CARBON PRICING is picking up steam in Massachusetts, and Rep. Jen Benson’s bill to promote green infrastructure and reduce carbon emissions (H2810) has gained enough political support to make oil and gas lobbyists sweat. The bill, which earned 108 co-sponsors in the Legislature (more than any other climate bill), puts a price on carbon pollution being emitted through the burning of fossil fuels.
This bill isn’t just about solving climate change. It’s about growing our economy and creating jobs in the state. The bill breaks our dependence on fossil fuel imports, which puts more than $20 billion in the pockets of out-of-state fossil fuel companies each year. The result would be the creation of upwards of 10,000 jobs, according to a 2014 study from the state.
This bill is also about reimagining how we move people and goods around. Solving our traffic congestion nightmare, which has recently been dubbed the worst in the country. Tackling our housing crisis. Fostering sustainable and inclusive development. Creating good jobs in emerging sectors. Improving public health and keeping pollutants out of the air we breathe. Making sure our state isn’t left behind as the world transitions to a green economy.
The two main objectives of carbon pollution pricing are: first to disincentivize the use of dirty energy sources and move us away from a fossil fuel dependent economy, and, second, to raise revenue for investments in clean energy and green infrastructure.
Our economic impact analysis of Benson’s bill shows that, while it creates the needed market incentives to reduce emissions, it will still result in net-positive economic benefits for low- and moderate-income households. The bill also includes protections for vulnerable industries in the state, and devotes a substantial portion of the revenue to a green infrastructure fund to invest in further emission-reduction solutions and green initiatives.
How does it manage to accomplish all of this? Through thoughtful policy design by Benson. The bill devotes 52.5 percent of the revenue to rebates for state residents, weighted toward low- and moderate-income households. The result is that the bottom three-fifths (quintiles) of households come out ahead on average.
A recently released study from the Mass Fiscal Alliance and the Beacon Hill Institute would have you thinking otherwise, using incomplete data to suggest that the program’s cost to the state economy would be greater than the benefits. Using cherry-picked findings, their polluter-funded report suggests that a carbon price would be of enormous burden to the state. But this is standard behavior for an institution with well-documented questionable practices to serve the agenda of their “members,” large polluters and shady interest groups. By now, the academic and scientific community does not have to read a Beacon Hill Institute study for long to find major errors and unsubstantiated claims.
The institute uses its fiscal analysis model, titled STAMP, to project unfounded economic impact and overblow job losses that do not have a base in real data. STAMP is a computable general equilibrium model, meaning it is fundamentally grounded in principles of perfect economic efficiency that “bear little resemblance to reality.” For example, the model assumes the economy is always at full employment. The model has been used for over a decade to claim that any tax increase will collapse the entire economy, and any tax cut will create explosive economic growth. Each time this model has been used to challenge other environmental or social policies, such as the Clean Power Plan, researchers have made quick work of pointing out the model’s extensive shortcomings.
The study’s appendix offers no explanation of how STAMP was modified to accommodate a carbon price, nor does it list the key assumptions made that ultimately determine the projected impact of the bill. The most recent methodology document for STAMP that we could find on the institute’s website appears to be 15 years old.
Fortunately, there are far more credible studies that paint a more accurate picture of how carbon pricing will impact the Commonwealth. The widely-used, peer-reviewed REMI PI+ model has been used by many state governments to evaluate a variety of policy proposals, including tax changes and economic development projects. A 2014 study conducted on behalf of the state of Massachusetts by a REMI-led consulting team found that carbon pricing in the Bay State would create 10,000 net jobs and increase personal income by up to $80 per person per year. Another study conducted by REMI, Harvard, and Boston University last year found that carbon pricing in Massachusetts would create $2.9 billion in public health benefits and save hundreds of lives by reducing harmful air pollutants.
The Beacon Hill Institute study completely ignores a majority of the bill’s economic benefits. Within the first paragraph of its appendix, the institute reveals that major elements of H.2810 have been completely stripped away from the analysis, including the 30 percent of revenue dedicated to the Green Infrastructure Fund. Furthermore, the authors decide to create their own distribution of rebates that is not reflective of the bill’s carefully designed rebate structure.
This means that the billions of dollars of economic benefits that we stand to realize by addressing the state’s most prominent challenges, whether it be our dependence on fossil fuel imports, our stifling traffic congestion, or the quality of the air we breathe, are not captured by the study. Rather, the Beacon Hill Institute decides to calculate the program’s benefits purely on its contribution to reducing global emissions. The fact that this tiny sliver of benefits still amounts to $57 million in the first year speaks to the bill’s strengths more than its shortcomings.
Another key talking point of the Beacon Hill Institute is that because our state is responsible for what seems like a small percentage of global carbon emissions, we should not even try to address the issue at the state level. On the contrary, we have an opportunity right now to be leaders in this movement towards a clean future, to show the way for other states and nations on how this transition should happen.
Hiding away and denying our responsibility is a disservice to our capacity for innovation and change and serves to jeopardize future economic growth in the Commonwealth. Let’s make sure we don’t buy into false economics, and instead pass a price on carbon pollution.
Marc Breslow is the research and policy director and Jonah Kurman-Faber is a research associate at Climate XChange, a Boston based nonprofit focused on carbon pricing advocacy, media, and research.