Fossil Fuel Tax in California: A Health Impact Assessment

2009 Fossil Fuel Tax in California: A Health Impact Assessment

Rosanna Beltre, Katie Sheehan, Tina Yuen, Meredith Glaser, Bethany Hendrickson, Nicole Schneider, Linda Dix-Cooper , and Carlos Gomez

UC Berkeley 5/11/2009

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Table of Contents Contents Executive Summary ........................................................................................................................................... 4 List of Abbreviations ......................................................................................................................................... 7 1.0 Introduction ..................................................................................................................................................... 8 2.0 Background .................................................................................................................................................... 9 2.1 Fossil Fuel Policy Scoping and Overview ......................................................................................................... 9 2.2 Overview of affected sectors ..............................................................................................................................11 2.3 Benefits of a Fossil Fuel Tax in California ......................................................................................................12

3.0 Screening ..................................................................................................................................................... 13 3.1 HIA Process ...............................................................................................................................................................13 3.2 The Decision to Conduct an HIA ........................................................................................................................13 3.3 Overview of Potential Health Impacts of a Fossil Fuel Tax ......................................................................14

4.0 Scoping ......................................................................................................................................................... 14 4.1 General Framework ...............................................................................................................................................14

5.0 Assessment of Impacts & Recommendations ................................................................................. 15 5.1 Overall Effectiveness of the Carbon Tax .........................................................................................................16 5.2 Next Steps ..................................................................................................................................................................17

6.0 Transportation .......................................................................................................................................... 18 6.1 Existing Conditions ................................................................................................................................................18 6.2 Scoping .......................................................................................................................................................................20 6.3 Health Effects from Tax on Transportation ..................................................................................................22 6.4 Research Questions and Methods .....................................................................................................................25 6.5 Assessment of magnitude, direction, and certainty of health impacts ...............................................28 6.6 Discussion .................................................................................................................................................................29

7.0 Food & Agriculture .................................................................................................................................. 29 7.1 Existing Conditions ................................................................................................................................................30 7.2 Scoping .......................................................................................................................................................................31 7.3 Potential Health Impacts .....................................................................................................................................33 7.4 Research Questions & Methods .........................................................................................................................34 7.5 Assessment of Magnitude, Direction, and Certainty of Health Impacts ..............................................34 7.6 Discussion .................................................................................................................................................................36

8.0 Home Energy .............................................................................................................................................. 37 8.1 Existing Conditions ................................................................................................................................................38 8.2 Scoping .......................................................................................................................................................................39 8.3 Potential health impacts from a carbon tax ..................................................................................................43 8.4 Assessment of Magnitude, Certainty, Direction, and Impact ..................................................................44 8.5 Discussion and Research Questions ................................................................................................................46

9.0 Assessment of Alternatives for Revenue Redistribution............................................................ 48 9.1 Reinvestment in Renewable or Cleaner Technology .................................................................................48

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9.2 Redistribution to Low-Income Families .........................................................................................................49

Appendices ......................................................................................................................................................... 51 References .......................................................................................................................................................... 64

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Executive Summary This policy proposes implementation of a tax on fossil fuels in California in order to reduce harmful greenhouse gas emissions. We analyzed the potential impacts of the tax on human health, focusing on the following specific sectors: transportation, agriculture, and home energy.

Revenue raised from this tax will be substantial, estimated at $6.39 billion per year at the highest tax rate from all three sectors combined. Recommendations for revenue expenditure include reinvesting the money to stimulate green jobs and technologies, and/or reinvesting funds back to lower-income families in order to make the tax less regressive.

We expect to see about a 3% reduction in greenhouse gas emissions over 5 years, compared to business as usual. Revenue raised by the tax could be invested to bring California even closer to the emissions reductions required by AB 32.

Overall, impacts on health are expected to be minimal, though a tax on the transportation sector, will result in small positive health impacts for all Californians. Some minimal negative effects on health would result from a tax on the home energy sector. These effects may be mitigated through certain reinvestment strategies.

Health impacts from a fossil fuel tax include: Fewer fatalities and injuries from auto collisions Fewer auto-pedestrian accidents Fewer extreme asthma events Potential for improved blood pressure near roadways Fewer sleep disturbances Fewer fatalities and injuries from auto collisions Fewer auto-pedestrian accidents Fewer extreme asthma events Potential for improved blood pressure near roadways Fewer sleep disturbances Recommendations to strengthen the proposed tax include increasing the tax rate, taxing methane emissions in addition to carbon dioxide, and advocating for a federal level fossil fuel tax.

Why Mitigate Greenhouse Gases?

Climate change is the warming of Earth‘s atmosphere due to increasing emissions of heat-trapping greenhouse gases. There are myriad impacts to human health and ecology associated with climate change. Because of increasing concern in the scientific community and public, both individuals and governments are attempting to make changes that will mitigate future climate change.

Greenhouse gas emissions in California have been steadily rising from 420 million tons of carbon dioxide equivalent in 1990, to a 475 million ton average between 2002 and 2004. The California

Figure 1. Trends in carbon dioxide emissions, 1970-2004

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Air Resources Board estimates that emissions will reach nearly 600 million tons a year by 2020 if effective climate change mitigation is not employed.

Currently, transportation is responsible for 38% of total greenhouse gas emissions in California, followed by the electricity sector contributing 23% (including in-state and out-of-state production), and agriculture at 6% (CARB GHG Inventory, 2008).

Additional pollutants are often associated with emissions of greenhouse gases. Termed co-pollutants, levels of these pollutants increase or decrease in tandem with greenhouse gases. These co-pollutants are often associated with adverse health effects such as asthma (EPA Particulate Matter, 2009). Decreasing greenhouse gas emissions will decrease the co-pollutants that harm health.

Fossil Fuel Tax This policy was based on the fossil fuel tax, or carbon tax, implemented in British Columbia, Canada in 2008. The policy will tax virturally all fossil fuels consumed in the state, beginning at a rate of $10 per ton of carbon equivalent. The tax rate will increase incrementally until reaching $30 per ton in 2012.

The tax is revenue neutral. Money generated by the carbon tax will be returned to individuals and businesses via reductions of other taxes. None of the revenue will be used for expenditure programs. To help offset the cost of the tax, lower-income families will receive an annual Climate Action Credit of $100 per adult and $30 per child.

Health Impacts from a Fossil Fuel Tax Transportation A tax on gasoline and diesel fuel would slightly improve health by decreasing vehicle miles traveled.

Increased gas prices at the pump will result in fewer tailpipe emissions of both greenhouse gases, and harmful particulate matter, or soot. An overall decrease in driving will result in fewer severe asthma cases, less sleep disturbance from traffic noise, and fewer injuries from collisions.

Agriculture A fossil fuel tax on agriculture and food production will likely have a negligible effect on health. The increase in food costs from the tax is not likely to be substantial enough to generate a large shift in dietary patterns; however, rather than redistributing the tax revenue, the revenue could be reinvested to promote or subsidize healthy foods grown in California.

Home Energy Increased home energy prices will have a negative effect on health in low income households across California. Child development may also suffer due to tradeoffs between spending on health care, nutrition and housing conditions. Increased heating and cooling costs may result in higher morbidity and mortality during cold winters and heat waves.

