Sure, the crisis is a complex challenge with no one solution. But while carbon pricing may not be a silver bullet, it's one we're going to need in the chamber—and critically, support is growing all along the political spectrum right when we need it.
First, a quick primer. Carbon pricing as a concept is basically just what it sounds like: attaching a market price to carbon pollution emitted from burning fossil fuels. From there, things get a little more complicated as there are several ways to do it.
Carbon Tax: The simplest approach, a carbon tax assigns a price to each unit of carbon emitted or the carbon content of a fuel, either for designated industries or entire societies. There's a clear cause and effect: the more carbon you burn and emissions you put into the air, the more you pay. Plus, the price rises over time, gradually putting more and more pressure on people or industries to cut their emissions.
Emissions Trading Scheme (ETS): Usually called "cap-and-trade" in the U.S., the principle is that a state, provincial or national government establishes a market with a limit on how much a designated set of industries can emit in a year (the "cap" part). The government then distributes and/or sells allowances to emit a certain amount to everyone in the market. If a company, for example, is going to emit more than it originally bought, it has to buy more from someone else in the market who's not planning to emit as much (the "trade" part).
Fuel Tax: This is where a government will directly tax a fuel based on the amount of say, coal itself, rather than the carbon it produces when burned.
Hybrid Instruments: An increasingly popular option, hybrid instruments combine elements of a carbon tax and an ETS.
There's more to say about each of these—and we've put together the 2017 Handbook on Carbon Pricing Instruments to say it—but the important thing is that each uses market forces to encourage people or companies to burn less carbon—and so put less pollution driving climate change into the air.
Even big energy CEOs know that climate change is real and we have to take action today. #StandWithReality:… https://t.co/eKpEy2E1Xx— Climate Reality (@Climate Reality)1493294860.0
There's a flip side in that introducing some form of carbon pricing in turn makes low and no-carbon alternatives like solar and wind a lot more attractive because they don't carry the same costs as coal, oil, or gas. Users save money while investors start shifting more into renewables as demand for the better economic option grows, encouraging more development that encourages prices to drop even further. And on and on in a virtuous cycle.
The important point: done right, carbon pricing shifts the transition to a clean energy economy into high gear. And does it by making one part of our economic system a little more fair, a little more just.
That's because carbon pricing – as economists would say—helps to internalize externalities. As normal people would say, in many cases, those responsible for carbon pollution—think power plants, fossil fuel companies—aren't the ones paying the cost of climate change. That goes to kids suffering from more frequent asthma attacks or families watching wildfires devour their houses or a hundred other examples. Carbon pricing reverses that dynamic and puts something closer to the big-picture costs of carbon into the price of burning it.
Best of all, carbon pricing can appeal to pretty much every political persuasion—and in a time when at least in the U.S., Republicans and Democrats seem to have trouble agreeing on anything other than the virtues of spicy salmon rolls and bacon cheeseburgers—that's an important thing. More and more conservatives like carbon pricing because – if done right (and that's a big "if")—it can significantly cut government regulations and give businesses greater degrees of freedom, while achieving much of the same result. Better yet, carbon pricing can be designed to become revenue neutral, meaning the money generated from the plan goes back to individual taxpayers in one form or another.
This is the approach an all-star team of Republican thought leaders and policymakers from the Reagan and Bush administrations has taken, though there is a real danger of cutting regulators like the EPA almost completely out of the picture in exchange for a carbon price, as this plan would do. Meanwhile, one economist has even boiled an approach to carbon pricing he thinks can stop rising temperatures and heat up the economy down to one page.
On the other side of the spectrum, progressives like carbon pricing because, with the right design, it can help both cut down emissions and make the world a little more fair. Two factors in particular go into making this happen. First, structuring any plan to ensure that lower-income citizens get more in benefits than they personally pay in costs. Second, using a significant part of the revenue generated to actually lower emissions by investing in clean energy—and focusing investment in communities that are already suffering from climate impacts or fossil fuel industry pollution.
Progressives also like carbon pricing because it works in the real world. Scandinavian countries—Finland, Norway, and Sweden—were the first to embrace carbon pricing back in the 90s and contrary to the scare tactic stories you might expect, have actually seen their economies grow. After introducing a carbon tax in 1991, Sweden, for example, has seen emissions drop by 25 percent while its GDP has grown 60 percent—all with what has become the highest carbon tax in the world.
