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Carbon Pricing Today, Carbon Tax Tomorrow

Posted on June 18, 2014

Warren Buffet is fond of saying that price is what you pay, value is what you get.

InnovationSmallA new state effort to set a premium price on the carbon dioxide saved through energy efficiency is likely to provide little value – beyond setting the stage of a carbon tax that will ultimately raise the cost of electricity for employers and consumers.

The Massachusetts Department of Environmental Protection (DEP) and Executive Office of Energy Environmental Affairs (EOEEA)have filed a joint petition asking state energy regulators to set the price of carbon dioxide saved through energy efficiency at $54 per metric ton. That price would be more than 10 times higher than the value currently assigned by the Regional Greenhouse Gas Initiative, the Northeast Plan to reduce carbon dioxide emissions from utilities.

State officials claim they need to set a price for carbon dioxide to calculate the benefits of energy efficiency programs. But there is little doubt that the process also establishes the foundation for a tax on the carbon contents of gasoline, natural gas, heating oil, coal and other fossil fuels.

Associated Industries of Massachusetts opposes a carbon tax of this magnitude because it would raise what are already some of the highest costs in the nation for electricity and heating fuels. A group of environmental activists initially hoped to place a carbon tax question on the 2014 election ballot, but later withdrew the initiative citing the complexity of the issue, weak fund-raising, and potential constitutional challenges to the question.

“Massachusetts is already committed to reducing carbon through the Regional Greenhouse Gas Initiative, which already acts as a carbon tax” said John Regan, Executive Vice President of Government Affairs at AIM.

“Raising the cost of living or the cost of doing business just to make a statement seems counterproductive.”

A carbon tax is an environmental fee levied by governments on the production, distribution or use of fossil fuels. The amount of the tax depends on how much carbon dioxide each type of fuel emits when it is used to run factories or power plants, provide heat and electricity to homes and businesses, and drive vehicles.

AIM intends to intervene on behalf of employers in any discussion of a carbon tax in Massachusetts. The largest employer association in Massachusetts remains determined to ensure that any such tax is based on transparent methodologies and does not place Massachusetts at a competitive disadvantage for electricity costs.

Even without the specter of the carbon tax, the attempt to set a Tiffany price on carbon represents a transparent attempt by the commonwealth to overstate the solid value of energy efficiency. The idea is that replacing a light bulb in your home, which generates a financial return from electricity saved, would now return far more benefit if the carbon price of $54 per metric ton were added. That’s a formula for keeping price and value out of whack.

Member employers interested in learning more about AIM’s effort in this docket should contact me at