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J. Mijin Cha on April 28, 2008 - 11:10am
Too often, the impact that policies and measures have on low-income and marginalized communities is considered only as an after thought, if at all. Climate change policies are no exception.
While everyone will be impacted by the effect of climate change, the impacts will be distributed unequally. For example, temperatures are expected to increase across the country resulting in higher cooling costs, which more greatly affects poorer households. But the impacts go beyond just increased cooling costs. Higher temperatures will have a greater effect on those with poorer health and lack of access to hospitals and health care. People of color and low-income communities face more health care disparities, including less routine care and unequal access to quality care. As a result, these communities will doubly suffer from the effects of climate change.
While there is no doubt that aggressive, comprehensive action must be taken, the impact these policies have on lower-income communities and communities of color must be considered from the beginning, especially in a time of recession when family budgets are most strained. This Dispatch lays out the issues facing climate change policies and how states can implement smart, equitable changes.
Stopping"Cap and Dump"
The disproportionate burden on low income communities and communities of color is continued by bad climate change policies. If not properly created, implemented, and enforced, cap and trade policies can result in poor communities and communities of color being exposed to a grossly disproportionate level of pollution. The idea behind cap and trade is that emissions levels for a particular industry are capped. Emissions allowances are then distributed amongst the industry. These allowances can then be traded between companies to compensate for exceeding emissions limits.
Dumping in Poor Communities: Without proper policing, a cap and trade system can become a "cap and dump" system where companies, especially those in disadvantaged communities, make no changes in their behavior and instead just buy emissions credits to cover their bad behavior. In the end, communities that cannot afford to keep polluting industries out become toxic dumping grounds.
In a declaration against cap and trade schemes, environmental justice advocates point out that many current cap and trade schemes are undemocratic, "because it allows entrenched polluters, market designers, and commodity traders to determine whether and where to reduce greenhouse gases and co-pollutant emissions without allowing impacted communities or governments to participate in those decisions."
Carbon Taxes as a Better Alternative: Many economists, including conservative ones, argue that an across-the-board tax on carbon to encourage emission cutbacks from all sources would not only be fairer, but would be economically more effective for overall both stopping climate change and economic efficiency.
Many analysts argue that carbon taxes are simpler, more transparent, and less subject to manipulation by polluters. And because it applies to every carbon source, it gives stronger incentives to immediately convert to less toxic and renewable energy sources. Combined with tightening regulatory limits, carbon taxes are less likely to end up with disproportionate dumping of emissions and toxins in poorer communities.
Smart Cap and Trade Policies: Where cap and trade policies are used, several steps must be taken to ensure that cap and trade schemes are fairly implemented as we highlighted in an earlier Dispatch. First, emissions allowances must be auctioned off, instead of being given away, to raise revenue and create economic incentives for businesses to change their behavior. The revenue raised can be used to provide economic relief to lower-income families and to ensure that lower-income communities do not become emissions dumping grounds.
Second, the emissions trading must be strongly monitored with stringent enforcement provisions, including reasonably accurate emissions measurement and automatic excess emissions penalties that are not subject to appeal or waivers. The trading of any emission that is toxic, like mercury, must also be prohibited, even if they are greenhouse gases.
Easing Economic Disparity
Last year, the Congressional Budget Office found that under a cap and trade system for carbon dioxide emissions, most of the costs of meeting the cap would be borne by consumers through higher prices for products like electricity and gasoline. The price increases would have a disproportionate impact on lower-income households because they would bear a larger burden relative to their income.
Potentially Regressive Pollution Taxes: In fact, any form of pollution tax is regressive because the economic burden falls more heavily on low income households. Poor households spend more than 15% of their income on energy, while households earning over $50,000 a year spend less than 3%. For households with an average income of roughly $13,000, the costs of a modest emissions-control target would be between $750-$950.
Before moving on to policy options for protecting low-income households, it is important to clarify what exactly is meant by economic burden. Many right-wing climate change deniers claim that climate change policies would destroy the U.S. economy. This is easily disputed by a new report by the Environmental Defense Fund (EDF) found that a cap and trade policy would not unduly burden economic growth and not adversely affect employment or business growth. To this extent, climate change policies will not hurt overall economic growth. However, there will be some cost to consumers. The EDF study put the amount at less than 1% of household budgets for the average American family. That is an average, so that amount for lower-income families will be larger as a portion of income and more daunting. Climate change policy must ensure that these families are not unduly economically burdened.
There are several ways to ensure that working families are not left behind in the race to fight climate change. First and foremost, policies must be enacted now. The EDF report pointedly stated that the longer the delay in action, the higher the costs of emissions reductions will become.