It's not just idyllic Scandinavian countries making carbon pricing work either. Until the election of a premier friendly to fossil fuel interests in 2012 stalled annual rate increases, British Columbia was showing how a revenue-neutral carbon tax could work in North America to cut emissions without impeding economic growth.
More carbon pricing is on the way, too. China—the world's largest carbon polluter—has been running ETS pilots in seven major industrial cities across the country with a view to launching a national system some time this year. In the U.S., lawmakers in Washington State, Massachusetts, Rhode Island, Connecticut, and Vermont have learned from past setbacks and are working to introduce plans at the state level. Plus, Canada just announced a new plan requiring all provinces to develop some approach to carbon pricing by 2018—or adopt a hybrid federal plan that's one part fuel tax and one part ETS.
It's not only the urgency of the crisis itself that's driving policymakers to look at carbon pricing as a feasible strategy for cutting emissions. After promising to cut emissions as part of the Paris agreement in 2015, many leaders started looking into real-world paths to live up to their commitments. In a world where no country wants to be the one that can't honor their word, carbon pricing looks like a very attractive and practical path forward.
Even the CEO of Shell knows that we have to #ActOnClimate. #StandWithReality: https://t.co/FVn828hP4N https://t.co/VIxpPcREGw— Climate Reality (@Climate Reality)1494822122.0
The French writer Victor Hugo (author of The Hunchback of Notre Dame and Les Misérables, among others) once wrote, "You can resist an invading army; you cannot resist an idea whose time has come." For those who want to keep talking about glaciers in the present tense and pass a world we can be proud of on to our children, carbon pricing is an idea whose time has certainly come.
Through net metering programs, homeowners who have installed solar energy systems can get utility credits for any electricity their panels generate during the day that isn't used to power home systems. These credits can be "cashed in" to offset the cost of any grid electricity used at night.
Where net metering is available, solar panels have a shorter payback period and yield a higher return on investment. Without this benefit, you only save on power bills when using solar energy directly, and surplus generation is lost unless you store it in a solar battery. However, net metering gives you the option of selling any excess electricity that is not consumed within your home.
Generally, you will see more home solar systems in places with favorable net metering laws. With this benefit, going solar becomes an attractive investment even for properties with minimal daytime consumption. Homeowners can turn their roofs into miniature power plants during the day, and that generation is subtracted from their nighttime consumption.
What Is Net Metering?
Net metering is a billing arrangement in which surplus energy production from solar panels is tracked by your electricity provider and subtracted from your monthly utility bill. When your solar power system produces more kilowatt-hours of electricity than your home is consuming, the excess generation is fed back into the grid.
For homeowners with solar panels, the benefits of net metering include higher monthly savings and a shorter payback period. Utility companies also benefit, since the excess solar electricity can be supplied to other buildings on the same electric grid.
If a power grid relies on fossil fuels, net metering also increases the environmental benefits of solar power. Even if a building does not have an adequate area for rooftop solar panels, it can reduce its emissions by using the surplus clean energy from other properties.
How Net Metering Works
There are two general ways net metering programs work:
- The surplus energy produced by your solar panels is measured by your utility company, and a credit is posted to your account that can be applied to future power bills.
- The surplus energy produced by your solar panels is measured by your home's electricity meter. Modern power meters can measure electricity flow in both directions, so they tick up when you pull from the grid at night and count down when your solar panels are producing an excess amount of electricity.
In either scenario, at the end of the billing period, you will only pay for your net consumption — the difference between total consumption and generation. This is where the term "net metering" comes from.
How Does Net Metering Affect Your Utility Bill?
Net metering makes solar power systems more valuable for homeowners, as you can "sell" any extra energy production to your utility company. However, it's important to understand how charges and credits are managed:
- You can earn credits for your surplus electricity, but utility companies will not cut you a check for the power you provide. Instead, they will subtract the credits from your power bills.
- If your net metering credit during the billing period is higher than your consumption, the difference is rolled over to the next month.
- Some power companies will roll over your credit indefinitely, but many have a yearly expiration date that resets your credit balance.
