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Proxy carbon pricing: a tool for fiscally rational and climate-compatible governance

The Center for American Progress proposes that federal agencies and state governments adopt the private-sector practice of proxy carbon pricing when evaluating long-term government decisions and investments. This practice would apply to decision-making with respect to both direct government action, such as investment in transportation infrastructure, and indirect government action, such as permitting. This report focuses on energy infrastructure permitting and how a proxy carbon price could inform government decisions about the U.S. network of pipelines, power plants, transmission lines, and other facilities that transport and generate energy. Specifically, the report recommends that Congress enact legislation to require all federal agencies to use a proxy carbon price when reviewing permit applications for energy infrastructure. In the absence of legislation, the Obama administration or its successor should identify existing authorities and direct federal agencies to employ proxy carbon pricing. The report also recommends that state agencies, such as public utility commissions, leverage existing authorities that would allow them to use a proxy price when evaluating the long-term viability of potential projects.