Effects on Low-Income Families A carbon tax that effectively mitigates greenhouse gases will disproportionately affect low-income and rural families, as well as the elderly. Because the tax is broad-based and Figure 2. Expected increase in cost of living per household.

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affects multiple sectors, the cost of living for low-income Californians will rise by an average of $90 to $213 per year at the different tax rates, or an average of $152 per year. The regressive nature of the carbon tax may be mitigated by our recommended reinvestment and redistribution proposals.

Recommendations and Future Directions The total revenue generated from all three sectors affected by the carbon tax is estimated to be $6.39 billion per year at the highest tax rate, with contributions of $5.4 billion from transportation, $145 million from agriculture, and $846 million from home energy.

Potential reinvestment strategies include: Redistributing the revenue to low-income Californians Investing in sustainable energy development and fuel efficient technologies To mitigate the regressive nature and disparate health impacts on susceptible populations, we suggest reinvesting revenue in affordable, accessible, and energy efficient public transportation, home energy efficiency programs, local agriculture production for healthy foods, and providing $50 annually to each low-income adult and $25 for each low-income child, with added special assistance for rural low income families.

The policy would be further strengthened by increasing the tax rate, keeping necessary support for low income households, and making the policy more comprehensive. We propose that the California Air Resources Board implement this fossil fuel tax, but at a higher rate of $100 per ton of carbon. This higher tax rate will provide consumers and energy producers with incentives to change behaviors, as well as increase revenue for reinvestment programs, mitigate greenhouse gas emissions, and protect public health. The tax would better reach its goals of carbon emissions reductions if it included carbon dioxide-equivalents, such as methane from agriculture, as taxable emissions. The California carbon tax should also serve as a model for a federal-level tax. A federal tax would avoid putting California businesses and individuals at an economic disadvantage and more effectively mitigate greenhouse gases nation-wide.

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List of Abbreviations AB 32

Assembly Bill 32: The California Global Warming Solutions Act of 2006

BAU

Business as usual

CARB

California Air Resources Board

CH4

Methane

CO

Carbon monoxide

CO2

Carbon dioxide

dB

Decibels

GHG

Greenhouse gases

NOx

Nitrogen oxides

PM

Particulate matter

SES

Socioeconomic status

USEPA

US Environmental Protection Agency

VMT

Vehicle miles traveled

WCI

Western Climate Initiative

WHO

World Health Organization

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1.0 Introduction Global climate change has gained public awareness since the 1970‘s, but especially since the establishment of the Kyoto Protocol in 1997. Also referred to as ‗global warming,‘ climate change denotes a warming of the Earth‘s atmosphere due to increased emissions of heat-trapping greenhouse gasses. The myriad impacts on ecology and human health associated with climate change has catalyzed individuals and governments to make political and lifestyle changes that attempt to mitigate future climate increase. This report is a Health Impact Assessment of one strategy to reduce greenhouse gas emissions: a tax on fossil fuel use, or more commonly known as a carbon tax.

Since 1990, the Intergovernmental Panel on Climate Change (IPCC) has published numerous reports scientifically documenting climate change. The latest 2007 report definitively linked climate change to everyday human actions, concluding that future increases in average global temperatures are unmistakable and will ultimately result in increased ocean temperatures, melting snow caps, and rising global seal levels (Norcia, 2008). The IPCC noted that the increase in temperature over the last 50 years is above and beyond the natural variability of temperatures and identified increased emissions of greenhouse gasses (GHG‘s) as the cause of unnatural warming.

The three most common GHG‘s are carbon dioxide (CO2), methane (CH4), and nitrous oxide (N20).

Between 1705 and 2005 CO2 has increased by 35 %, N2O by 18%, and CH4 by 142.5 %. Levels of all three GHG‘s surpass the natural range of emissions from the last 600,000 years, as shown by ice cores from geologic data (IPCC, 2007).

Figure 1A: Global changes in temperature from 1930-2005 (IPCC Report 2007)

CO2 is naturally produced by soil respiration and is a byproduct of burning fossil fuels (Raich and Schlesinger, 1992). When the atmosphere is in balance, CO2 is removed from the atmosphere by terrestrial and oceanic plants. However, since the industrial revolution, the balance of the carbon cycle has been compromised by exponential increases in burning of fossil fuels and deforestation (EPA CO2).

Carbon dioxide contributes to the most GHG emissions by volume. Figure 1B below illustrates the exponential increase of CO2 emissions, especially over the past 20 years.

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Figure 1B: Historical Greenhouse Gas Emissions (IPCC report 2007)

Fossil fuel combustion also generates harmful co-pollutants that have linked to negative health effects in humans (Bell, 2008). Research has revealed that high levels of air pollutants have been associated with increased respiratory and cardiovascular related emergency room visits, excess mortality, and decreased life expectancy (Schwartz, 2004; Peel, 2005; Peel, 2007; Kinney, 1991; Dockery, 1993; Pope, 2009).

Although a number of co-pollutants are associated with burning of fossil fuels, this HIA focuses on health effects associated with particulate matter (PM). PM is a complex mixture of dry solid fragments, solid cores with liquid coatings, and small droplets of liquid that can be made up of metals, soot, soil, dust, and gaseous air pollutants (Schlesinger, 2006; CARB Almanac Emissions Projection Data). Sources of airborne PM include burning of fossil fuels or wood, and wind-blown dust (CARB Almanac Emissions Projection Data). PM2.5 and PM10 are of concern because they can easily penetrate into the airways and lungs can produce negative health effects. Increasing concentrations will have a significant negative health impacts (Confalonieri, 2007; Pope, 2009).

The United State is one of the top emitters of GHG at 20 tons per capita. In comparison, Japan emits less than 10 tons per capita (Appendix 1.0A). California itself is one of the top five emitters in the U.S. (Environment News, 2007). In an effort to reduce GHG emissions, Assemblyman Núùez introduced AB 32, the California Global Warming Solutions Act, in 2006. The bill requires a GHG emissions reduction to 1990 levels by 2020 (AB 32 Factsheet).

2.0 Background 2.1 Fossil Fuel Policy Scoping and Overview AB32 represents a milestone in California that placed climate change at the forefront of the political agenda. The California Air Resources Board (CARB) was entrusted to scope its implementation and decrease greenhouse gas (GHG) emissions by 15 % from 2008 to reach 1990 levels. The CARB scoping plan focused on several key elements: expand and strengthen existing energy efficiency programs, achieve statewide renewable energy mix, and developing a cap-and-trade program (AB 32 Scoping, 2008).

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A carbon tax policy was not part of the CARB scoping plan for several reasons: a strong focus on energy efficiency and boosting the California economy through development of green jobs and an emphasis on working with the Western Climate Initiative (WCI) partner programs. Also, the U.S. does not have experience with direct taxation of pollutants as an effective policy and development of green energy jobs shift the paradigm. For example, instead of decreasing vehicle miles traveled (VMTs) and emissions by taxing gasoline, it focuses on fuel-efficient cars. A partnership with WCI restricted the scoping plan to policies that other partners approved. In addition, unfamiliarity with a carbon tax system may have excluded a carbon tax from AB32 scoping. Unlike a carbon tax, a cap-and-trade has been successfully implemented in the U.S. to reduce SO2 emissions (Metcalf et al., 2008).