With all of this in mind, it is possible to reduce your annual electricity cost to zero. You can accumulate credit with surplus generation during the sunny summer months, and use it during winter when solar generation decreases.
You will achieve the best results when your solar power system has just the right capacity to cover your annual home consumption. Oversizing your solar array is not recommended, as you will simply accumulate a large unused credit each year. In other words, you cannot overproduce and charge your power company each month.
Some power companies will let you pick the expiration date of your annual net metering credits. If you have this option, it's wise to set the date after winter has ended. This way, you can use all the renewable energy credits you accumulated during the summer.
Is Net Metering Available Near You?
Net metering offers a valuable incentive for homeowners to switch to solar power, but these types of programs are not available everywhere. Net metering laws can change depending on where you live.
In the U.S., there are mandatory net metering laws in 38 states and Washington, D.C. Most states without a mandate have power companies that voluntarily offer the benefit in their service areas. South Dakota and Tennessee are the only two states with no version of net metering or similar programs.
If net metering is available in your area, you will be credited for your surplus energy in one of two ways:
- Net metering at retail price: You get full credit for each kilowatt-hour sent to the grid. For example, if you're charged 16 cents per kWh consumed, you'll get a credit of 16 cents per kWh exported. This type of net metering is required by law in 29 states.
- Net metering at a reduced feed-in tariff: Surplus electricity sent to the grid is credited at a lower rate. For example, you may be charged 16 cents per kWh for consumption but paid 10 cents per kWh exported. Feed-in tariffs and other alternative programs are used in 17 of the states where retail-rate net metering is not mandatory.
Note: This is just a simplified example — the exact kWh retail price and solar feed-in tariff will depend on your electricity plan.
The Database of State Incentives for Renewables & Efficiency (DSIRE) is an excellent resource if you want to learn more about net metering and other solar power incentives in your state. You can also look for information about solar incentives by visiting the official websites of your state government and utility company.
Other Financial Incentives for Going Solar
Net metering policies are one of the most effective incentives for solar power. However, there are other financial incentives that can be combined with net metering to improve your ROI:
- The federal solar tax credit lets you claim 26% of your solar installation costs as a tax deduction. For example, if your solar installation had a cost of $10,000, you can claim $2,600 on your next tax declaration. This benefit is available everywhere in the U.S.
- State tax credits may also be available depending on where you live, and they can be claimed in addition to the federal incentive.
- Solar rebates are offered by some state governments and utility companies. These are upfront cash incentives subtracted directly from the cost of your solar PV system.
In addition to seeking out solar incentives available to you, you should compare quotes from multiple installers before signing a solar contract. This will ensure you're getting the best deal available and help you avoid overpriced offers and underpriced, low-quality installations. You can start getting quotes from top solar companies near you by filling out the 30-second form below.
Frequently Asked Questions: Solar Net Metering
Why is net metering bad?
When managed correctly, net metering is beneficial for electricity consumers and power companies. There have been cases in which power grids lack the capacity to handle large amounts of power coming from homes and businesses. However, this is an infrastructure issue, not a negative aspect of net metering itself.
In places with a high percentage of homes and businesses using solar panels, surplus generation on sunny days can saturate the grid. This can be managed by modernizing the grid to handle distributed solar power more effectively with load management and energy storage systems.
How does net metering work?
With net metering, any electricity your solar panels produce that isn't used to power your home is fed into your local power grid. Your utility company will pay you for this power production through credits that can be applied to your monthly energy bills.
Can you make money net metering?
You can reduce your power bills with net metering, using surplus solar generation to compensate for your consumption when you can't generate solar power at night and on cloudy days. However, most power companies will not pay you for surplus production once your power bill has dropped to $0. Normally, that credit will be rolled over, to be used in months where your solar panels are less productive.
On very rare occasions, you may be paid for the accumulated balance over a year. However, this benefit is offered by very few electric companies and is subject to limitations.
For decades, Earth Day has served as a global rallying cry for a cleaner, healthier planet. It's a symbolic day but only one day in a 365-day movement. But this Earth Day is different. Today we have renewed hope as leaders from almost 170 countries formally signed the Paris agreement created at last December's COP 21 climate conference. The agreement commits countries to a series of pledges to cut greenhouse gas emissions and other steps with the goal of limiting global temperature rise to well below 2 degrees Celsius (with efforts to aim for 1.5 degrees). It isn't victory, but a hopeful sign that the international community is committed to get there.
