The HVACR industry, in which I spent much of my career, has been a leader in environmental progress. Since the 1970s, the industry has worked with Congress and the U.S. Department of Energy to promulgate minimum efficiency standards that make it illegal to manufacture and sell the least energy efficient heating and cooling systems. In the 1990s, industry participants worked cooperatively and with great success to find alternatives to refrigerants that were attacking the ozone layer. More recently, all sectors of the industry have been working to eliminate high global warming refrigerant gases from their new products. There have been legitimate business reasons for doing these things, but for the most part, it has been an industry that has done well by doing good.
Once again, the industry has a chance to lead in working toward a more sustainable future. HVACR companies, like most of U.S. industry, tends to prefer free market solutions over government regulation. Carbon emission pricing — in particular, the Energy Independence and Carbon Dividend Act (EICDA), currently in subcommittee as H.R. 763 — fits the bill perfectly.
EICDA proposes placing a fee on carbon emissions. The fee is assessed when coal, oil, and natural gas are extracted from the ground. The fee is then passed on to the energy distributors and shows up as price increases for the resulting gasoline, natural gas, and electricity that is produced from fossil fuels. These price increases, which will be known well in advance, will be a market signal to all energy consumers to move to alternatives, such as carbon-free electricity sources; to retrofit buildings; and to use more energy efficient HVACR equipment. The fee starts at $15 per metric tonne of carbon emissions and would escalate at a predefined rate of $10 per metric tonne a year, adjusted for inflation, so that its long-term impact on energy pricing would be known and predictable. The fees collected are then returned to all legal U.S. residents in the form of monthly dividends that can help defer the costs of higher energy prices. That annual dividend to a family of four is estimated to be $750 in year 1, rising to over $4,400 in year 10. Low-income homes would receive more in dividends than they would pay in increased energy costs.
How would the Energy Innovation and Carbon Dividend Act benefit HVACR manufacturers, distributors, and contractors, and why should the industry support this legislation? It sends a strong energy price signal to customers to invest in equipment that uses less energy. While the industry already has some very high efficiency equipment available, sales of lower cost minimum efficiency equipment continue to dominate the U.S. market. A price on carbon emissions would change the buying equation by making the industry’s higher efficiency offerings considerably more attractive.
The carbon dividend would help consumers offset the incrementally higher initial cost of more efficient equipment. There would be more winners than losers. A Citizens Climate Lobby study estimates that 72 percent of residents would either collect more in dividends than they would pay in higher energy costs or would come out even. Further, the distribution of dividends would be very progressive: 86 percent of households in the bottom quintile of the income distribution would benefit, compared to just 15 percent in the top quintile.
Of course, the EICDA doesn’t just help the HVACR industry. A Columbia University study shows that this policy by itself would reduce U.S. carbon emissions by 2030 by about 37 percent from 2005 levels. It would do so over the entire economy, rather than just on easy-to-regulate industries. That same study also shows that it would result in a net increase of 2.1 million new U.S. jobs. EICDA is fuel-neutral, as it places a fee on all fossil fuels and the electricity generated from fossil fuels. A border adjustment provision protects U.S. manufacturers from imports that were not subject to carbon emission fees in their country of manufacture.
In short, the Carbon Fee and Dividend Act is the single most effective and most easily implemented policy tool for reducing carbon emissions.
The EICDA provides a win-win-win: The HVACR industry would manufacture and sell higher efficiency equipment, less carbon would be emitted, and the customer would enjoy better equipment subsidized by their dividend check.
The customer, the industry, and planet all come out ahead!