BestPractices_Final
- 1. Mitigating Greenhouse Gas Emissions: Implementation and Application of the Climate Recovery Fund to Austin December 2015 Samantha Abbott, Hussam Alorabi, Emily Arnold, Laura Engells, L. Megan Gunnells, Kurt Kreusel, Jeremy Lacaze, Shadi Maleki, Joshua Newton, and David Vela Acknowledgements Our team would like to acknowledge and thank the following individuals and municipal offices for their the guidance and assistance throughout this report process: Dr. Ron Hagelman,
- 2. ii Mr. Zach Baumer, Climate Program Manager for the City of Austin’s Office of Sustainability, and the City of Austin’s Office of Sustainability. Dr. Ron Hagelman, thank you for the opportunity to apply our knowledge, skills, and creativity to a current issue affecting the Central Texas region. Your guidance throughout this process was invaluable. Mr. Zach Baumer, thank you for the opportunity to assist your office with this project and your guidance throughout the process. Your expertise with city issues and city structures helped us narrow down our grand ideas to applicable ideas for the city level. We believe you will be very happy with the results of our best practices. City of Austin’s Office of Sustainability, thank you for the opportunity to apply our knowledge, skills, and creativity to the current and pressing issue of greenhouse gas emissions. Your continued support and guidance helped us to create an appropriate system of best practices for the City of Austin. Table of Contents 1. Executive Summary 1 2. Purpose of Best Practice 2
- 3. iii 3. Site and Situation of Study 3 3.1 Physical Geography Context 3 3.2 Demographics 3 3.3 Resource Use Trends 3 3.4 Economic Trends 4 3.5 Cultural Settings and Trends 5 3.6 Current and Past Initiatives 5 4. Carbon Mitigation Policies 6 4.1 System for Carbon Mitigation 6 4.1.1 Cap-and-trade 6 4.1.2 Carbon Tax 6 4.1.3 Discussion 6 4.2 Case Studies: Cap-and-trade 7 4.2.1 European Union 7 4.2.2 Tokyo, Japan 8 4.3 Case Studies: Carbon Tax 8 4.3.1 British Columbia, Canada 8 4.3.2 Australia 9 4.3.3 Boulder, Colorado, United States 11 4.4 Advantages and Disadvantages 12 4.4.1 Cap-and-trade 12 4.4.1.1 European Union 12 4.4.1.2 Tokyo, Japan 12 4.4.2 Carbon Tax 13 4.4.2.1 British Columbia, Canada 13 4.4.2.2 Australia 14 4.4.2.3 Boulder, Colorado, United States 14 4.4.3 Best Practices for Austin 15 5. Model Practice for Austin 16 6. Conclusion 21 7. Bibliography 23 8. Appendix 1 27 9. Appendix 2 30
- 4. 1 Executive Summary According to multiple scientific reports, research has strongly indicated that human activities are a dominant cause of observed global warming; especially warming that has occurred since the mid-20th century (EPA 2014; IPCC 2013). According to the EPA, human activities release over 30 billion tons of CO2 into the atmosphere every year. Scientists believe that the human activity responsible for the rate at which climate change is occurring is the burning of fossil fuels (IPCC 2013). The Intergovernmental Panel on Climate Change (IPCC) reported in their 2014 Climate Change Report that global greenhouse gas (GHG) emissions must be significantly reduced, based on the 2005 levels, by 2050 in order to curb the most severe impacts resulting from climate change. Meeting the goals set by the IPCC for GHG reductions is an effective way to curb the rapid increase in global temperature that has been occurring since the industrial era. This goal is especially important for central Texas, which has been plagued by increases in extreme drought, dangerous flash flooding, and rising temperatures. The current drought has brought unprecedented climatic conditions, which have greatly diminished the water levels in both the Lake Travis and Lake Buchanan reservoirs. To put the current drought into perspective, the top five lowest annual inflows of these two reservoirs have occurred since 2007 (COA OS 2015). While this does show a decrease in precipitation over time, there has also been an increase in flash floods and particularly in catastrophic flash floods. The extreme weather events that have occurred in the past decade in central Texas have taken lives, destroyed homes, and presented significant challenges for city managers and planners. Due to the susceptibility of Central Texas to the effects of climate change coupled with a forward-thinking municipality, the City of Austin’s Office of Sustainability has set forth the Austin Community Climate Plan, which presents a goal for Austin to be a net-zero carbon emitting community by 2050. This plan will target reducing GHG emissions in industrial sectors such as electricity and natural gas, transportation, materials management, and industrial process sources by 2050 with short-term goals set for 2020, 2030 and 2040. A community-wide effort will be integral to achieving this goal, as household and consumer behaviors will also need to be
- 5. 2 altered through educational programs, financial incentives and better enforcement of policies already in place. Purpose of Best Practice Report As the world’s attention turns to climate change, many localities have taken steps to reduce their carbon footprints. Austin, Texas is one of these localities that have taken such steps. In April 2014, the City Council of Austin unanimously approved the Austin Community Climate Plan (ACCP), which goals are to reduce greenhouse gas emissions and consumption by having citywide net-zero consumption of GHGs by 2050 (COA OS 2015). For the city to meet this goal, Austin must educate its population including businesses, industries, and residents, about the importance of reducing emissions and offer incentives to promote carbon-reducing initiatives. The city already has many initiatives in place to reduce its carbon footprint, but to succeed in being net zero by 2050, the city will need to generate funds specifically for emissions reduction initiatives. If executed correctly, this net-zero goal will aid in addressing challenges that are currently facing Austin such as traffic congestion and disaster preparedness, but will not further current issues such as affordability and gentrification. According to the 2010 data used in the ACCP, the sectors responsible for the largest amounts of GHG emissions are (in order of largest to smallest): transportation and mobile sources, resident electricity, and commercial electricity (COA OS 2015). The goal of this report is to assess how to properly target and reduce these emission levels without hindering economic growth or furthering affordability issues in the rapidly growing City of Austin. This best practices report analyzes the successes and failures of funding and implementation strategies that other cities, provinces, and countries have utilized to institute their individual carbon reduction goals. Reviewing the carbon mitigation policies of cap-and-trade systems and carbon tax systems, a carbon fee system is best suited for the industrial, economical and residential interests of Austin. The fees collected from this program will be distributed to fund various initiatives such as alternative transportation, green education, and renewable energy programs.
