About a year ago, I blogged about the fossil fuel divestment movement at universities, arguing that it is unlikely to have any effect, and that even if it did it would be to raise fuel prices, which we could do more directly with a carbon tax. I said that those of us at the University of California (and other top universities) should fight climate change by researching the science and policy changes that could make a real difference.
In the last year, I’ve changed my mind. Not on divestment, but on what a university can do. I owe my enlightenment to Frank Wolak, my colleague, friend and sometimes co-author at that other top university in the bay area that I will not name. Frank wrote an excellent op-ed for the Los Angeles Times last May and has since co-authored a longer policy paper, both arguing that university action against climate change should start at home, with a campus carbon tax. All expenditures by campus units would be assessed a tax based on the GHG emissions associated with whatever they are buying or activity they are supporting. Of course, that raises issues like how large the tax should be and who should get the money, which I return to below.
Two decades of U.C. Berkeley’s Greenhouse Gas Emissions Source: http://sustainability.berkeley.edu/climate
The idea is brilliant. First, it avoids the hypocritical appearance of the divestment movement, marking fossil fuel producers as evil polluters while happily continuing to consume their product. Second, it puts real incentives in place to reduce GHG emissions and sets a price against which reduction strategies can be compared. Third, and probably most valuable, it makes the campus grapple with all the difficult real-world issues that come with trying to implement cost-effective national or global policy for carbon reduction. In doing so, it creates teachable moments that could fill many courses and inter-disciplinary research projects.
The standard knock on divestment is that it is pure symbolism, with no real effect on oil or coal companies. But in an important way, I think it may be worse than that. The symbolism is likely to be counter-productive if the divesting university takes no broad-based action to reduce its own carbon footprint. To an outsider it may sound like “Shame on fossil fuel companies for producing their products. Oh, and we have no credible plan to reduce our dependence on those fuels.” I’m among the many – at least from the reactions to divestment I’ve read– who thinks that divestment is just cheap talk, because it requires no sacrifice by the divesting organization.
Estimates of U.C. Berkeley’s 2012 carbon footprint Source: http://sustainability.berkeley.edu/climate
The analogy to the South Africa divestment movement is inapt in many ways, but in any case the South Africa divestment movement was accompanied by a boycott of South African goods.
A campus carbon tax skips the moral judgment distraction and gets right to demonstrating a plan for change, a market mechanism that rewards reductions in GHG emissions. By putting a price on emissions, it also confronts a reality that is too often sidestepped: reducing emissions is costly, and not all strategies for reduction are worthwhile. If you work on climate change issues at a university, you have seen plenty of shiny campus plans for alternative energy or energy efficiency that are never clear on the cost per ton of emissions reduction. A campus carbon tax would set a marker and naturally point the analysis towards cost effectiveness.
U.C. Berkeley’s Combined Heat and Power Plant. More information (and source of this photo) at: http://files.harc.edu/sites/gulfcoastchp/ProjectProfiles/UCBerkeley.pdf
Finally, the complexity of instituting a campus carbon tax is actually its strength. The campus – and countless student seminars and senior theses – would confront the challenges of real-world issues in GHG reduction:
- What GHG emissions count? Just emissions on campus or also from upstream? How far upstream?
- Practically, how will GHG emissions be measured? This is a particular challenge for the upstream emissions for goods and services coming from places with no GHG monitoring.
- Does the tax just cover GHGs from fossil fuels? What about agricultural products?
- How big should the tax be? A starting point might be California’s cap-and-trade price around $12/ton or the U.S. government’s estimate of the “social cost of carbon” (i.e., GHG emissions), which is now commonly cited as $37/ton. In any case, a lively debate on the right tax level would be educational for all.
- Should a unit on campus be allowed to buy offsets in order to reduce its tax liability? How would the campus determine if the offsets really reduce world GHGs (i.e., are really additional)?
- Some departments or faculty are more carbon-intensive than others, perhaps due to different energy usage (a chemistry lab versus English literature research) or different travel needs (an international diplomacy scholar versus a professor who focuses on the local urban economy). Should there be some compensation for those hit hardest by the tax? How to design that compensation without distorting incentives to reduce?
- What should be done with the tax revenues? Should they be redistributed to all faculty research funds on a per-capita basis, or used for scholarships or tuition reduction, or invested in energy efficiency and alternative energy projects?
- How would this affect the competitiveness of the university? Would it make it harder to excel in energy-intensive fields? Would it help make the school a leader in alternative energy research? Would it strengthen the school’s brand?
The beauty is that these are the same issues that come up in any broad-based scheme for GHG reduction whether at the city, county, state or national level. Doing it at the campus level would bring a deeper understanding of the challenge that we face in reducing GHGs and could lead to new insights about how to overcome those challenges. Students coming out of such an experience would be far more prepared to work in the companies, governments and non-governmental organizations that are grappling with climate change policy within all the constraints of the real world.
Though Frank Wolak proposed the campus carbon tax, Stanford shows no signs of adopting it, though Yale, Harvard and MIT, among others, are discussing it. Stanford divested its (practically non-existent) coal investments last year and there was a lot of back-patting, that is, until it came out that they are deepening investment in oil and natural gas.
It is time for U.C. Berkeley to adopt its traditional leadership role on environmental issues and get ahead of other universities on the campus carbon tax. Just the process of establishing and implementing the tax would be an immense learning experience for students, staff, faculty and administrators. And it would show that we take climate change so seriously that we are willing to adopt Stanford’s best ideas to address it.
Severin Borenstein is E.T. Grether Professor of Business Administration and Public Policy at the Haas School of Business. He has published extensively on the oil and gasoline industries, electricity markets and pricing greenhouse gases. His current research projects include the economics of renewable energy, economic policies for reducing greenhouse gases, and alternative models of retail electricity pricing. In 2012-13, he served on the Emissions Market Assessment Committee that advised the California Air Resources Board on the operation of California’s Cap and Trade market for greenhouse gases. Currently, he chairs the California Energy Commission's Petroleum Market Advisory Committee and is a member of the Bay Area Air Quality Management District's Advisory Council.