There have been global climate agreements before, but nothing with this extraordinary reach, ambition and international backing. It sends a clear message that finally, as a planet, we're serious about moving away from the dirty fossil fuels slowly destroying our planet and finally stopping climate change.
After many hard fought fights, wins, losses, optimistic moments mixed with disappointing setbacks, the climate action movement has had its fair share of ups and downs which only makes this moment more remarkable. I was awestruck by the unanimous view among all the world's leaders who were present that they have to take significant steps now to address climate change and by the fact that there was no climate denial expressed by anyone. It brought me back to the lead up to the Paris negotiations when millions of individuals, businesses and NGOs across the globe demanded their leaders do what's required to protect our planet. If you weren't at the UN ceremony, I can say that the world's leaders will be working together to protect your future.
[email protected]: The World Is Now Watching https://t.co/Ff3xfM7jj4 @UN #EarthDay #ParisAgreement #climatechange https://t.co/homqwfDrUo— EcoWatch (@EcoWatch)1461342277.0
With the Paris agreement coming into force and countries actively cutting emissions and turning to clean, renewable energy, we have both the framework we need to stop climate change and the tools to do it. Already, we can see how the agreement has transformed perspectives all around the world and spurred countries, companies, and citizens to get to work even before it's been formally signed. In just the four months since negotiators reached the agreement, Copenhagen announced plans to divest from fossil fuels, while the influential Rockefeller Family Fund began to do the same. Norway banned more than 50 firms from its sovereign wealth fund. New York State announced plans to go coal-free by 2020 while JP Morgan halted funding new coal mines. Investment in renewables reached levels double that of coal and gas.
The list goes on and on and reaches into nearly every sector. And it tells you that the world is changing in profound ways.
So let's savor this moment. Know that today, you're experiencing history in the making. Today on Earth Day, let yourself believe that finally solving climate change is possible—because, thanks to the Paris agreement, it is. Imagine a world powered by renewable energy and know that while we won't get there tomorrow, we will get there.
Tomorrow, however, it's time to act. There is real and hard work ahead of us to implement the Paris Agreement in every country that signs it and the fossil fuel industry and its powerful allies have no intention of going gently into that good night. Witness, for example, the current action against the Clean Power Plan here in the U.S. brought forward by two dozen state attorneys general. Plus, we need to make the commitments to cutting emissions now in the agreement even more ambitious if we're going to keep warming below 2 degrees.
Which countries won’t be signing the #ParisAgreement on #EarthDay? https://t.co/i154kS1gDa via @EcoWatch— TckTckTck (@TckTckTck)1461309603.0
But also know that increasingly, millions and millions of people on every continent are waking up not just to the threat climate change poses to the future of our precious planet, but also to the reality we can solve it. They're speaking up for change with a voice so loud and strong that politicians can simply no longer afford to ignore it.
And more than anything, more than any meeting of politicians, more than any agreement, that simple fact gives us hope.
Let world leaders know you support the Paris agreement—and your president, prime minister or representative know you're ready to get to work to implement it at home by signing our petition today.
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Yesterday during the first official visit by a Canadian Prime Minister to the U.S. in 19 years, the two countries made a historic and precedent-setting announcement to curb methane emissions. In addition to pledging cooperation on implementing their emissions reduction commitments under the Paris agreement, advancing clean energy and preserving the Arctic, the two North American countries both committed to cutting methane emissions from their oil and gas sectors by 40-45 percent below 2012 levels by 2025 and to explore additional avenues for reducing methane emissions.
While at first glance this announcement may seem to have a particularly niche focus, it is critically important to helping solve the climate crisis in three key ways:
1. The Announcement Demonstrates Continued Momentum for Internationally Agreed-Upon Climate Action
Last December, a year of bilateral announcements and national emissions reduction commitments culminated in the Paris agreement, where the entire global community made a historic agreement to limit greenhouse gas emissions. It was an exhilarating moment—but now countries around the world must turn their attention to the hard work of implementing their plans and increasing the ambition of their commitments over time.
