State-level carbon taxes catalyze action---uniform action paves the way for federal follow-on

Economists have argued for national carbon pricing to effectively address carbon emissions. With the lack of action by the US government, questions arise about the impacts of state-level implementation of carbon pricing. By modelling the impacts of a carbon tax in Hawai’i, our study informs ongoing discussions of regional carbon pricing, with implications beyond the Hawai’i context. First, our state-level CGE model could be adapted to evaluate proposals in other states with carbon pricing policies before their legislatures. The structure of H-CGE has particular relevance for other states with large tourism sectors possessing some market power, e.g. Nevada, Louisiana, and Alaska. The model also has relevance to other island economies that, like Hawai‘i, generate all of their own electricity and, because they are part of larger political federations, have limited ability to impose border adjustment taxes. US-affiliated examples include Guam, the Northern Mariana Islands, Puerto Rico, and American Samoa. For sovereign island nations – such as Jamaica, Sri Lanka, Tonga, and Fiji, the H-CGE model could be modified to impose relevant trade adjustments. If Hawai‘i were to adopt a carbon tax at the level of the 2021 federal SCC, Hawai‘i’s cumulative emissions would decline by 10% over twenty years, over and above reductions from other policies already in place. In the absence of a national approach to address the global climate crisis, such state programmes could prove to be valuable demonstration projects that would help catalyze further climate action. This is important because our results strongly suggest that the goal of deep decarbonization is unlikely to be realized solely by the imposition of a carbon tax set at the SCC price by a state government. However, if more states adopt a carbon tax, then the likelihood increases that regional cooperation will emerge and facilitate the adoption of a common carbon price.Footnote15 Thus, state and regional actions to enact carbon pricing could pave the way to the adoption of a national programme.