Local heroes

City and provincial governments could have a crucial – and global – role to play in putting carbon pricing on national agendas.

In the face of extreme opposition coming mainly from the US Trump Administration, many are claiming that we need a “new narrative” on climate change. But better communications aren’t enough. We need much more substantial policy initiatives too: climate solutions like carbon pricing and dividends that drive this new narrative. Sub-national governments are an often-overlooked place for such policies to emerge, get tested, and force their way onto national agendas.

Photo by Denise Jans on Unsplash

This summer the US State of Hawaii passed a law that aims to raise some $100 million a year by increasing its tourism tax in order to pay for environmental projects. It’s the first “green fee” of its kind in the US and shines a light on the potential of sub-national governments – whether at city or provincial/state levels – to make a substantial difference on climate issues.

It’s relatively easy to raise taxes on outsiders, particularly when the additional cost to a family vacation will be marginal to most visitors to Hawaii. And just two years after the wildfires that destroyed large swathes of Maui, making the impact of climate change top-of-mind for Hawaiians. It’s much harder, however, to make locals pay the kinds of increased costs involved in carbon pricing policies at a scale necessary to drive accelerated reductions in emissions.

But it’s not impossible. The growing adoption of congestion pricing in a variety of European, American and Asian cities, from Singapore to San Diego, shows that disruptive and costly policies can be politically feasible IF the value proposition to citizens is clear enough.

We should be clear that the effectiveness of carbon pricing – like any policy that aims to address climate change – will necessarily be less in a single city like Singapore than in a vast country like China. We must recognise, too, that the range of policy options available to sub-national governments is more limited than at the national level.

But that's doesn’t mean that city and provincial policies can’t help. On the contrary, sub-national governments and policies can play a disproportionately influential role as testing grounds for carbon pricing policies, catalysts for getting those policies on the national agenda, and as demonstrations of practicality to national policymakers and populations. Here’s why:

• Progressive policies that might face unsurmountable opposition at a national level can often be more feasible at the local level. Sub-national constituencies – particularly cities – tend to be more politically progressive than their national counterparts. Just look at voting patterns in any developed country: divisions between the political left and right are almost always distributed along urban/rural lines. In short, in many cases it’s much easier forge a political consensus for climate policies at the sub-national level.

• Policy ideas first implemented at the sub-national level tend to find their way onto the national agenda. This is particularly true if the city or province (think Washington DC, Delhi’s National Capital Region, or the provincial-level authorities governing Beijing or Shanghai) is the nation’s capital or major commercial centre and, therefore, home to not only the national government but also substantial proportions of the media, business and cultural elites who set the national agenda. Because mainstream awareness of carbon pricing is extremely low, this local piloting can also generate broader interest and acceptance.

• More specifically, sub-national carbon pricing policies can help spread the idea that climate pollution is something that needs to be paid for (as opposed to something that can magically be regulated out of existence) and make this crucial but often overlooked concept a more prominent part of the national debate. Research from many countries has shown that the “polluter pays” principle is generally understood and accepted by voters. The more that carbon pricing is associated this principle, the less abstract and complex – and the more acceptable to the mainstream - it will become.

• Crucially, as long as revenue raised from carbon pricing (whether levied locally or imposed on tourists) is paid to citizens on a per-capita basis and not subsumed into the government’s general or operating account, regular people will see first-hand how carbon pricing benefits them financially. Because wealthier people tend to have significantly higher carbon footprints, per-capita carbon dividends act progressively, and only those most able to afford to pay carbon taxes will face higher costs.

There are important differences between policymaking at the provincial level and the city level. City governments typically have more limited authority to impose taxes. But limited tax authority doesn’t mean no tax authority. Congestion charges, property taxes and, in some cases, sales taxes, are just a few of the ways cities can generate tax revenue.

In contrast, states and provinces generally have greater capacity to impose more sweeping taxes. In some cases, provinces are so important that they set what become de-facto minimum standards (as California has done for US vehicle emissions, for example). However, their electorates also tend to be more divided between urban, suburban, and rural communities, which can lead to increased political division and make it more challenging to build the kind of consensus needed for effective policymaking.

With the political landscape in many parts of the world deeply polarized and sub-national government everywhere facing extreme budget pressures, there’s no climate policy that can provide an easy win. But the special characteristics of sub-national level governments make them a vital proving ground for new policy ideas, particularly when there is a tangible net-upside for constituents. In the case of carbon pricing – the one climate policy that accelerates positive change across consumer, corporate and investment behaviour – this is not only good for local governments but also has potential to have an outsized impact on the national climate agenda.