The WCI partnership includes Arizona, Oregon, Washington, and New Mexico, as well as the Canadian provinces British Columbia, Quebec and Ontario (WCI, 2009). WCI is committed to cooperative ways to address climate change by reducing regional GHG emissions. The formation of the WCI is essential to preventing capital flight from western states due to a tax on GHG emissions. As part of the WCI partnership, a cap-and-trade market-based system has been recommended (WCI, 2009). As California is collaborating with WCI, carbon tax policy was excluded from the AB32 scoping plan.

Carbon tax policies are not a new idea; countries like Denmark, Finland, Norway and Sweden adopted a carbon tax in the 1990‘s. In the U.S several bills for a carbon tax have been proposed; in 1993, President Clinton introduced an energy tax which failed to generate republican support. More recently, U.S. Representative Jon B. Larson (D-CT) embarked on a quest to introduce a carbon tax which will redistribute revenue to low-income families (Broader, 2009). Although the carbon tax system has been around since the 1990‘s the verdict on its effectiveness has not been confirmed or fully assessed.

However, Denmark has been succesful at lowering emissions of carbon dioxide (CO2) per capita by nearly 15% from 1990 to 2005, while posting a remarkably strong economic record and without relying on nuclear power. The success of carbon tax in Denmark has been attributed to using the tax revenues to redistribute the money back to industry via subsidized grants for environmental innovations (Prasad, 2008).

In addition to action at the federal level, at the state level AB 32 stands alone as the central policy for climate change mitigation. Further efforts by the Bay Area Air Quality Management District have set the stage for a carbon fee on over 2,500 companies in the Bay Area, including power plants, supermarkets and gas stations that will pay $0.044 for every metric ton of carbon emitted. This fee is focused on stationary sources of CO2, which account for less than 50% of the Bay Area‘s GHG emissions (Carbon Fee Factsheet). Such a fee will cost the top ten polluters a total of only $800,000 per year (Zito, 2008). Although this number may seem large, considering the multimillion dollar oil refinery industry housed in the Bay Area, this fee is insignificant and will not curb CO2 emissions.

GHG emissions in California have been steadily rising from 420 million ton of CO2-eq in 1990, to a 475 million ton yearly average between 2002 and 2004. CARB estimates these numbers will rise to nearly 600 million ton a year by 2020 if effective climate change mitigation is not employed. Within these projections different sectors contribute varying amounts of CO2-eq‘s (GHG emissions Inventory, 2009).

Transportation is responsible for 38% of total GHG emissions in California, followed by the electricity sector contributing 23% (including both in-state and out-of-state production), and agricultural at 6% (CARB climate change scoping, 2008). These numbers illustrate the large contribution of the California Carbon Tax: A Health Impact Assessment - 10 -

transportation sector in GHG emissions, if a cap-and-trade system is adopted as projected in the CARB scoping plan, only stationary sources will be taxed, limiting the scope of the policy and potentially resulting in hot spots of pollution around stationary sources who can afford to pollute.

Adaptation of Fossil Fuel Policy An effective mitigation policy should be comprehensive and target multiple sectors including stationary and non-stationary sources. With this assumption we have used the British Columbia carbon tax policy as a model for California. Although British Columbia is a member of WCI that promotes a cap-andtrade system, in 2008 they introduced a carbon tax. The purpose of the tax is to encourage individuals and businesses to make more environmentally responsible choices by reducing their use of fossil fuels and related emissions. The tax has the advantage of providing an incentive without favoring one way to reduce emissions over another. This tax will apply to virtually all fossil fuels, including gasoline, diesel, natural gas, coal, propane, and home heating fuel. The tax will be phased in to give individuals, businesses, and industry time to adapt, innovate, and reduce the impact of the tax. The carbon tax starts at a rate based on $10 per ton of associated carbon, or carbon-equivalent, emissions and will rise by $5 a year for the next four years, reaching $30 per ton by 2012 (BC Carbon Tax Fact sheet).

Under a carbon tax it is assumed that business will transfer cost to the individual. Thus, low-income families and individuals may be negatively impacted. This carbon tax policy provides some protection to this susceptible population by distributing an annual Climate Action Credit of $100 per adult and $30 per child. In addition, the carbon tax is revenue neutral. All revenue generated by the carbon tax will be returned to individuals and businesses through reductions to other taxes. None of the carbon tax revenue will be used for expenditure programs. The carbon tax is based on per ton of carbon dioxide equivalent emission from the combustion of each fuel (for more details see Appendix 2.1A) .We evaluated its strengths and weaknesses in terms of health and proposed a set of recommendations to make this policy more effective in California.

2.2 Overview of affected sectors This HIA will evaluate the health impacts of three sectors: transportation, home energy, and food production.

Transportation: The primary effect on the transportation sector is a tax on gasoline at the pump.

Additional taxes on the transportation sector are discussed later in the paper. Assuming that the increase in gas prices affect consumer behavior, the direct result will be fewer vehicle miles traveled (VMT).

Health outcomes associated with reduced VMT include fewer auto collisions, fewer pedestrian-auto collisions, less disturbance due to traffic noise, and a reduction in air pollution related disease and illness (see transportation scoping for more details).

Home Energy: The cost of natural gas, a fuel that is used in households across California for basic needs such as home temperature control, water heating and cooking, is expected to increase. Rising home energy prices will not change consumption patterns as discussed in the home energy elasticity section, and will lead to budget trade-offs in low income households where home energy use comprises a larger portion of their budget than in medium and high income households. Trade-offs between home energy use, nutrition, housing conditions, and temperature control can adversely impact the health of California Carbon Tax: A Health Impact Assessment - 11 -

developing children in low income households who already experience disproportionately high rates of disease and illness (see home energy scoping for more details).

Food & Agriculture: By introducing a carbon tax, California hopes to mitigate climate change, protect crop yields, and cushion the State‘s economic vitality; however, a carbon tax has other potential consequences. We anticipate the industry to offset the new costs to consumers, thus increasing food prices. Raising food prices may burden specific communities in California, especially low-income populations. Based on demand and income elasticities we calculated the impact of higher beef and dairy prices on consumption and found the increase costs to have a minimal impact on consumption and therefore health.

2.3 Benefits of a Fossil Fuel Tax in California California is particularly vulnerable to negative impacts of climate change. A report from the California Climate Change Center notes that a warming California climate would generate more smoggy days due to increase ozone formation and warm temperatures will foster more large brush and forest fires. It has been estimated that if global greenhouse gas emissions continue its exponential trajectory rate, by late in the century California will lose 90 % of the Sierra snowpack, sea level will rise by more than 20 inches, and there will be a three-fold increase in heat wave days. These impacts will translate to numerous negative health impacts across the state; increased heat waves, fires and increased pollution disproportionally affects the elderly, children and low-income families. Low-income individuals may not have the resources to adapt to increase heat waves and loss of water supply. Furthermore, the implications of increased fires and loss of water supply in the California‘s economy are estimated to be in the billions of dollars loss each year, if the state continues business as usual (AB 32 scoping plan).