- 6. 3 Site and Situation of the Study Area Physical Geographic Context The Austin area comprises 322.5 square miles along the Balcones Escarpment within the Colorado River Basin. Along the I-35 corridor, the flat coastal plains from the east meet the cliff side of the escarpment on the west. According to climate data from the City of Austin, the City is situated between a subtropical humid climate and a subtropical sub-humid climate, which can lead to colliding fronts that often result in severe thunderstorms and excessive amounts of rain. Areas of the city are located above the Edward’s Aquifer, which is the source for the iconic Barton Springs swimming pool, and one of the most prolific aquifers in the world. Demographics Austin is a diverse city with many social classes, ethnic and cultural backgrounds, and age ranges that call it home. It has a fast-growing Hispanic population (35 percent of total population); more than half of citizens are younger than 35 years old (56 percent), with a rapidly increasing population of children ages 5-14 (49 percent increase from 2000-2013). According to the most recent census data, Austin has a population of 885,415 and it is expected to increase to 1.4 million residents by 2050 (United States Census Bureau 2010). The Department of Planning and Zoning collects and maintains the city’s demographic data, analyzes and compares it with previous years, and outlines significant trends. The most relevant trends to this report are: an increasing imbalance of affluence between residents, a prominent increase in urban sprawl, and a decreasing amount of families in the city core. Resource Use Trends With the projected population increase, carbon emissions are predicted to increase by 30 percent by 2050. According to their website, Austin Energy supplies about 50 percent (448,000+ customers) of the total electricity used by the city. The total energy generation is categorized into two types: renewable and nonrenewable sources. About 23 percent of customers currently utilize renewable sources and roughly 77 percent rely on nonrenewable energy. Austin Energy keeps a daily record of the fluctuations in renewable and nonrenewable energy use on their website.
- 7. 4 Customers that choose renewable energy sources have the options of wind, solar, or bio energy generation with varying prices and incentives for each choice. Since 1996, the City of Austin has been constructing utility-scale renewable resources at a consistent rate. The total capacity of currently installed renewable energy sources is 1482.4 megawatts (MW), with the majority coming from wind power (1340.6 MW). According to data from Austin Energy, wind power is the fastest growing renewable resource within their entity, and they are one of the only utilities in Texas to be making significant purchases of wind power energy. The first wind farm in Texas was constructed in 2005, and as of 2015 there are nine. Currently, all City of Austin facilities are powered with renewable energy (Austin Energy 2015). Of the accounted eligible drivers, 92.9 percent (448,827) commute to work and 73.7 percent (355,739) travel as sole-vehicle occupants. Ridesharing accounts for, 9.9 percent (48,007) of commuters with only 4.2 percent (20,380) of the workforce using public transportation. Individuals who work from home make up 7.1 percent (34,091) of the workforce and individuals who walk to their place of employment consist of 2.4 percent (11,519) (United States Census Bureau 2013). Economic Trends The expected population growth will expand the economic sector with raised consumption and increased employment opportunities. These factors, as well as the ones discussed below, will be very attractive to businesses looking for relocation or possible start up opportunities. Austin’s current business climate is accommodating and encouraging to economic growth with a strong base of enterprises in technology, digital media, clean energy and life sciences, advanced manufacturing and data centers. Austin Energy, proving the city’s capacity to keep up with rapid growth, has some of the lowest rates in the country for outage duration and frequency duration. The cost of living in Austin is 6 percent below the national average, and relative to other business hubs, it provides some of the most affordable living. The State of Texas has continuously had one of the lowest state and local tax rates in the country, ranking 41st out of 50 in taxes paid per $1,000 of income (Austin Chamber of Commerce 2013).