This agreement between the U.S. and Canada is exactly the kind of inspiring, additive action we need to continue the momentum from Paris. The more joint announcements, the more ambition can be increased, the more countries expand their actions to include global warming emissions beyond carbon dioxide, the greater our chances become of winning the climate fight.
2. The New Plan Expands Upon Existing U.S. Enivornmental Protection Agency (EPA) Safeguards on Methane
Although carbon dioxide is the global warming pollutant with which most people are familiar, methane is nevertheless a highly potent greenhouse gas that, according to Environmental Defense Fund is responsible for about a quarter of today's global warming. The U.S. and Canada are among the top five largest emitters of oil and gas-sector methane in the world. And in the U.S. alone, oil and gas operations leak enough methane to power millions of homes.
The U.S. EPA was already in the process of developing new rules to limit methane emissions from new oil and gas operations. The U.S. and Canada's announcement sets into motion a process for the EPA to not only look at new facilities, but to take action on existing sources of methane as well.
3. Canada's National Government is Echoing the Will of Its People and Provinces
There is a reason we held a Climate Reality Leadership Corps training in Toronto last year: Canada is a crucial player in the climate fight. In recent years, the country seemed to be on the wrong track at the national level, backing away from any leadership role on climate change. But courageous regional leaders like Ontario Premier Kathleen Wynne and local activists like our Canadian Climate Reality Leaders continued calling for stronger climate action as Alberta, traditionally a fossil fuel stronghold, elected a government that unveiled a plan for both an economy-wide carbon tax and a cap on pollution from oil sands last November. Today, under Prime Minister Justin Trudeau, the national government has chartered a new course on climate action that better reflects the will of its people and regional leaders.
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2015 is shaping up to be the year when the world takes action on the global climate crisis. Business leaders, non-profit organizations, NGOs, national governments and citizens all over the world are mobilizing in the lead-up to December's United Nations Framework Convention on Climate Change 21st Conference of the Parties in Paris (COP21), where we hope national leaders will sign a strong emissions reductions agreement.
The Paris negotiations represent a critical opportunity for the international community to take a bold step forward to halt climate change. At The Climate Reality Project we believe COP21 is our best chance yet to secure a strong international agreement that includes meaningful emissions reductions commitments based on national circumstances, a system of periodic review for these commitments and a long-term goal of net zero carbon emissions.
To harness this global momentum towards COP21, The Climate Reality Project recently launched its Road to Paris campaign. The campaign focuses on garnering public support from the international community and citizens in eight key countries that are strategically significant for COP21: Australia, Brazil, Canada, China, India, Philippines, South Africa and the U.S.
In each of these countries, The Climate Reality Project's Road to Paris campaign will build on the work we've already undertaken, including training new members of the Climate Reality Leadership Corps and activating local branches, which will employ social/digital earned media tactics to educate and mobilize communities, hold events, and offer practical suggestions for grassroots action people can take to support and strengthen the commitments their national governments have made. Our partnership with Live Earth: Road to Paris will also play a significant role in the campaign and serve as a rallying point for in-country programs this summer.
So what does the Road to Paris look like on the ground?
In the U.S., our Road to Paris campaign will foster public support for the climate efforts already underway—most notably the United States' initial commitment for the COP21 negotiations and the U.S. Environmental Protection Agency's Clean Power Plan—and train a new cadre of Climate Reality Leaders.
To take a step back, the United Nations has called for each country to submit an initial commitment—officially called an intended nationally determined contribution (INDC)—for reducing carbon emissions domestically. Countries around the world have waited to see if the United States would make good on President Obama's own calls for climate action. At the end of March, the country did just that, committing for the first time to reducing carbon pollution based on real world targets with real world policies, by announcing an INDC that would reduce national greenhouse gas emissions 26-28 percent below 2005 levels by 2025.
The U.S. plans to accomplish this largely through existing policies like fuel economy standards for vehicles and the Clean Power Plan, the first-ever national standard that would limit emissions from existing power plants. This proposed rule is significant for the United States because 40 percent of the U.S. carbon pollution that drives climate disruption comes from power plants—the rule would cut emissions by 30 percent below 2005 levels by 2030, making it the largest single action that the United States has taken to address climate change.