Implementing a fossil fuel tax in California will beneficially reduce GHG emissions and alleviate associated negative health impacts. Besides the health benefits, continuing with business-as-usual will financially burden the state; implementing a fossil fuel tax will generate a total of $26 billion by the affected sectors over 5 years. At the highest rate, a tax on fossil fuels will generate $6.39 billion per year from transportation, $150 million per year from agriculture, and $846 million per year from home energy. The revenue generated from the carbon tax will allow California to reinvest the money in green technology for further mitigation of CO2 emissions and associated co-pollutants. In addition, this tax will place California at the forefront of climate change mitigation in the United States and set an example for effective policies at the state level.

The carbon tax intends to target the sources that emit the most greenhouse gases in California. The carbon tax will increase cost of transportation, home energy, and food production, thus the cost of living will increase for every Californian. For an average low-income family of four with two working parents, the carbon tax will add an average of an additional $152/year to cost of living, not including electricity, consumer goods, and increased costs of public building energy.

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3.0 Screening 3.1 HIA Process Health impact assessment (HIA) is a ―systematic assessment of potential health impacts of proposed public policies, programs, and projects, offers a means to advance population health by bringing public health research to bear on questions or public policy‖ (Cole, 2005). HIA strives to make the health impacts of social decisions more explicit by using diverse methods and tools to identify and characterize the health effects of policies (Quigley, 2006). HIA draws upon diverse sources of knowledge, expertise, and experience in conducting the assessment. HIA also offers alternatives or improvements to policy decision to enhance positive health impacts and mitigate or eliminate negative health impacts. A typical HIA involves five stages: screening, scoping, assessment, communication, and monitoring.

Steps in the HIA Process

3.2 The Decision to Conduct an HIA AB 32 is an ambitious plan that calls for a reduction in California‘s carbon footprint by reducing greenhouse gas emissions to 1990 levels by 2020. This will mean cutting approximately 30% from business as usual emission level projected for 2020, or about 15% from today‘s levels (AB 32 Scoping Plan, 2008). California recognizes that now is the time for new ideas, new solutions, new cleaner and greener energy technology to meet these necessary goals. Currently, the cornerstone of the plan to is a cap-and-trade program with other Western Climate Initiative partner programs to create a regional market system to reduce GHG emissions. The cap-and-trade program would place progressively stricter limits on GHG emissions, require power plants, industries, and other major sources of greenhouse gases, to purchase permits to pollute and establish a market with those permits. As the cap-and-trade option has many supporters, including President Obama, there is some opposition and alternatives have been proposed.

Carbon tax is an alternative plan that has benefits that may outweigh the cap-and-trade system.

Proponents of carbon tax state that the overriding benefits include its simplicity and transparency. A tax California Carbon Tax: A Health Impact Assessment - 13 -

also covers the entire economy, not only stationary sources of GHG emissions, and would include automobiles, household energy use, and agriculture. A carbon tax would raise a clear amount to revenue that can then be used for targeted purposes such as a tax breaks for low-income families or investment into new energy efficient technologies (Yale Environment 360, 2009). However, CARB does not address a carbon tax as a viable option for meeting its GHG emission goals. Carbon tax and cap-andtrade systems both have benefits and trade-offs and it is the purpose of this HIA to assess the carbon tax, using a feasible hypothetical scenario, and it‘s potential health benefit as an alternative to the proposed cap-and-trade system.

3.3 Overview of Potential Health Impacts of a Fossil Fuel Tax The implementation of an effective carbon tax may have far-reaching health benefits, in terms of populations affected and the health impacts themselves. Even with small reductions in consumption of fossil fuels per person, the cumulative reduction in emissions of CO2 and co-pollutants over a population of 36 million would be quite large.

All Californians would benefit from improved air quality. However, additional health benefits would be seen near highways, major roadways, trucking corridors, and ports.

Positive Health Impacts of Carbon Tax: Primary indicators of health benefits associated with a carbon tax in California include a potential decreased rate and of vehicle collisions, decreased air pollutionrelated diseases, and decreased noise disturbances.

Negative Health Impacts of Carbon Tax: One concern with the carbon tax is that it may disproportionately burden low-income families by affecting a higher percentage of their daily expenditures. This issue of a regressive tax has been addressed in the original policy by making the tax revenue neutral and reducing the burden on low-income Californians by redistributing revenue to lowincome households. We also examine whether this is an effective method of mitigating potential negative health impacts to low-income families.

4.0 Scoping 4.1 General Framework The carbon tax will directly raise the cost of fossil fuels, affecting both individual households and private businesses. The direct costs applied to the households (ie. increased gasoline prices at the gas pump) will have immediate and foreseeable impacts on the family‘s budget, but the indirect costs passed down to the public via increases in prices of goods and services is less direct and unpredictable.

Increases in the price of goods and services will have two effects. The demand for these goods and services associated with higher GHG emissions will decrease and can possibly lead to decreases in traffic related noise injuries, vehicle miles traveled, and improvements in air quality. These are the cobenefits of decreasing GHG emissions. On the other hand, increases in direct and indirect costs of goods and services may also disproportionately affect low-income households, reduce their disposable

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income, negatively affect their housing conditions, and create food insecurities. These impacts are negative health determinants that can lead to poor health outcomes.

Another predictable outcome of the applied carbon tax is revenue generation, which then can be redistributed in either a credit for low income families that may be disproportionately impacted by the increases in the cost of essential goods and services or reinvested into energy efficiency technologies and programs.

The three sectors, food/ agriculture, transportation, and home energy, were chosen for analysis because a carbon tax in these areas would have the greatest impacts to the household budget. These sectors also account for large portions of the GHG emissions in California and reductions in these areas secondary to a carbon tax will help fulfill AB32‘s goals.

Figure 4.1A General Scoping

Changes in consumer price affecting food, transportation and household energy

Change in demand

Decrease traffic related noise and injuries Decrease VMTs Improvements in outdoor air quality Change in food consumption patterns

Increase in consumer expense (direct & indirect)

Carbon Tax

Revenue redistribution

Credit for low -income individuals Reinvestment in energy efficient technologies and programs

Disparate impacts to low income individuals Reduction in disposable income Housing conditions Food security

5.0 Assessment of Impacts & Recommendations The health impacts associated with a carbon tax vary between sectors. The reduction in vehicle miles traveled will result in better air quality and a small decrease in respiratory associated disorders, but disease and illness related to trade-offs in housing conditions and other essential needs will augment as a result of combined rising household costs in transportation and home energy. The costs of household food will increase minimally and will not affect health status. Overall, the carbon tax will have minimal California Carbon Tax: A Health Impact Assessment - 15 -

cumulative positive or negative effect on population health in the short term and long-term health impacts can be avoided altogether if our recommended actions are taken.