- 8. 5 According current data from the Chamber of Commerce, there are five main sectors that employ the largest amount of workers. The sectors that employ 6,000 or more people are: government, healthcare, higher public education, public education, and technology. Other sectors that employ 1,000 or more include banking, community service organizations, insurance, manufacturing, pharmaceutical, retail, real estate, telecommunications, and tourism. The Bureau of Labor Statistics reports that the unemployment rate for Austin in 2015 is 3.3 percent, which is down from 4.1 percent in 2014, and lower than the 2015 national average of 4.9 percent. In Appendix 1, Figure 1 from the Austin Chamber of Commerce shows the growth of Austin’s economy in 2014. The economy grew a total of 6.1 percent in 2014, which is ranked 3rd fastest growing metro economy out of the 50 largest metro economies for 2014 (Bureau of Labor Statistics 2015). Cultural Setting and Trends The creative sector in Austin is a large part of what makes Austin so unique. Nicknamed the “Live Music Capitol of the World”, there are numerous music venues and annual festivals that serve as just one engine powering the creative sector. Along with a renowned music scene, Austin is also home to many art galleries, gaming conventions and film conventions. In 2009, the CreateAustin Cultural Master Plan was passed with the goal of establishing recommendations for stimulating cultural creativity through 2017. The core values identified by City Council for this plan are inclusion, collaboration and innovation. The CreateAustin Plan is a demonstration of how important cultural diversity is to residents and local government in Austin (COA CA 2009). In Appendix 1, Table 1 shows economic data gathered by the economic consulting firm TXP. The firm is responsible for evaluating the economic influence of the creative sector in Austin (TXP 2012). Current and Past Initiatives Austin is nationally recognized as a city with environmentally friendly aspirations, and current and past legislation is what has built this image. In Appendix 1, Table 2 highlights a handful of past and present environmental initiatives as well as recognitions.
- 9. 6 Carbon Mitigation Policies Systems for Carbon Mitigation Cap-and-trade A cap sets a maximum allowable level of pollution and penalizes companies that exceed their emission allowances (EDF 2015). The cap is gradually lowered over time to continually reduce emissions. The trade creates a market for carbon allowances helping some companies meet their allocated limit. The less a company emits, the less it pays, providing an economic incentive to pollute less. Permits or allowances are distributed or auctioned to polluting entities. The total amount of allowances will be equal to the cap. A company or utility may only emit as much carbon as it has allowances for. Carbon Tax A carbon tax is a fee on fossil fuel emissions levied by federal, state, or city governments. In specific, a carbon tax is assessed on the carbon dioxide portion of carbon emissions (CTC 2015). The idea is founded on the economic concept of negative externalities. In economics, externalities are defined as costs or benefits generated by manufacturing goods and services. Therefore, negative externalities are classified as unpaid costs of the pollution that is generated from fossil fuels. Proponents of carbon tax argue that a tax on CO2 emissions would encourage polluters to reduce their emissions. Moreover, a tax would make clean energy options such as solar and wind become more cost competitive with energy gained from burning fossil fuels. The revenue returns back to tax payers in different forms of tax reduction, or funds climate action related plans. Discussion Under either a carbon tax or a cap-and-trade program, the desired result is a level of CO2 abatement that equates the cost of abatement with the estimated benefits of abatement. However, with cap-and-trade, the market price of CO2 allowances may be less or more than the estimated benefits per ton of CO2 abatement. The amount of abatement generated by a carbon tax may be less or more than the amount required equating the cost of abatement with the benefit of abatement. Thus, both entail risks.
- 10. 7 Both cap-and-trade and a carbon tax are subject to uncertainty about costs. However, cap- and-trade has the advantage of making clear, through a market price for emissions, the actual cost of a stipulated quantity of emissions reductions. Furthermore, the market price for CO2 allowances under cap-and-trade automatically and continuously adjusts for changes in abatement cost over time as changes take place in the prices of fossil fuels, the demand for electricity, and the rate of technological change. Frequent changes in a carbon tax to adjust the tax level to the changing cost of abatement are likely to be administratively difficult and politically divisive. Clearly a carbon tax is easier to administer. Both cap-and-trade and a carbon tax need to be enforced – emissions must be determined for various sources and penalties imposed if a source does not have the requisite allowances or does not pay the required taxes. However, with cap-and-trade there is an additional administrative requirement – the allocation of allowances. Early attempts at allocation of allowances – for example, the sulfur dioxide emissions trading system used by the United States in the 1990’s – allocated allowances on the basis of historical emissions by source. The more modern approach is to auction allowances as done by the nine eastern U.S. states comprising the Regional Greenhouse Gas Initiative (RGGI 2015). Auctions are easier to administer and more palatable politically. Cap-and-trade would be expensive to administer if applied to automobile transportation or residential heating and cooling. Thus a tax on fuels used for transportation, heating, and cooling is the preferred way to promote CO2 emissions abatement in these sectors. Case Studies: Cap-and-trade European Union In 2005, the European Union (EU) launched the first international cap-and-trade program, European Union Emission Trading System (EU ETS), to reduce greenhouse gas emissions (EU ETS 2015). It was comprised of three phases: Phase I, Pilot Phase, ran from 2005 to 2007, Phase II ran from 2008 to 2012, and Phase III ran from 2013 to 2020. Yet, the cap-and- trade program only lasted until 2013 before needing reform. The main reasoning behind the reform was the EU’s over-allocation of emission allowances (Brown et al. 2012). With the over- allocation of emissions allowance, the price of carbon dropped significantly, the price per ton had fallen from 20 Euros to 5 Euros. Essentially, it was cheap to pollute. To combat the low
