Bonus Episode: A Man, A Plan, A Canal, Carbon Price [Full Transcript]
Internal Carbon Pricing Teaser
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Casey: Hi, this is Pricing Nature. I’m Casey Pickett. Before we start this episode, I’d like to ask your help. The talented Yale designer Anton Sovetov, who has created countless designs for the Yale community, among them, the Pricing Nature logo, disappeared in February. If you have any information that could help locate Anton, please call 203-946-6316. Thank you.
And now, on with the show. This is Pricing Nature. I’m Casey Pickett.
Jacob: I’m Jacob Miller.
Casey: And you have joined us for a mini episode.
Jacob: It’s quite short.
Casey: We worried that you might miss us over spring break.
Jacob: And also we just have one thing to say.
Casey: Yeah, we’ve got like, one idea, we’re gonna share it, and then we’re gonna roll the credits. And like, don’t blink!
Jacob: It’s a hook of sorts… a teaser.
Casey: Yeah exactly.
Jacob: There’s a big episode coming…
Casey: Buckle up, but don’t blink.
Jacob: That’s too many idioms. I can’t follow.
So Casey, the Panama Canal. What does that make you think of?
Casey: I guess I’d say… global trade? Maybe that reductive palindrome about a man with a plan?
Jacob: Yes there is that -- Did you know there are actually two palindromes about Panama? It goes: “Are we not pure? ‘No, sir!’ Panama’s moody Noriega brags. ‘It is garbage!’ Irony dooms a man—a prisoner up to new era.”
Casey: What?! You’ve gotta be kidding me.
Jacob: It’s definitely the longest palindrome I’ve ever heard.
Casey: I don’t wanna say my mind is blown, ‘cause that’s kind of cliché, but my mind is definitely standing back, hands on hips, tongue cheek, like “huh.” Yeah, that’s amazing. That’s a phenomenal palindrome, I’m amazed.
Jacob: Well Casey, when I think about the Panama Canal, I do also think about palindromes and global trade. But now when we think of the Panama Canal, we should also think: “Carbon pricing.”
Casey: You’re kidding! You mean, they’re…
Jacob: Didn’t you read the title?!
Casey: I did, but I didn’t know whether to believe it. That sounds like a big deal… The Panama Canal is the gateway for global shipping between the Atlantic and the Pacific. NYC to Shanghai, Chile to Spain, San Francisco to Savannah… If I remember right, something like 5% of all global trade passes through the Canal.
Jacob: Exactly. That’s why I like to call this a BFD. *music stops*
Casey: Uhh… Exqueeze me?
Jacob: A bold financial decision. A brilliant, fascinating development.
Casey: Got it. A blue, frothy drink.
Jacob: Sure. Yeah. BFD.
Casey: Hey man, blue frothy drink, I’m with you! We are on the same page.
So. The Panama Canal is going to start charging for carbon emissions?
Jacob: Yep.
Casey: How do they a-man-a-plan to do it?
Jacob: Ooh that’s good. So, we spoke with Maxim Rebolledo, who’s in charge of the Canal’s decarbonization strategy. And he says they’ll be applying carbon prices to larger, less efficient ships passing through the canal. Every ship longer than 125 feet will be charged a fee, depending on how it performs on three metrics.
Casey: What are the three metrics?
Jacob: Those are energy efficiency, maneuverability through the canal (how easily it’s able to navigate the canal), and the kind of fuel it uses.
Casey: Got it. So it’s not a price-per-ton of emissions, as we’ve looked at in the past?
Jacob: Yeah, I would think of it more like those tolls on the highway, where you pay depending on how many axles your vehicle has. Except instead of axles, you’ll pay depending on the fuel you use, or the efficiency technologies that you install on the ship. Maxim explained the motivation behind this system:
Maxim: [30:53] “What we're trying to do with this is to just accelerate the change. Technology-wise, we might influence the shipbuilding industry -- definitely. When the canal was built, it actually established physical parameters for the shipbuilders to comply with. That's why a ship is called Panamax. And when we opened the new locks, ships started being built before we opened them called “Neopanamax.” So we do influence the shipbuilding industry, definitely. And these type of parameters definitely will make shipbuilders think about complying with them.”
Casey: So a price on carbon emissions in the Panama Canal could cause shipbuilders to change how they design and build. But what could shipbuilders actually do to reduce the carbon emissions from their vessels?