A multi-faceted approach to mitigating the predicted negative health impacts on susceptible low income and rural households is necessary. In order to strengthen the policy, we recommend amending it in the following four ways: Implement a combination of household carbon tax credits and alternative energy efficient programs and services geared toward mitigating the financial burden for low-income households (outlined in section 9.1 and 9.2). Among low-income households, adults will receive $50 and children will receive $25 every year, annually throughout the 5-year period. This is necessary to serve as a way to have the bill passed, and to recover the $758 incurred over the 5 years on lowincome families.

Include methane and nitrous oxide carbon equivalents in agriculture as part of the carbon emissions calculations and to consider a nationwide tax to mitigate the impacts on local producers and businesses.

Advocate for a federal level policy in order to avoid harm to California‘s markets. Given the flow of goods across state lines, a federal program would help eliminate a competitive advantage of other states and reduce has incurred on local businesses, agriculture, and residential energy.

New Zealand may serve as a model for ensuing the competitiveness of each state with implementation of a carbon tax (Scrimgeour, 2005) Increase the tax rate to $80-100 per ton in order to effect significant behavior change and curb GHG emissions. Experts estimate that the tax must be much higher if any changes are to be seen (IPCC Report, 2007; Deakin, personal communication, 2009).

5.1 Overall Effectiveness of the Carbon Tax The carbon tax in California will effectively generate nearly $26 billion in revenue over the first five years. This provides a significant source of funding for a variety of related climate change investments.

From clean technology to assistance programs that prevent low-income families from suffering a disproportional burden due to increasing energy cost, the opportunities to move California toward a greener economy and infrastructure cannot be denied.

In the long term this tax will help to reduce greenhouse gas emissions; however, the carbon tax will not effectively reduce greenhouse gas emissions in the short term. The tax on food, gas, and home energy will be negligible, and consumer behavior is not likely to change due to the tax alone. As the tax increases over the first five years, the severity of the tax will begin to show an effect as the cost to the consumer begins to rise. In the long term, the tax will increase to a level that will result in a necessary reduction of fossil fuel use due to both the unaffordable cost to the consumer and the supply-side

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increase in opportunities for investment in clean technology. Pressure on energy suppliers to provide cheap, clean energy will stimulate research and development.

The California Global Warming Solutions Act of 2006 (AB 32) requires California to reduce greenhouse gas emissions to 1990 levels by 2020, but the means to achieve this goal have yet to be instituted. The current plan establishes a cap-and-trade program in an effort to stimulate investment in green technology and clean business. In contrast to CARB‘s cap-and-trade proposal, there would be no loopholes such as ―pay-to-pollute‖ in a carbon tax policy. Revenue raised from a carbon tax would stimulate growth of green businesses, as well as pressure current businesses to invest in proven methods of emissions mitigation. Thus, a carbon tax is a viable alternative to achieving AB 32 goals. The financial impacts are better predicted in a carbon tax, allowing for policy adjustments and avoiding disproportionate health impacts on susceptible populations. The British Columbian carbon tax, marketed as a social change movement, was implemented to strengthen the economy and investment climate during predicted times of economic hardship south of the border (Fowlie, 2008). It isn‘t yet known whether the tax achieved its goal of changing energy consumption behaviors and reducing emissions, but it is considered a successful policy overall. A phased-in carbon tax in California will be more effective at reducing longterm fossil fuel consumption.

5.2 Next Steps Successful implementation of the proposed California carbon tax requires both leadership and a collective understanding of the need to reach practical and lasting solutions to climate change. This will require establishing integrative partnerships, collecting additional research, and receiving public support.

CARB must work with key federal agencies, including the U.S. Department of Energy and their national labs, the U.S. Environmental Protection Agency, the U.S. Bureau of Land Management, the U.S. Department of Agriculture, the U.S. Department of Transportation, and others. Building on partnerships with State and local governments is also necessary in order to ensure their role as ―incubators‖ of climate change. These local agencies have the ability to implement effective programs such as vehicle standards, energy efficiency programs, green building codes, and alternative fuel development as well as propose strategies to manage any potential health impacts resulting from this tax. Pairing with California‘s academic institutions is necessary to support and stay up to date on current research into climate change. Both private and public research institutions as well as coupling with industry can combine the vast knowledge with business expertise and can be a forceful collaboration in tackling the problems associated with climate change. Including the public in the findings of the HIA as well as in all future measures is necessary to keep the process transparent, to identify all stakeholders, and to promote buy-in. State agencies involved in measure development will continue to meet periodically with communities to assess any challenges to implementation, or to discover possible new measures or approaches. Stakeholders will be invited to participate in the many additional workshops, workgroups and seminars that will be held as individual measures are developed.

California Carbon Tax: A Health Impact Assessment - 17 -

6.0 Transportation Transportation is the largest source of greenhouse gas (GHG) emissions in California, constituting 38% of all GHG emitted in the state in 2004 (CARB GHG Inventory, 2009). Between 2005 and 2007, Californians drove on average 182 billion miles per year and consumed roughly 19 billion gallons of gasoline and diesel per year (California State Board of Equalization, 2009; California Department of Transportation, 2008). These figures are steadily increasing as both population and suburban sprawl increase. It also represents an opportunity to make significant changes in VMT and air emissions. An increase in fuel price due to a carbon tax on fuel will create an incentive to take measurements to change driving habits and increase energy efficiencies.

An increase in the cost of fuel at the pump will impact the overall family budget. In a typical household in a metropolitan area, transportation accounts some of the largest household expenses. A working family of four making between $20,000 and $50,000 per year spends approximately 30% of their budget on transportation per year (Lipman, 2006). Increases in the cost of transportation will impact disposable incomes of many families and will disproportionally impact low-income families that already spend a larger proportion of their income on transportation (Lipman, 2006; Cooper, 2004; Margonelli, 2008).

Increases in transportation costs, especially to low income families, may leave less money to spend on other essential goods and services such as food, housing, or medical care. The health benefits from reduced GHG emissions and changes in driving habits would be tempered by these effects on household budgets.

6.1 Existing Conditions Although consumption is projected to increase, instability of the US economy and gas prices may create a natural decrease in consumption of gasoline. The State Board of Equalization reported that gasoline consumption figures from March 2008 show a downward trend in gasoline consumption of 3.2% compared to March of 2007 (California State Board of Equalization, 2009). During this time period, California experienced both almost a doubling of gas prices, and a downturn in the economy. The resulting reduction in gas consumption resulted in savings of 43.5 million gallons of gasoline (California State Board of Equalization, 2009). Vehicle miles traveled (VMT) and gasoline consumption are directly related to air quality, traffic related collisions, pedestrian injuries, noise; therefore any change in demand of gasoline will alter existing conditions.

California Carbon Tax: A Health Impact Assessment - 18 -

Air Quality The primary GHG from gasoline combustion is CO2. A gallon of burned gasoline emits 19.4 pounds of CO2 (USEPA Emissions Facts). Californians consume approximately 15.8 billion gallons of gasoline, which equates to an estimated 153 million tons of CO2 a year from gasoline alone.i Additional pollutants emitted include particulate matter (PM), carbon monoxide (CO), and nitrogen oxides (NOx). These copollutants rise in tandem with rising GHG emissions and have been linked to negative health outcomes.