- 11. 8 prices of carbon, the EU planned to postpone the auctioning of carbon allowances, the European Parliament and Council agreed that 900 million tons of carbon allowance would be put on reserve (EC CA 2015). This plan failed to pass in the European Parliament. The EU has now reformed their cap and trade program, but many are not optimistic about its chances of success and are calling for a carbon tax that would keep the price of emitting greenhouse gases stable. Tokyo, Japan In 2010, the Tokyo Metropolitan Government (TMG) implemented a cap-and- trade program focused on the industrial and commercial sectors. These sectors account for approximately 40 percent of the greenhouse gases emitted in Tokyo (EDF 2015). Since the cap applies to large-scale facilities such as buildings and factories, 1,400 of the highest energy using buildings in the city are accountable to the cap. The cap and trade system has two phases comprised of five- year compliance periods: the first phase is from 2010-2014 and the second phase is from 2015 to 2019. According to the Bureau of the Environment, during the first phase, businesses were required to reduce emissions by 6 to 8 percent. Additionally, the second phase requires businesses to reduce emissions by 15 to 17 percent. Yet, there are penalties for noncompliance. According to Kaneko, the penalty for not meeting the phase 1 goal was to pay a fine of up to 500,000 yen, further reduce emissions by 1.3 times the required amount in phase 2, and to have their names published for public shaming (EDF 2015). The City of Tokyo has determined that the system was a success for their goals: building owners who were targeted by the program have reduced their power consumption by 23 percent below the baseline level (Kaneko 2014). Since Phase 1, there have only been 22 transactions for carbon trade. Overall, Tokyo has had great success with their system. Case Studies: Carbon Tax British Columbia, Canada When the IPCC’s Fourth Assessment on Climate Change Report was published in 2007, the political climate of British Columbia was receptive to new climate change policies. The government officials of British Columbia followed a series of implementation guidelines when initiating their carbon tax policy: an easily administered policy, minimal exemptions, an initial low tax price, and returnable tax revenue. Following these guidelines, British Columbia became
- 12. 9 the first North American country to implement an economy wide carbon pricing policy (Clean Energy Canada 2015). The implementation of an economy wide carbon pricing policy was a part of British Columbia’s Climate Action Plan. The Climate Action Plan had goal of reducing greenhouse gas emission by 33 percent by 2020. To achieve this goal, the carbon tax as tacked onto the existing fuel tax based on the purchase or use of fuels within the province (Clean Energy Canada 2015). There are selected carbon tax rates by fuel based on carbon content. According to the Ministry of Finance, gas, diesel, jet fuel and propane are taxed per liter, natural gas is taxed per cubic meter, and coal is taxed per ton. The tax began with a low initial price, but there were scheduled tax increases planned for the following 4 years. The tax began with a $10 tax per metric ton in 2008 and then ramped up $5 each year until it reached $30 per ton by 2012 (Clean Energy Canada 2015). This tax nearly covered all of the carbon emissions of British Columbia. In terms of fuel, the tax in 2008 was 0.02 cents per liter and in 2012 the tax was raised to 0.07 cents per liter. The consumer did not truly feel the negative impacts of the carbon tax- the consumer only felt the positive impacts of the carbon tax. The carbon tax policy of British Columbia is a revenue neutral policy. A revenue neutral policy a policy in which tax revenue is returned to the taxpayers and businesses through tax cuts (Clean Energy Canada 2015). The revenue neutral tax has allowed British Columbia to reduce taxes for individuals, families, and businesses. Upon reviewing the tax, policymakers realized the burden the tax might have on low income and rural communities. As a revenue neutral tax, the policy makers made the policy so a low income climate action tax credit and the Northern and Rural homeowner benefit was made available to low income and rural communities. Other uses of the revenue include: lower business tax, personal income tax, low income tax credits, and direct grants to rural households (Murray and Rivers 2015). Australia Australia had a short, but tumultuous history with initiating and implementing a carbon tax policy. In 2012, the carbon tax policy was established through the Clean Energy Act of 2012 with a goal of reducing emissions 5 percent lower than 2000 levels by 2020 (Meng et al. 2013). With this goal in mind, the initial carbon tax price was as high as $24.15 per ton of
- 13. 10 CO2. The main sectors affected by this tax were the electricity, manufacturing, and mining industries. The focus of the carbon tax was on the industrial sectors and the industrial sectors had to pay the majority of the carbon tax. In 2012, when government officials implemented the carbon tax, two types of carbon tax were created: a carbon tax for industries and an equivalent carbon tax. Industries that emitted more than 25,000 tons of CO2 were liable to the carbon tax and were required to report their annual emissions to the Clean Energy Regulator (Clean Energy Regulator 2013). In addition to the carbon tax, companies had to pay a fuel tax and a synthetic greenhouse gas charge. According to the Department of the Environment, as an assistance measure to these industrial companies, Australian government officials enabled the industries to eligible for industrial assistance to remain competitive in international market. Yet, with these high costs of operation and taxes, many of the companies passed on the cost of the tax to their customers. By passing the cost of the tax onto the customer, the cost of electricity increased by 10 percent for the households and by 14.5 percent for industry (Robson 2014). The Australian public within a year of the policy being enacted were in high opposition to the policy. The Australian government did not truly evaluate the costs and benefits of the policy or they would have realized this policy was not implemented fairly: industries were paying the majority of the tax and had to pass on the costs of this tax to the household. The tax was supposed to generate revenue, but not in this manner. With the high costs of the carbon tax and high public opposition to the tax, the carbon tax policy was sent to the Australian Parliament to be repealed. On July 17, 2014, the Australian Parliament repealed the legislation of the Clean Energy Act of 2012 and abolished the carbon tax. By abolishing the carbon tax, the cost of living would be reduced for households and operating costs for businesses would be reduced as well. According to the Department of the Environment, through the abolishment of the policy, “the cost of living was reduced by $550, electricity costs were reduced by 9 percent and gas prices were reduced by around 7 percent “ (Clean Energy Regulator 2013). Usually, a policy is better than no policy, but in the case of Australia, no policy is better than a policy.
