Congress at a Climate Crossroads: Legislative Pathways for Decarbonization in the United States Honorable Mention, 2021 Dunlop Undergraduate Thesis Prize Myer Jei Johnson-Potter June 2021 M-RCBG Associate Working Paper Series | No. 170 The views expressed in the M-RCBG Associate Working Paper Series are those of the author(s) and do not necessarily reflect those of the Mossavar-Rahmani Center for Business & Government or of Harvard University. The papers in this series have not undergone formal review and approval; they are presented to elicit feedback and to encourage debate on important public policy challenges. Copyright belongs to the author(s). Papers may be downloaded for personal use only. Mossavar-Rahmani Center for Business & Government Weil Hall | Harvard Kennedy School | www.hks.harvard.edu/mrcbg Congress at a Climate Crossroads: Legislative Pathways for Decarbonization in the United States A thesis presented by Myer Jei Johnson-Potter to The Committee on Degrees in Environmental Science and Public Policy in partial fulfillment of the requirements for a degree with honors of Bachelor of Arts Harvard College Cambridge, Massachusetts March 2021 Johnson-Potter 1 Table of Contents Acknowledgements ....................................................................................................................................................... 3 Chapter 1: Introduction ............................................................................................................................................... 4 The American Climate Policy Pendulum ................................................................................................................... 4 Thesis Roadmap ....................................................................................................................................................... 10 Methodology and Scope ........................................................................................................................................... 12 Thesis Scope and Key Policy Proposals Being Analyzed .................................................................................. 12 Methodology ....................................................................................................................................................... 13 Chapter 2: Contemporary Economy-Wide Carbon Pricing Proposals in the United States .............................. 16 Chapter 2 Introduction and Overview ..................................................................................................................... 16 Chapter 2 Roadmap ............................................................................................................................................. 19 Part I: The Climate Leadership Council Carbon Dividends Plan .......................................................................... 20 Part II: How Would a Carbon Dividend Work (The Baker-Shultz Example) ......................................................... 21 Carbon Fee .......................................................................................................................................................... 21 Carbon Price Accelerator and Emissions Assurance Mechanism (EAM) .......................................................... 22 Revenue Neutral Carbon Dividend ..................................................................................................................... 22 Regulatory Relief and Impact on Existing Regulations ...................................................................................... 23 Border Carbon Adjustment ................................................................................................................................. 24 Part III: Impact on Climate Crisis Mitigation and Technology Adoption .............................................................. 25 CLC Emissions Projections ................................................................................................................................ 25 CLC Technological Additionality Projections: .................................................................................................. 26 What is Left Out of the CLC Proposal ................................................................................................................ 28 Independent Emissions Projections for a Carbon Fee ........................................................................................ 31 Estimates of the Additionality of Low-Carbon Technologies Resulting from a Carbon Fee ............................. 34 Part IV: Economic Impact of Carbon Dividends .................................................................................................... 36 CLC Estimates of the Economic Impact of a Carbon Fee and Dividend ........................................................... 36 Empirical Evidence of a Carbon Fee’s Impact on Economic Growth (GDP) .................................................... 37 Models of the GDP Impacts of a Federal Carbon Fee ........................................................................................ 37 CLC Estimates of a Carbon Dividend’s Impact on Unemployment ................................................................... 38 Independent Estimates of the Impact of a Carbon Fee on Unemployment ........................................................ 39 CLC Estimates of the Distributional Impacts of a Carbon Fee and Dividend .................................................... 41 Independent Estimates of the Distributional Impacts of a Carbon Tax and Dividend ....................................... 42 Part V: Alternative Carbon Pricing Options from the 116th Congress ................................................................... 44 Differences in Starting Carbon Prices ................................................................................................................. 45 Differences in Carbon Price Accelerators ........................................................................................................... 45 Differences in Emissions Targets ....................................................................................................................... 46 Differences in Revenue Use ................................................................................................................................ 47 Differences in Proposed Regulatory Relief ........................................................................................................ 49 Part VI: Political Feasibility: Can an Economy-Wide Carbon Price Get Passed into Law? ................................. 49 Public Support for Carbon Pricing and the Carbon Dividends Plan ................................................................... 53 The Republicans: Support and Opposition: ........................................................................................................ 54 The Democrats: Support and Opposition ............................................................................................................ 57 Regulatory Relief as a Political Bargaining Chip for Carbon Pricing?: ............................................................. 59 Budget Reconciliation ......................................................................................................................................... 61 Part VII: Chapter Conclusion ................................................................................................................................. 64 Johnson-Potter 2 Chapter 3: Federal Emissions Reduction Policies for the Power Sector ............................................................... 66 Chapter 3 Introduction ............................................................................................................................................ 66 Part I: Clean Energy/Electricity Standards ............................................................................................................ 67 What is a Clean Energy/Electricity Standard (CES)? ......................................................................................... 67 Part II: Tradable Performance Standards (TPS) .................................................................................................... 69 What is a Tradable Performance Standard (TPS) ............................................................................................... 69 Part III: Analysis of CES and TPS Policies ............................................................................................................. 70 Emissions and Technological Impacts of a CES/TPS Policy ............................................................................. 70 Economic and Distributional Impacts of CES/TPS ............................................................................................ 73 Part IV: Current and Recent CES/TPS Proposals .................................................................................................. 76 The 116th Congress ............................................................................................................................................. 76 The Evergreen Action Proposal .......................................................................................................................... 77 The CLEAN Future Act .....................................................................................................................................