after it crashed in the U.S. Senate, congressional carbon-pricing supporters became as rare as snowballs in a smokestack.

Now, carbon taxation is emerging as the policy of choice, thanks to the attractiveness of revenue neutrality. It’s drawing support from across the energy landscape, from Tesla’s Elon Musk to ExxonMobil’s Rex Tillerson. Revenue neutrality means all of the carbon-tax revenues are “recycled” to the public via rebates and/or tax credits. It solves the political problem of conservatives’ opposition to growing government, and it neutralizes the “job killer” argument against carbon taxation.

Citizens’ Climate Lobby (an organization I work for) has proposed an elegant revenue-neutral Carbon Fee and Dividend (CFD)  system. It has three parts: 1) fossil fuel companies pay CO2-equivalent extraction fees starting at $15/ton CO2, increasing $10 per year for 20 years; 2) all revenues are returned in equal monthly dividends to households; and 3) carbon duties are levied on imports from countries without comparable carbon pricing.

A May 2014 study by the non-partisan firm Regional Economic Models Inc. (REMI) concluded that this proposal would add a net 2.1 million jobs in 10 years. In 20 years, that rises to 2.6 million jobs, with a net CO2 emissions reduction of 52 percent. The REMI study has enjoyed wide circulation with Congress and the media, yet its basic findings have yet to be challenged.

In sharing the fee revenues equally among all households, the plan does three important things.

First, it rewards carbon-footprint reduction in any form, independent of approval by any organization.

Second, because fossil fuels are used to make nearly everything we buy, carbon footprint correlates with household income -- thus, CFD financially benefits lower- and middle-income households, enabling their investment in clean energy.

Third, the universal household dividend creates a broad-based and enduring political constituency for the legislation.

With growing power in Washington, the solar industry and other renewable energy interests should be pushing for this simple, effective solution.


Petaluma, California resident Bruce Hagen writes this as a co-chair of the Citizens’ Climate Lobby Sonoma County Chapter. He is also a program manager for Enphase Energy. Find out more about Citizens' Climate Lobby, or email Bruce at [email protected].