It's Time for a Price on Carbon

It's Time for a Price on Carbon

In March, about 30 Democratic Senators pulled an all-nighter in the Capitol, speechifying for a collective 15 hours about the need to act swiftly on the issue of climate change. It is a politically contentious position in Congress, where the Center for American Progress reports 90 percent of the Republican leadership denies the overwhelming scientific consensus that human activity is driving global climate change.

But what is political anathema in Washington is an answer so obvious among economists it has been a foregone conclusion to policy wonks and experts across industries for years: put a price on carbon. This could be done with the cap-and-trade schemes proposed and dashed amid political squabbling a few years ago (a similar scheme successfully cleaned up smog-causing sulfur oxides and nitrogen oxides decades ago), but a much simpler way is to just tax greenhouse gas emissions.

Carbon dioxide, the gas chiefly responsible for human-driven global warming, is causing global damage, but those responsible for emitting it don’t pay a dime for their privilege to pollute—that is the classic definition of an economic externality. Applying a cost to carbon pollution encourages polluters to cut back, but it would also kick start the industries poised to create innovative solutions to the challenge of the century. That includes urban design and architecture.

Last month AN ran a Q&A with Peter Busby, who initiated the development of LEED in Canada and later revamped sustainable design practices for Perkins + Will. Design standards have changed drastically in just five years, he said, with every project in his global design firm’s many studios materially affected by environmental standards. The days of un-shaded glass boxes in the desert are winding down.

Busby’s one-time home province of British Columbia passed a carbon tax in 2008. Six years later, their economy is doing fine. A “wood first” policy meant to promote the local lumber industry has pushed innovation in timber high-rises, one important way designers might make a dent in the 8 percent of global carbon emissions due just to the production of concrete and steel.

Many companies already factor a carbon price into their internal bookkeeping. They include tech companies like Google and Microsoft, but also giants in the carbon-intensive worlds of retail and even fossil fuel extraction—Wal-Mart, General Electric, and even Exxon Mobil all anticipate carbon taxes in their future budgets.

Several countries have already passed carbon taxes. Sweden, Finland, and Ireland already have them, while plans to enact or continue carbon taxes in Australia, Chile, and Mexico face some political opposition. But the U.S. has to lead, according to Yale University economist William Nordhaus. “It’s ludicrous to think India, China, or Brazil are going to take costly steps when the U.S. is doing nothing,” Nordhaus said at a recent University of Chicago event. “We’ve got to get started.”

In the U.S., the Energy Independence and Security Act of 2007 set a goal of net-zero energy use in all commercial buildings by 2030. That is an ambitious benchmark, but it is only voluntary. In municipalities where energy standards have been required, they have made important progress in raising awareness, but they have also highlighted a problem with LEED and other prescriptive strategies of environmental design. It is possible to cheat the system. Energy-intensive buildings can earn high marks just for checking off the right boxes—boxes that can also constrain design choices.

A better approach would be a performance-based code, which would judge buildings against environmental standards of resource use—emit more carbon, get a lower rating. Such a system would work like a carbon tax, incentivizing efficiency and letting individuals chart the course to a cleaner future.

Those who claim a carbon tax is a paternalistic affront to freedom or an economic albatross either have not seriously considered the idea, or are being disingenuous to serve political ends. There are many ways to craft such a tax to avoid undue economic hardship. It could be graduated, scale up over time, and even be rendered revenue-neutral by tying the price to an equal reduction in taxes elsewhere. Whether that is from income taxes, the payroll tax, or outmoded government subsidies is a matter for political debate. But the problem now is that the issue is not even on Congress’ lips.

And as designers know well, the impacts of inaction are potentially disastrous. Hurricane Sandy catalyzed the discussion around disaster resiliency, but floods, food shortages, and heat waves could easily outpace our ability to adapt if we do not get emissions under control soon. Planning for an uncertain future is difficult enough. Without a guiding market signal like a carbon tax, we are directionless. It is a foolish strategy to hope we will have the tools to dig ourselves out of a pit whose depth we might not know until it is too late.