PM2.5 is extremely harmful to human health. It can be inhaled into the deepest part of the lungs, and ultra-fine particles may even pass into the blood stream. Health effects associated with PM2.5 may include decreased lung function, aggravated asthma, and nonfatal heart attacks (USEPA Particulate Matter).

Asthma exacerbations are a problem in California, especially among children, and may be triggered by PM. Approximately 3.7 million adults and 1.7 million children in California have been diagnosed with asthma at some point in their lives and many remain undiagnosed (Milet, 2007). The prevalence of severe asthma symptoms is almost 7 times higher among adults with household incomes below $20,000, compared to adults with household incomes over $100,000 (Milet, 2007).

Exposure to traffic-related air pollution can have negative effects on health. Diesel exhaust PM is a toxic air contaminant and contains over 40 known carcinogens. Long-term occupational exposure to diesel exhaust has been associated with 40% increase in the relative risk of lung cancer (CARB, 2006).

Health Effects of Diesel Exhaust Particulate Matter). The relative amounts of nitrogen oxides, carbon monoxide, and small particulate matter emitted from vehicles have increased disproportionately due to the dramatic increase in worldwide automobile use in the past 30 years (CARB PM). Studies have indirectly implicated traffic sources of air pollutants such as NO2 and PM as potential sources of acute health effects (Schlesinger, 2006).

Injuries In 2007, 3,967 people were killed in automobile collisions, and an additional 266,687 were injured (California Highway Patrol). The financial cost of auto collisions is extremely high and was estimated at $25.7 billion dollars in 2007 (California Highway Patrol Table 7c). A decrease in VMT will decrease automobile collisions and injuries.

Noise Noise is measured in decibels (dB), with 0dB being the threshold of human hearing. See Table 6A for examples of decibel levels of common sounds. Due to the logarithmic scale used to measure noise, different noise levels cannot be added together. A 10 dB increase is usually perceived as a doubling of noise to the human ear. Transportation is the main source of environmental noise pollution.

i

19.4 pounds of CO2 multiplied by average number of gallons of gasoline purchased in CA from 2005 – 2007 (State Board of Equilization) California Carbon Tax: A Health Impact Assessment - 19 -

Table 6A. Decibel Levels (adapted from Galen Carol Audio website) Sound Whisper Heavy traffic at 300 ft Normal conversation at 3-5 ft Diesel truck at 50 ft at 50 mph Subway train at 200 ft Snowmobile, motorcycle Loud rock concert Jet engine at 100 ft

Decibel level 15-30 dB 60 dB 60-70 dB 85 dB 95 dB 100 dB 115 dB 140 dB

Table 6B. dBA by type of vehicle and speed at 50 ft (CalTrans) for vehicles traveling on level terrain at a constant speed.

Vehicle Type* Autos Autos Heavy-duty trucks Heavy-duty trucks

Speed 45 65 45 65

dBA 70 dBA 76 dBA 82 dBA 85 dBA

Noise levels from traffic are extremely hard to estimate on a statewide level because of multiple variables including terrain, weather conditions, speed, and vehicle type. Traffic noise also varies by time of day, and distance from the source affects the noise level. When a vehicle is traveling at a constant speed on a level roadway, noise emissions may vary from 60 dBA to over 85 dBA (see Table 6B). Average noise levels over a 24-hour period in San Francisco are about 62 dB; however levels vary according to neighborhood and time of day. Currently there is no data on traffic noise levels in other urban areas of California.

6.2 Scoping Transportation is the largest contributor to greenhouse gas (GHG) emissions in California at 38% of the total GHG emissions (Schlesinger, 2006; CARB Almanac Emissions Projection Data). Even with a small reduction in VMT, California as a whole may see a significant decrease in traffic-related noise, PM pollution, and accidents.

There are potentially many health consequences secondary to a carbon tax on fuel, but the analysis was limited to these 3 indicators because they were more measurable and quantifiable. These potential outcomes were less speculative. Traffic-related noise, injuries, and air pollution are also huge consequences of driving and increased vehicle usage that can have enormous impacts on wellbeing. The health effects will be discussed further in section 6.3. Figure 6.2A is the scoping diagram of potential health consequences of the carbon tax.

California Carbon Tax: A Health Impact Assessment - 20 -

Figure 6.2A: Transportation Scoping Diagram

Decrease injuries

Decrease automobile collisions

Decrease pedestrian injuries

Increase in costs of gasoline and diesel

Decrease in individual fuel consumption

No change business as usual (BAU)

Decrease in driving frequency/ VMT

Decrease in CO2 emissions and PM 10

Decrease in noise

Decreased stress and improved sleep

Decrease Cardiovascular disease Improved air quality Improved respiratory health including asthma, CVD and mortality

The health impacts evaluated in the transportation sector were limited to health outcomes from noise, air pollution, and injuries. Additional health impacts and pathways originally considered included: Negative health outcomes due to increased cost of goods for families, and therefore less money available to a household Positive health outcomes due to a shift to consumption of more local products, and therefore fewer emissions and pollution associated with goods movement Positive health outcomes due to increased shift to public transit, walking/biking, and therefore lower rates of obesity, hypertension, and high blood sugar These pathways were eliminated from the scoping plan because of high levels of uncertainty regarding behavior changes. In addition, factors outside of the scope and carbon tax may impact behaviors, such as population growth, state and federal economic conditions, or variability in living conditions.

Because of uncertainty, these pathways were omitted as feasible to evaluate. Shifting away from driving and towards walking/biking was assumed to occur on some level, but was speculative and difficult to measure, predict, and is dependent on a variety of factors such as neighborhood safety, walkability, and access to reliable public transit. Reduction of VMT does not necessarily translate to an increase in physical activity; rather there may be an increase in trip chaining, or in use of public transportation.

Increase in price of necessary goods secondary to increases in transportation costs to move goods and subsequent impacts on the purchasing habits of individuals and families are also difficult to ascertain and measure.

California Carbon Tax: A Health Impact Assessment - 21 -

Research on transportation elasticity is abundant. We analyzed how the increase in fuel price due to the carbon tax would likely affect travel behaviors. Although, individual decision-making may be quite variable and also difficult to predict, in aggregate they tend to follow certain patterns that are foreseeable (Victoria Transport Policy Institute, 2009). Elasticities are defined as the percentage change in consumption of a good caused by a 1% change in its price (Victoria Transport Policy Institute, 2009).

Based on available research on transportation elasticities, changes in fuel consumption and driving behaviors secondary to increases in the fuel prices can be extrapolated. The five concrete health impacts that will be evaluated closely are supported by peer-reviewed studies and government literature. Our analysis of the carbon tax was done for the first five years of implementation.

6.3 Health Effects from Tax on Transportation Air Quality There will be a net benefit in terms of reduction of CO2 and PM10 compared to business as usual (BAU), but the significance of these changes are more difficult to assess. Mitigation strategies to improve air quality and reduce emissions can provide ancillary benefits (Bell, 2008). Growing evidence strongly suggests an association on poor air quality and negative health impacts. Any improvements in air quality and reduction in emissions would result in some benefit. For the analysis, we focused on analyzing the effects of improved air quality on asthma events and mortality.