Our goal with the Road to Paris campaign is to help provide the political and social support for the commitment the U.S. has already announced, helping to provide a bold example to encourage other countries around the world to commit to their own strong national plans. Through these efforts, we can build a powerful movement for change at COP21.
And while this year is meaningful in the context of the year-end negotiations, the Road to Paris won't end at the conclusion of COP21. Beyond December, climate change will continue to be a critical issue for countries all over the world. Particularly in the U.S., it is increasingly something that voters care about—a recent national poll of registered voters in the U.S. showed that a majority of voters favor candidates who will take action to fight climate change.
For exactly this reason, the Road to Paris campaign in the U.S. includes a Climate Reality Leadership Corps training in Cedar Rapids, Iowa, this May. The training will not only help to empower the great work of community leaders on the ground there, but will also capture Iowa's unique political significance—as the first caucus state, Iowa's voters will help determine the issues and candidates that will feature in the presidential race for the next 18 months.
The Iowa training—which will take community leaders and equip them with the knowledge and tools to communicate effectively around climate change—is one of two trainings in the U.S. this year—the other will take place in Miami, Florida in September.
As we look ahead to COP21 and beyond, we must hold leaders of all political parties and at all levels accountable for taking action to combat the largest threat the world has ever faced. We have the solutions to solve the climate crisis and—as the Road to Paris campaign shows—the international community is beginning to take action. Now we must work together to mobilize individuals, organizations and leaders to build the momentum we need to stop global climate change altogether.
Note that a version of this article appears in the May issue of Formiche.
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Last week, the U.S. took an important step forward and joined the European Union, Mexico and others in announcing a national commitment for reducing carbon emissions. Of course, with the climate negotiations happening in Paris at the end of the year, this national commitment is extremely important in demonstrating to the international community that the U.S. is serious about solving climate change.
But here at home, climate change is also becoming an increasingly hot-button issue. Recent antics like Senator Inhofe’s throwing a snowball on the Senate floor to “disprove” climate change and the series of Senate votes to establish that climate change is not a hoax indicate that politicians can no longer evade questions as to their positions on climate change. Just last week, a national poll of registered voters in the U.S. showed that 58 percent of voters favor candidates who will take action to fight climate change.
It is critical that we hold our leaders of all political parties and at all levels accountable for taking action to combat the largest threat the world has ever faced. We have the solutions to solve the climate crisis and the international community is beginning to take action—now it is a question of mobilizing individuals, organizations and leaders here in the U.S. to take urgent action.
The good news is that community leaders across the U.S. are already taking up the cause and implementing solutions. At The Climate Reality Project, we seek to find those individuals and equip them with the knowledge, tools and drive to communicate effectively and activate their communities on what can be done to solve the climate crisis.
It is for this reason that we’re bringing our highly effective international Climate Reality Leadership Corps program back to the U.S.—our 28th training will take place May 5-7 in Cedar Rapids, Iowa.
At the training, former U.S. Vice President Al Gore and I will join scientists, strategists, organizers and technical specialists to discuss the science of climate change, the direct cost climate impacts are having on communities around the world and solutions available to solve the climate crisis.
Iowa, of course, holds unique political significance—as the first caucus state, Iowa’s voters will help determine the issues and candidates that will feature in the presidential race for the next 18 months.
Additionally, increasingly extreme weather, exacerbated by climate change—including heat waves, drought and flooding—will have major negative implications for Iowa’s extensive agricultural production.
Finally, climate change may hold serious health consequences for the people of Iowa—the Natural Resource Defense Council estimates that more than 240,000 people in Iowa suffer from asthma, a condition that may worsen as climate change causes air quality to deteriorate.
In Iowa next month, the training will not only explore these negative impacts of climate change, but will also focus on the solutions at hand, building on Iowa’s strong history of supporting renewable energy.
What You Can Do
We’re looking for those passionate individuals from all political parties and backgrounds to join us in Iowa and help demonstrate to our leaders that Americans want climate action today. Our Climate Reality Leaders are critical to bringing together climate voices to call for national climate policies that will have an impact globally.
We hope to see you there.
Applications open now to be trained in Iowa by former Vice President Al Gore and other experts to become a Climate Reality Leader. This is the first of three North American trainings to be held in 2015, with others to follow in Toronto and Miami.
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