Jacob: Well, there are a lot of things they could do. For one, they could incorporate tech like bow thrusters which make it easier to navigate the canal… They could install motors that run on zero-carbon fuels, like ammonia made using renewable energy. And how’s this for back to the future: they could even install sails to reduce fuel consumption.
Casey: Sails? On a cargo ship? You mean like in Kim Stanley Robinson’s Ministry for the Future?!
Jacob: Sounds a little crazy, right? But several companies today are working on sail technologies to reduce cargo ship emissions.
Casey: I have a new goal: To be the reverse Ralph Waldo Emerson of our age–during the technological transition from wind to steam power, he sailed to Europe but then returned on a steam ship.
Jacob: Ah yes of course. So what you’re saying is you’d like to do the reverse.
Casey: Wouldn’t you?
Jacob: I suppose.
Casey: I rest my case.
Now, Jacob, this Panama Canal carbon price is an interesting design, and clearly important, given the central role of the Canal in global trade. But you know what really stands out to me?
Jacob: No, what’s that?
Casey: This isn’t an example of a government creating a carbon pricing policy. It isn’t a carbon tax or cap-and-trade system established by law, like the regional examples we saw in the US in episode 9, or the cap-and-trade systems in China, the EU, and Canada. The Panama Canal is autonomous from the Panamanian government… This is an example of an independent institution, pricing emissions voluntarily.
Jacob: Yeah Casey, and I think that might be the bluest, frothiest drink about this. Private actors are beginning to take climate action into their own hands, and this is happening more and more, around the world.
Casey: Oh believe me, I know! I’ve been seeing it up close and personal for over 5 years now. Every episode, I say, “I’m Casey Pickett, Planetary Solutions Project Director and Director of the Yale Carbon Charge.” But I’ve never explained what the Yale Carbon Charge is, nor how it works. I think the time has come.
Jacob: I feel like I’m about to go through some sort of rite of passage….
Casey: If you’ve been listening to Pricing Nature, you may know that states, countries, and entire regions of the planet use cap-and-trade mechanisms and carbon taxes to try to squeeze out fossil fuels from their economies. The Carbon Pricing Leadership Coalition reports that there are 45 national jurisdictions and 34 sub-national jurisdictions covered by a carbon price. That means over 21% of global greenhouse gas emissions are subject to a price on carbon.
What you may not know is that companies and institutions price carbon too. According to CDP, formerly the Carbon Disclosure Project, there are more than 800 companies already using what we call “Internal Carbon Prices.” If that’s a head scratcher, you are forgiven. Why would a company or institution put a price on its own emissions? Charge myself, you might think? Wouldn’t that be like slapping my own hand for reaching into the cookie jar? If that seems like an odd way to behave, stay tuned…
Jacob: I’ll be honest, Casey, it does seem like a pretty strange way to run your organization.
Casey: Well, then, stick around! As it turns out, some of the world’s best-known companies and universities are putting a price on their carbon emissions.
At Yale, we’re trying to understand how to use carbon pricing to drive down carbon emissions effectively and efficiently at companies and institutions. We’re using ourselves as a guinea pig, and we’ve learned a lot. Next time on Pricing Nature, we’ll share lessons from our experience, and hear from others who are researching internal carbon prices at Universities:
Joanna MC: [20:05] “A university setting is definitely the most diverse that I've encountered because you have got that total range from people who are simulating earthquakes with some clever system to people who are running a library to a cafeteria. You've got that full range of activity”
We’ll talk to experts who see a business case for internal carbon pricing:
Alex Barron: [5:15] “Institutions that are not paying attention to the cost of climate are putting themselves in a position of risk…”
Anirban Ghosh: We are all very fortunate that there are many, many clean technologies out there, which pay for themselves… Those opportunities are out there. Internal carbon pricing helps you access them faster and at scale.
Casey: And we’ll find that internal carbon pricing is no walk in the park. How do you pick a carbon price high enough to incent reductions at your company, but not so high that your employees revolt?
Jacob: How do you set up the pricing system in a way people find fair enough to participate?
Casey: How should you spend the funds generated by your carbon price?
Jacob: And how do you deal with emissions that your institution is responsible for, but doesn’t control, such as business travel and use of your products?
Casey: Join us next time to learn about the growing world of internal carbon prices, as companies and institutions take climate action into their own hands.
This mini episode was written by Jacob Miller and Casey Pickett. Sound Engineering by Jacob Miller. Original music by Katie Sawicki. Special thanks to the Carbon Pricing Leadership Coalition and the Tobin Center for Economic Policy for their partnership.