Although health benefits are expected, they will be small and gradual. The health impacts exerted by the carbon tax will be long-term changes that lack acute benefits as seen with the Atlanta study assessment on the short term impacts of changes in transportation behaviors during the 1986 summer Olympics (Friedman, 2001). Longer-term application of the tax may yield greater impacts when people have more opportunities to take prices into effect when making long-term decisions (Victoria Transport Policy Institute, 2009). Additionally, susceptible populations at the greatest risks of poor air quality may also be the largest beneficiaries of any improvements. For this analysis, identified susceptible populations include those living closest to busy roadways and children.

Communities living nearest to busy roadways have the most benefits from reduction in traffic-relation air pollution and vehicle miles traveled since their exposure to vehicular exhaust are higher. Several epidemiological studies have shown that people living closest to roadways are more likely to experience negative health outcomes (Garshick, 2003; Brunekreef, 1997; Lin, 2002; Venn, 2001). People living within 200 meters of highways are exposed to pollutants more than people living at greater distances.

Studies have shown an elevated risk for the development of asthma and reduced lung function in children living close to major roadways. Evidence has also linked particulate matter to cardiac and pulmonary mortality (Brugge, 2007). There is also substantial evidence that near highway exposures present elevated risks of childhood asthma. Using more narrow definitions of proximity to traffic, more recent studies have found significant associations between the prevalence of asthma or wheezing and living very close to high volume vehicle roadways (Brugge, 2007). Thus, reductions in vehicle exhaust association with high traffic will reduce these health impacts of living closest to busy roads.

Diesel particulate matter is of special concern because it represents about 70% of the potential cancer risk from the vehicle traffic. These studies linking traffic emissions with health impacts build on a large foundation of data on the adverse health effects of ambient air pollution. As result, CARB has recommended the avoidance of setting new sensitive land uses defined as residences, schools, daycare

California Carbon Tax: A Health Impact Assessment - 22 -

centers, playgrounds, or medical facilities within 500 feet of a freeway, urban road with 100,000 vehicles per day, or rural roads with 20,000 vehicles per day (2005).

Figure 6.3A: Decrease in Concentration of Freeway Diesel PM Emissions with Distance

Source: CARB, 2005. Air Quality and Land Use Handbook: A Community Health Perspective.

Children‘s exposure to air pollution is a special concern for a multitude of reasons. They represent a highly vulnerable population since their exposure and health impacts from air pollution are different than adults (Schwartz, 2004; Salvi, 2007). Negative health impacts at this point in their growth and development may have lasting effects on respiratory health. Children are also more exposed to air pollution since they spend more time outdoors than adults, particularly in warmer weather. Children also have a larger lung surface area per kilogram of body weight than adults and breathe 50% more air per kilogram of body weight than adults (Schwartz, 2004). Exposure to particulate matter has been shown to worsen asthma and lung function in children (Salvi, 2007). There are also associations between traffic-related pollutants and presence of asthma and bronchitis (Salvi, 2007). In sum, their risk of negative health impacts secondary to air pollution is greater than adults.

There is also evidence showing that reducing air pollution produces reductions in asthma exacerbations in children. In a study examining hospital admissions of children in the Utah valley during 3 consecutive winter (before, during, and after a strike that closed a steel mill in the valley that was the largest source of air pollution) showed a greater than 50% drop in admissions of children for asthma (Schwartz, 2004). In the aforementioned study of traffic reductions during the 1986 Atlanta summer Olympic games revealed decreases in asthma emergency visits (Friedman, 2001). Improvements in air quality will have benefits in children‘s respiratory health.

Noise Noise related to traffic has an effect on health and quality of life. According to a report written in the late 1970‘s, excess noise is a common complaint and reason for relocation to a different community.

The number one source of noise cited is urban traffic (US EPA Noise Effect Handbook), and traffic rates have only risen in the last 30 years. The EPA identifies a noise level of 70 dB averaged over a 24-hr period to prevent hearing loss over a lifetime (EPA, Noise Levels). In comparison the World Health California Carbon Tax: A Health Impact Assessment - 23 -

organization (WHO) guidelines state that sound levels should not be above 30 dB at night (WHO, Noise and Sleep).

Sleep and cardiovascular disease Sleep disturbances are one effect of traffic noise. While there are many individual differences in reaction to night-time noises, noise was found to increase amount of time spent awake and reduced REM sleep (Vallet, 1983), and increased distance from traffic noise is associated with improved sleep (Sasazawa, 2004). The average peak noise level that causes awakening is 50.3 dBA, but the average level that causes a change in sleep state is 48.5 dBA (Vallet, 1983). The study further concludes that if noise levels were kept below 40dBA, most effects on sleep could be avoided (Vallet, 1983). Sleep interruptions may have a negative effect on health by decreasing cognitive function and increasing the risk of injury. Over the long-term, lack of sufficient sleep may lead to negative health effects such as high blood pressure (Tochikubo, 1996), and auto collisions (Horne and Reyner, 1999).

Cardiovascular disease (CVD) is one of the leading causes of death in the United States. CVD is an umbrella term that includes heart disease and stroke. These diseases are costly to California in terms of economics and quality of life. Although there is no California-specific information on the economic cost of CVD, for the country as a whole, the cost was estimated to be over $431 billion in 2007 (Rosamond, 2007). Rates of heart disease in California counties range from 4.5% to 12.7%, with 37% of them being in low-income individuals (Jhawar, 2005). Increased blood pressure levels are harmful to health because over time, they contribute to heart failure, heart attacks, and stroke. Blood pressure levels may also be affected by noise from traffic. Workers exposed to continuous noise of 80-85 dB, on the high range of traffic noise, were found to experience increased blood pressure (Ising, 1980). A Swedish study found that people living in homes with average exposure of 50-55 dB had twice the incidence of high blood pressure compared to people exposed to ≤45 dB (Bluhm, 2007).

If the carbon tax is implemented, we can reasonably expect a decrease in VMT over the 5 years.

Although the overall decrease is small, if implemented on a statewide level, the change would affect up to 30 million people. Additional benefits will be seen as VMT from diesel engines are reduced, which emit more than twice as much noise as personal autos. Although not all sleep or cardiovascular problems can be attributed to traffic noise, a decrease in noise will likely lead to a decrease in negative health outcomes. Improved sleep may lead to increases in productivity and academic performance.

Reduced levels of CVD may also reduce medical events such as strokes and heart attacks, which are extremely costly to California‘s families and health care system.

Even small reductions in traffic could reduce traffic noise and improve sleep for millions of people.

Long-term changes due to the carbon tax may involve improved urban planning that would decrease the need for cars and increase public transportation services. An overall reduction in VMT may save the state of California millions of dollars in health care costs, but more importantly, will improve quality of life for residents by reducing noise.

Injuries Auto collisions in California result in 3,967 fatalities every year, and more than 266,000 injuries.

Collisions are a function of the number of VMT. If we expect the tax to reduce VMT, California will see an associated decrease in fatalities from auto collisions. The carbon tax will potentially reduce the number of fatalities by 21 deaths per year. In addition to decreased injuries in drivers and passengers, we will also see a decrease in injuries to pedestrians. In 2007, there were over 13,000 collisions involving California Carbon Tax: A Health Impact Assessment - 24 -

pedestrians each month, with 666 resulting in fatalities (SWITRS Table 7C). The tax could reduce the number of pedestrian collisions by 4 per year.