- 14. 11 Boulder, Colorado, United States The City of Boulder is located in north Denver with approximately 100,000 in 2013, including the university students. Boulder’s community has always been attentively committed to environmental protection and preservation of natural resources (Brouillard and Van Pelt 2007). The city embraced the goals of Kyoto protocol in 2002 in order to reduce the GHG emissions by 22 percent below the current levels (Gichon et al. 2008), and introduced a tax for carbon in 2006 that became effective in 2007. The tax was calculated based on the amount of electricity (KWh) generated by burning fossil fuels. The Office of Environmental Affairs (OEA) is responsible for the implementation of the majority of Boulder’s environmental programs. This tax is levied on businesses, residents and industries. The extra on tax is not significantly high, but it is very effective to help consumers understand how increasing or reducing their energy usage or shifting to renewable energy sources reduces their bill. According to the City of Boulder in 2009, the initial tax rate was $0.0022 per kWh for residents, $0.0004 per kWh for commercial users, and $0.0002 per kWh for industries (approximately $12–13 per ton of CO2) (Sumner et al. 2011). In August 2009, the carbon tax increased to the maximum allowed by the ordinance: $0.0049 per kWh for residents, $0.0003 per kWh for industries, and $0.0009 per kWh for commercial (Bhatt and Ryan 2013). According to Bhatt and Ryan, the average carbon tax in Boulder is around $21 per year for residents; $94 for commercial owners, and industries can pay up to $9,600 per year. Renewable energy such as solar and wind energy users are exempt. In 2008, carbon taxes generated approximately $860,000 (Gichon et al. 2008), and over the following years, taxes are generating $1.8 million for the city annually (City of Boulder 2015). Utility Xcel Energy collected carbon taxes, and the fund is used for the implementation of Boulder Climate Action Plan and other mitigation programs that promote energy efficiency in buildings and transportation improvement. The tax money funds also energy audits for businesses and houses. Moreover, it funds the visit of experts who give advice to homeowners on how to save energy. The tax revenues are expected to lower over years as businesses and residents reduce their energy use and begin to use more renewable sources such as solar and wind power. As a result of mitigation programs, Boulder avoided over 50,000 metric tons of GHG emissions between 2007-2005, helping to keep the emissions almost constant despite the
- 15. 12 population and economic growth of the city (City of Boulder 2015). Boulder’s current goal is to reach 80 percent of emission reduction by 2050. In March 2018, Boulder’s current carbon tax expires and if it will be approved in Nov. 2015, the carbon tax would extend for 5 years and the collection strategies would not change (City of Boulder 2015). Advantages and Disadvantages of Case Studies Carbon Mitigation Policies Cap-and-trade European Union Advantages By far the largest example of carbon trading in operation, the scheme led to a 2-4 percent decrease in emissions prior to the European Union’s financial collapse. This reduction is more than the impact of many energy policy measures, which is impressive considering its scale. Disadvantages The scheme was poorly managed from the outset. During phase I, allowances were given for free, but were intended to be less than the actual amount of emissions, requiring companies to purchase extra allowances. This led to an over saturation in the carbon market, and the market price for carbon fell. The EU reduced the number of allowances they gave out, but the market never recovered, which means that most importantly, greenhouse gas emissions were not reduced as much as expected. The main disadvantage of this model is that its emission reductions are too vulnerable to economic unrest and market dealings. Tokyo, Japan Advantages Building owners who were targeted by the program have reduced their power consumption by 23 percent below the baseline level. Since Phase I, there have only been 22 transactions for carbon trade. Overall, Tokyo has had great success with their system- already 70 percent of the businesses have reached their Phase II target. Disadvantages
- 16. 13 Since this system was tailored to Japan, it would likely not work anywhere else. Firstly, 40 percent of Tokyo’s emissions come from the commercial sector, roughly twice as much as Austin. This means that most of the businesses involved in the emissions trading scheme are office and commercial buildings, which have a relatively easier path to emissions reductions than industrial buildings and plants. Secondly, the incentives simply would not work for American businesses. The fine of 500,000 yen for not meeting the Phase I goal is worth only 4,071.50 USD. The main incentive of this system appears to be public shaming in the form of publishing the name of the business and its failings in the press. Although, this tactic clearly works in Japan, there is no reason to believe that it would work in the United States. Carbon Tax British Columbia, Canada Advantages Since the inception of British Columbia’s climate action plan in 2008, per person fuel consumption has declined by 16 percent, while the rest of Canada’s consumption has increased by 3 percent (PF 2014). The carbon tax has helped to guide environmental and economic gains for the province, allowing British Columbia to maintain its status in comparison to other provinces. Political support for the tax has continued throughout its legacy, 54 percent of British Columbians supported the tax in 2008, and the public support rose to 58 percent in 2015. The increase of the public’s approval reflects the tax’s positive influence on the province. The tax revenue leads to a reduction in large and small business tax rates and a reduction in income tax rates. Additionally, British Columbia offers a climate action tax credit for low-income citizens. Disadvantages After the last tax increase in 2012, the declines in fuel consumption remained at 16 percent and have not declined since. Further tax increases may not continue to facilitate overall decreased consumption. The manufacturing and farming industries believe that they have been harmed by the impacts of the carbon tax due to reduced competitiveness in the market place. Cement manufacturers claim to have lost a third of their business to American and Asian imports. Due to heavy regulations, farmers faced competition from non- carbon taxed jurisdictions. To combat this competition, farmers requested rebates from the government to