Eliminating Regressivity: The Brookings Institution has released a paper on how to implement an equitable carbon tax. The study also seconds the need for rapid action, noting that the sooner states enact a carbon tax and then increase it gradually, the more cost effective it will be compared to cutting emissions drastically in the future. To help offset the cost of a carbon tax on lower-income households, the paper calls for the creation of an environmental earned income tax credit in the personal income tax that would be equal to the employer and employee payroll taxes on initial earnings (up to a limit).The tax credit could be financed by revenue raised through implementing the carbon tax. Economic analysis in the study shows that properly enacted rebates would completely offset any increase in costs by a carbon tax.
The Center for Budget and Policy Priorities (CBPP) developed a set of key measures necessary to offset the increased costs of climate-change legislation. Assistance for low-income consumers must:
fully offset the impact of higher costs on the bottom fifth of the population,
reach as many in the bottom fifth as possible,
cover increases in household's various energy-related expenses, not just utility bills,
reflect family size,
operate through proven delivery mechanisms, and
phase up as emission controls phase in.
The CBPP report estimates that 14% of the value of the emissions allowances under a cap and trade system would be enough to cover the costs of providing assistance to the poorest fifth of households and partially offset the costs for households with modestly higher incomes.
State Action to Address Climate Justice
Many states are already taking action to ease the burden of energy costs on lower-income families, and those efforts need to be accelerated as climate change policies are implemented.
Assistance for energy costs: As we highlighted previously, Illinois gave a $1 billion rebate to consumers to provide relief from large electricity rate increases. The Low-Income Home Energy Assistance Program clearinghouse lists all of the states and programs offering assistance. A few key state programs include:
- Minnesota requires electric companies serving over 200,000 residential customers provide a 50% discount for low-income customers on the first 300 kilowatt hours consumed each month.
- Arizona provides discounts up to 40% on the cost of electricity for customers who earn up to 150% of the federal poverty level.
- Ohio has a Percentage of Income Payment Plan that requires utilities to accept payments based on a percentage of household income.
Energy efficiency measures: While energy cost offsets are important, assistance to encourage adopting energy efficiency measures is needed, since the initial costs of doing so can be prohibitive. For instance, while in the long-term, compact fluorescent light (CFL) bulbs use less energy, the initial cost of a CFL is, on average, more than three times the cost of a regular light bulb. For families that barely make it month to month, those few dollars make a big difference. In recognition of the initial financial hurdle, Southern California Edison distributed one million free CFLs. Other state programs and policies include:
- West Virginia (SB 474) creates a limited sales tax holiday for energy star products.
- Colorado (HB 1387) uses funds from the severance tax trust fund to, among other things, provide home energy efficiency improvements for low-income households.
- New Hampshire (HB 1434) provides that at least 5% of a greenhouse gas emissions reduction fund shall be used to assist low-income residential customers to reduce total energy use.
- Michigan (SB 1046) establishes the low-income energy efficiency accounts to purchase energy efficiency windows, insulation and other energy efficiency measures that would be eligible for certain tax deductions and credits.
- Kansas (SB 580) creates weatherization assistance program account within the housing trust fund.
- South Carolina (SB 1076) creates a non-profit that would be able to receive funds and contributions that would help provide financial assistance to low-income households to implement energy efficiency and conservation measures.
- California's Public Utilities Commission implemented an unprecedented $108 million program to give incentives to low-income, single family homes to install high-performing solar installations.
Integrating Fighting Climate Change with Job Creation: Ultimately, the strongest way to help low-income communities and communities of color fight the disproportionate burden of climate change is to create environmentally beneficial jobs and economic growth within their communities.
Green for All, one of the leading advocates for green jobs in disadvantaged communities, highlights how shifting to a clean, green economy will improve the health and well-being of low-income earners who have suffered disproportionately from the current pollution-based economy.
Funds for states became available through the federal Green Jobs Act of 2007, authorizing $125 million per year to create green jobs worker training programs, which was included in the recently enacted Energy Independence and Security Act. Washington state was the first to pass a green collar jobs provision; HB 2815/ SB 6516 specifically targets low-income workers for green workforce training.
As we pointed out in our discussion on bio-fuels, blindly implementing climate change policies can create new harms, even while trying to fix old ones. Sound climate change policies are now desperately needed partly because of the failure to recognize the complexity of the issue. Protecting and re-investing in marginalized communities ensures an equitable and sound means to fighting climate change, instead of leaving substantial populations behind to deal with a mess they didn't create.