- 17. 14 balance the market. Stephen Harper, the previous Prime Minister of Canada, is not in favor of the tax; he believes that the tax is detrimental to job growth. However, there is limited evidence stating correlation between the tax and jobs. Australia Advantages The carbon tax lead to a clear reduction in carbon emissions. In the first year of the tax, emissions were reduced by 0.8 percent. In the second year, reductions rose to 1.4 percent leading to Australia’s largest annual reduction in a decade (Milman 2014). During the last year of the tax, emissions from the electricity sector fell by 4 percent, the highest rate of any of Australia’s industries. Disadvantages It only took a year for the public to distrust the tax policy due to rising costs of electricity. The tax was not implemented correctly- it put a high burden on the consumer and businesses. The cost of electricity increased by 10 percent for the households and by 14.5 percent for industry (Robson 2014). Due to these rates, industries paid the majority of the tax resulting in high costs for the consumer. With the overall discontent of the public, the tax was abolished in July of 2014. By repealing the policy, the Department of the Environment estimates that they will save the average household $550 million per year. Electricity costs are expected to reduce by 9 percent and gas prices reduced by 7 percent. Boulder, Colorado Advantages Boulder’s carbon tax has been remarkably successful in reducing carbon emissions. As a result of this success, GHG emissions have remained almost constant despite the population and economic growth of the City (City of Boulder 2015). The average carbon tax in Boulder was on average $21 per year for residents and it generated about $1.8 million in revenue (Bhatt and Ryan 2013). The collected funds from the tax are used for the implementation of the Boulder Climate Action Plan goals. Additionally, funds from the tax are used for investments in education initiatives, energy audits, and renewable energy rebates. The overall success of the tax
- 18. 15 has lead to the public’s positive view of the tax leading to the extension of the tax for another five years. Disadvantages The true benefits of the tax have not been studied. Boulder has struggled with the calculations of emission reductions in their study of the tax. There is a new challenge facing Xcel Energy, the utility provider for Boulder, and the City of Boulder in the measurement of greenhouse gas emissions. The sources and methods needed to do such measurements are not available. Best Practices: Applicability to Austin From extensive literature review and in-depth analyses of case studies including cities, provinces, and states with existing carbon mitigation policies, research indicates there are two policy options available to Austin. Considering the physical site, the commercial situation, and environmentally focused culture of Austin, a cap-and-trade system would not be beneficial to the implementation of Austin Community Climate Plan goals projected for 2050. The carbon tax systems found in British Columbia and Boulder, Colorado provide a potential carbon policy design structure for Austin. These systems promote a phased achievement of climate goals, ease of collecting funds, and assurance of sustainable industrial and commercial development. Although much of the literature used carbon tax and carbon fee interchangeably, recent literature proposes the utility of an alternative policy design, a carbon fee, at the city scale. Due to the nature of the net-zero goals proposed in the City of Austin’s Community Climate Plan (ACCP), this alternative policy design is best suited for the green culture and values of Austin. The final goals of a carbon fee system go beyond revenue collection and include three core values: transparency, democracy, and sustainable behavioral changes. Considering these goals and values, the following section will provide a detailed model of how to implement the fee in Austin.
- 19. 16 Model Practice for Austin Proposal Considering our best practices and the key factors of the site and situation of Austin, we propose a carbon fee system for the achievement of sustainable growth and net-zero goals. A three-phase model structures the design of the carbon fee system: Acceptance, Implementation, and Advancement (Figure 2, Appendix 1). The Acceptance phase includes the strategies for gaining the socio-political consent of community and city stakeholders. The Implementation phase includes the components of the fee structure, incorporation of the fee in the city system, and the distribution of funds to targeted existing and newly created programs. The Advancement phase includes the future allocation of fee funds focusing on the promotion of education, innovation, and efficiency. Model Discussion Acceptance In 2014, the City of Austin passed the Austin Community Climate Plan with a goal to achieve net-zero consumption of carbon by 2050. To achieve these goals, the City of Austin will have to pass a carbon mitigation initiative. Through extensive research on model practices, the team decided that a carbon fee would be the best suited for the City. Yet, only Austin community members and stakeholders can decide if the carbon fee is best suited for the City. The Acceptance phase’s purpose is to engage community members including residents, commercial entities, and political entities in education and discourse regarding the carbon fee mitigation policy. By having such education and discourse, the community members will be able to answer the following questions: Can it be achieved in Austin? and If it can be achieved in Austin, has it been done in the most efficient way? Factors of Achievability To gain the community’s acceptance, the City of Austin will need to focus their discourse with the public in three areas of achievability: ease of incorporation, cost-effectiveness of the initiative, and community impacts. Since this mitigation practice involves goals in the
- 20. 17 transportation and energy sectors, the collaboration with Department of Transportation and Austin Energy would be recommended. The already existing sustainability programs of these two city entities propose such collaboration. Tools, instruments, and partnerships already utilized in these programs suggest this initiative take a cost-effectiveness route. With this route, the carbon fee will be structured in a cost-effective manner based on the successes of other carbon mitigation policies, i.e., Boulder’s Carbon Tax. This cost-effectiveness leads to greater community acceptance of this fee. The perceptions of the fee begin to change with this cost- effectiveness. The community will begin to perceive this fee as instructive and necessary for Austin to maintain its position as a leader in sustainability. The policies identified through the Acceptance phase will be reflected and utilized in the implementation as the core of the fee. Implementation After gaining the socio-political consent of community and city stakeholders, the City Council would be able to propose an initiative to pass the incorporation of the carbon fee on Austin Energy utility bills. The structure of the initiative will reflect three underlying core values of the fee: transparency, democracy, and sustainable behavioral changes. Components of this initiative would include: the fee title, rate structure, and distribution of collected funds. Fee Title Considering the site of Austin and the core values of community members, the team proposed three possible titles for naming the carbon fee: Green Climate Fund, Green Living Fund, and Climate Recovery Fund. After reviewing cities with already existing carbon fees and taxes included on their electric bills such as Vancouver and Boulder (Appendix 2), the team decided on a name for the fee: Climate Recovery Fund. The philosophy behind this decision is to promote behaviors that care for the climate and reach net-zero goals. Rate Structure To determine the rate structure, the team evaluated cities having rate structures for carbon/carbon content. The City of Boulder’s initial rates seem best suited for Austin’s application. The fee is calculated for the three sectors of Austin’s population: residential, commercial, and industrial based on current Austin Energy data. The structure of the fee rate is
- 21. 18 based on consumption of high carbon content electricity and rates vary per sector (Table 3, Appendix 1). Distribution of Funds The Climate Recovery Fund will generate 11.4 million dollars for climate mitigation spending. According to Austin’s Climate Action Plan, the major sectors responsible of emitting green house gas pollution are the Transportation and Energy sectors. Remediation is needed for climate recovery; therefore, the Climate Recovery Fund will contribute to City programs and initiatives in these sectors. Based on a qualitative analysis of the needs of Austin, the team proposed initial distribution percentages for the Austin community. The funds would be divided between city programs and residents of Austin. Transportation being the largest emitter of pollution will receive forty percent of the funds, 4.5 million dollars, to spend on current programs such as Complete Street and Parking Benefit Districts. Additionally, the funds can be used for new transportation initiatives. Energy being the second largest emitter of pollution will receive thirty percent of the funds, 3.5 million dollars, to spend on current programs such as Plug-in Austin, Solar Solutions, PowerSaver, and Austin Energy Green Building (AEGB). Similar to the Transportation sector, energy funds can be dedicated to new energy initiatives. The remaining thirty percent of funds will go to a coupon system whose funds promote a sustainable living lifestyle. Green Bucks Program To administer the coupons at the city level, the team proposed the creation of the Green Bucks Program. Green Bucks Program is a coupon system administered by the City whose purpose is to educate the Austin community on sustainable living practices in connection to the Austin Community Climate Action Plan goals. To encourage engagement in these living practices, Green Bucks will partner with the following agencies, businesses, and stores: CapMetro, B-Cycle, and Home Depot. Based on Austin Energy Accounts Quick Facts, there are 383,257 residential accounts and with the Green Bucks program receiving 3.5 million dollars, residents will have the opportunity to redeem up to nine dollars worth of items. For the promotion of alternative transportation, CapMetro and B-Cycle would be identified as potential partners. Both have existing community outreach programs and projects to propose this kind of partnership. For the promotion of sustainable residential improvements, Home Depot would be
- 22. 19 identified as a potential partner. Looking at the market presence of home improvement stores in Austin, Home Depot is the most accessible to Austin residents. The following is a proposed list of redeemable items divided by sector: Transportation o Cap Metro Weekly Pass ($11.25) o B-Cycle Monthly Membership ($11.00) Home Improvement o Philips 3-Pack Efficiency Light Bulbs ($9.97) o Clear Silicon Window and Door Caulking ($5.92) + Faucet Aerator ($3.69) This list of items includes the current market prices of these items. With these partnerships, the team foresees price reductions in these items enabling the Green Bucks to be redeemable for nine dollars worth of items. Through the overall structuring of the Climate Recovery Fund, the City of Austin will have the opportunity to educate the three sectors of the community: residents, businesses, and industries on sustainable lifestyle and consumption behaviors. Advancement Plans for advancement of Austin’s carbon fee can take several routes of progressive action. While ensuring to maintain transparency, funding can be allocated to a variety of programs and projects that will help the City of Austin achieve its carbon neutral goal. These advancements can come in the form of coupons, grants, and other incentives for action. Due to energy and transportation being such critical issues of carbon emissions in Austin, they must be addressed through the advancement phase as well. Incentives for actions that will contribute to mitigating the significant emissions of energy and transportation will have priority in the advancement phase. We propose an “Austin Energy Challenge Grant” that will resemble the “Boulder Energy Challenge Grant”. We chose this model because it has been extremely successful in providing
- 23. 20 over $300,000 to the community for helping innovate and implement carbon reducing projects and other green initiatives. These can include everything from new development of technology and implementation of existing technologies to education and outreach. The objectives of this grant will be: Provide funding for innovation and development of carbon reducing and other green initiatives Support renewable energy methods and energy efficiency Encourage development of low carbon and carbon free innovation sectors within the City of Austin Reduce overall greenhouse gas emissions within the City of Austin Funding for such projects are available to all community members within Austin as well as for external constituents who wish to contribute to the mission of Austin’s net-zero goal. This includes individual residents, academic institutions, businesses, and nonprofits. Local schools are also an effective target to distribute funds to due to the number of people being served, as well as the ease of palatability to taxpayers. Targeting these schools and providing them with the funding and resources to achieve a lower carbon footprint and more effective green practices has the potential for great benefits for the future of Austin’s goals. This helps to directly achieve concrete goals of net-zero emissions as well as providing education and opportunities to the future generations of Austin’s leaders. We propose allocating funds specifically for a grant program designated for local schools. These funds can be used for, but not limited to: School gardens Extensive and effective composting programs Improvements to make school landscape less resource intensive Energy-efficient light bulbs and thermostats Rainwater harvesting systems Associated continuing support for these programs
- 24. 21 Also a potential for progressive action on green initiatives and behavioral change is the use of a coupon system. Portions of the revenue from the carbon fee can be distributed directly back to the residents and community members of Austin. Identifying and building relations with community partners can help facilitate administration and support of these different coupons. Such coupons may include: Solar panels o Partner with solar energy manufacturers Residential rain harvesting systems o Partner with agencies such as Hill Country Alliance “Cash for Clunkers” model o Consists of trading in heavily polluting vehicles for hybrid or electric models o Partner with local car dealerships Conclusion As the United States’ attention turns to climate change, many states, regions, and cities have begun to take steps to reduce their carbon footprints through carbon mitigation polices. Austin, Texas is one of these localities that have begun to take such steps. In April 2014, the City Council of Austin unanimously approved the Austin Community Climate Plan (ACCP), which goals are to reduce greenhouse gas emissions and consumption by having citywide net-zero consumption of GHGs by 2050. For the City to meet the goals of this plan, Austin must educate its population of businesses, industries, and residents, about the importance of reducing emissions and offer incentives to promote carbon- reducing initiatives. The City already has many initiatives in place to reduce its carbon footprint. However, to succeed in being net-zero by 2050, the City will need to generate funds specifically for emissions reduction initiatives. This best practices report analyzes the successes and failures of funding and implementation strategies that other cities, provinces, and countries have utilized to meet their individual carbon reduction goals. Reviewing the carbon mitigation policies of cap-and-trade systems and carbon tax systems, the team found that the commercial and industrial sectors of Austin could not support a cap-and-trade system. Additionally, the City of Austin could not
- 25. 22 implement a carbon tax immediately due to their level of governance. Therefore, our team suggested an alternative carbon mitigation policy, a carbon fee. The carbon fee system is suitable for Austin because it can be applied with ease at the city level and it is best suited for the industrial, economic, and residential interests of Austin. After much research and discussion, the team decided upon the name and structure of the carbon fee system. Since the funds collected from the fee would go into a fund to help recover the climate of Austin, the team decided to name our policy, the Climate Recovery Fund. The fund is structured by three-phase model to allow for ease in the implementation and advancement of this fund. The phases of the model are: Acceptance, Implementation, and Advancement. Through the structuring of the fund, the City of Austin will have 11.4 million dollars for climate mitigation spending. Transportation being the largest emitter of pollution will receive 40 percent of the funds, 4.5 million dollars, to spend on current programs such as Complete Street and Parking Benefit Districts. Energy being the second largest emitter of pollution will receive 30 percent of the funds, 3.5 million dollars, to spend on current programs such as Plug-in Austin, Solar Solutions, PowerSaver, and Austin Energy Green Building (AEGB). The remaining 3.5 million dollars will be allocated the Green Bucks Program. The Green Bucks Program is a coupon system administered by the City whose purpose is to educate the Austin community on sustainable living practices in connection to the Austin Community Climate Action Plan goals. To encourage engagement in these living practices, Green Bucks Program will partner with the following agencies, businesses, and stores: CapMetro, B-Cycle, and Home Depot. Overall, the Climate Recovery Fund will enable the City of Austin to reduce their greenhouse gas emissions, educate the population on sustainable behaviors, and create funds for spending on city programs and on the community. With the implementation of such fund, the City of Austin can maintain its national recognition as a city with environmentally friendly aspirations.
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- 30. 27 Appendix 1: Tables and Figures Table 1. 2010 Economic Impact of the Creativity Sector in Austin ($Million) 2010 Output Value-Added Earnings Jobs City Tax Rev. Music $865.10 $325.63 $156.52 7,957 $9.66 Film $282.70 $187.96 $73.66 2,748 $1.08 Gaming $990.74 $256.27 $122.58 7,274 $1.21 Not-For-Profit $497.67 $303.45 $157.34 8,781 $5.66 Visual Arts $283.80 $143.92 $64.48 3,851 $3.23 Tourism/Music $806.25 $485.19 $244.65 10,191 $28.40 Tourism/Other $634.61 $381.90 $192.57 8,021 $22.35 Total Annual: $4,360.87 $2,084.32 $1,011.80 $48,823.00 $71.59 (TXP 2012) Table 2. Selected Environmental Highlights in the City of Austin (Source: City of Austin Department Websites)
- 31. 28 Table 3. Carbon Fee Calculations Sector Fee Rate Est. Annual Revenue Average Cost Per Entity Residential $0.0022/kWh $9.152 M $24/household Commercial $0.0004/kWh $1.1664 M $36/commercial business Industrial $0.0002/kWh $546 K $3,956/industrial entity Total --- $11.362 M --- Figure 1. Sectors that saw job growth in 2014 in Austin compared to the 50 largest metro areas in the United States (Austin Chamber of Commerce 2013)
- 32. 29 Figure 2. Carbon Fee Model System CarbonFee Acceptance Political Realm Social Realm Implementation Initiative Fee Structure Distribution of Funds Advancement Grants Advancement of Green Initiatives
- 33. 30 Appendix 2: Example Bills BC Hydro Residential Bill Details: (https://www.bchydro.com/accounts-billing/bill-payment/bill-details/bill-details- residential.html)
- 34. 31 Xcel Energy Residential Bill Details: (Snider, 2011)