6.4 Research Questions and Methods In assessing expected changes of fossil fuel emission related to carbon tax two research questions were developed: 1.

2.

How effective is the carbon tax at changing the following endpoints related to air quality?

Fuel consumption CO2 emission Vehicle miles traveled PM10 emissions How effective is the carbon tax at changing the following health determinants?

Air quality Noise Injuries

Methods used to answer our two research questions include a detailed literature search, stakeholder interviews, calculation of gasoline price-elasticity, and comparison of BAU compared to carbon tax scenario.

Elasticity Analysis and Findings Fuel demand is fairly inelastic and is relatively insensitive to changes in price (Abowd, 1999). For the analysis on the effects of the proposed carbon tax on the endpoints of interest, a short-term fuel consumption elasticity of -0.25 and a short-term traffic volume elasticity of -0.10 were chosen from a review by Goodwin, Dargay, et al. (2004). As the price of fuel increases by 1%, the consumption of fuel is expected to decrease by 0.25% and VMT is expected to decrease by 0.10%.

A number of assumptions were made in order to calculate the effects of the carbon tax on the identified end points: 1. The short-term elasticities are the same for diesel and gasoline prices, the same across all of California irrespective of location, and the same for different socio-economic classes.

2. Vehicle fleet number and type remains constant.

3. The number of drivers does not change.

4. The percent reduction in VMT equals the percent reduction in PM10 co-emissions from mobile on-road gasoline and diesel sources.

5. Changes in the proportion of traffic volume also correspond to a similar alteration in amount of vehicle miles traveled.

Effects on the tax were calculated using fuel consumption and driving data from government agencies.

The change in endpoints were calculated secondary to the applied carbon tax from 2008 to 2012 and results to compared to business as usual (BAU), defined as the scenario of existing current trends in fuel consumption and driving behaviors.

California Carbon Tax: A Health Impact Assessment - 25 -

With the carbon tax added, the price of a regular gallon of gasoline in California will increase on average by 3.03% in 2008, 6.38% in 2009, 6.83% in 2010, 8.02% in 2011, and 9.17% in 2012. For 2008 and 2009, the percent increase in price for diesel mimics that of gasoline, but diverges in 2010 with sustained increase in percent increase in price through 2012 (Figure 6.4A). The increase in fuel price from the carbon tax is expected to affect diesel prices more than gasoline. However, the revenue generated from the gasoline carbon tax is greater than diesel since more gasoline is consumed in California than diesel in almost a 5 to 1 ratio in California (Figure 6.4B). The combined revenue with additional carbon tax on gasoline and diesel from these years is projected to be approximately $18.3 billion (Table 6C). Refer to Appendix 6.4A for detailed analysis of elasticity calculation.

Figure 6.4A

Figure 6.4B

Although the short-term fuel consumption elasticity of -0.25 is fairly inelastic (Goodwin, 2004), the estimated reduction in regular gasoline consumed from 2008 to 2012 will be around 2.7 billion gallons, which equates to a reduction of roughly 26 million tons of CO2 emitted during the same time period (3.31% decrease). Taxable gasoline gallons used in the evaluation included aviation gasoline, thus, the projected changes in fuel consumption may be an overestimation of the true effects of carbon tax on onroad mobile gasoline. Diesel fuel consumption will be reduced by 509 million gallons with the additional carbon tax. Overall, fuel consumption of both diesel and gasoline is projected to fall by 3.2 billion gallons and carbon dioxide emissions are expected to fall at the same rate of 3.3%.

The short-term elasticity in traffic volume is only -0.10 (Goodwin, 2004). Goodwin, Dargay, et al., conclude that fuel consumption decreases more than the volume of traffic because price increases will initially trigger a more efficient use of fuel (Goodwin & Dargay, et al.,2004). Individuals are more likely to take steps to save money by reducing their fuel consumption in the short term than changing their overall driving habits and decreasing the amount of miles traveled. Changes in VMT are more responsive in the long run when people have a more opportunity to make greater changes in their transportation behaviors such as relocating closer to their work or to a neighborhood with improved access to public transit (CBO, 2008). These behavioral changes may be limited in lower-income families that have restricted financial capital to make these lifestyle changes. However, the added carbon tax will produce some reductions in VMT. The data on VMT taken from the Department of Transportation did not break down the numbers in terms of type of vehicle or classification of fuel type.

Thus, the calculated percentage changes may be an overestimation of the true reduction. Calculated

California Carbon Tax: A Health Impact Assessment - 26 -

short-term reduction in gasoline-related VMT from the tax is approximately 12 billion miles (1.31% reduction). The reduction in diesel-related VMT was approximately 13 billion miles (1.38% reduction).

Figure 6.4C

Figure 6.4D

Emissions of both PM10 and CO2 are expected to decrease with the carbon tax. PM10 emissions are expected to decrease by 3,800 tons over the five years (2.64% reduction) compared to BAU. Diesel vehicles emit more PM10 than gasoline vehicles (CARB, 2009). Therefore, although the net taxable gallons of diesel consumed in California are a fraction of the volume of gasoline consumed, the PM10 emissions from diesel sources are similar to that of gasoline. Figure 6.3D demonstrates that there would be a consistent reduction in PM10 emissions during the incremental application of the carbon tax.

Compared to percentage reductions in CO2 emissions (Figure 6.3C), PM10 reductions are modest. This is due to the relative inelasticity of increasing fuel prices on traffic volume compared to fuel consumption.

CO2 emissions will decrease by 5.7 million tons (3.4% decrease).

Table 6C: Assessment of Health Outcomes, Judgment of Magnitude of Impact, and Quality of Evidence

Summary of Short-term Effects from Carbon Tax (2008-2012)

Fuel consumption (gallons) Average VMT (billions of miles)ii CO2 Emissions (tons) PM10 Emissions (tons)

BAU

Tax

% Change

95,472,196,970

92,293,041,548

-3.33%

940

Gas = 927.68 Diesel = 927.07

Gas = -1.31% Diesel= -1.38%

948,386,257

916,784,800

-3.33%

142,720

138,939

-2.65%

To assess the effectiveness of the carbon tax on health, we assessed vehicle miles traveled (VMT), CO2 emissions, and PM10 coemissions. Changes in VMT would also have effects on air quality and noise effects in communities living nearest to major roadways.

ii

VMT data from California Department of Transportation was given as total and not divided by gasoline and diesel vehicles; % change may be an overestimation California Carbon Tax: A Health Impact Assessment - 27 -

6.5 Assessment of magnitude, direction, and certainty of health impacts This section discussed the magnitude, direction, and certainty of health impacts predicts from a carbon tax applied to gasoline and diesel. A summary is outlined in table 6D below. The health effects from a tax on fossil fuel use in transportation will be positive, but minimal. There will be expected decreases in GHG, PM10, and VMT. Across California the decrease in VMT will result in decreased auto collision and pedestrian fatalities of about 25 per year. This is determined to be a significant reduction in lives saved each year due to the reduction in number of miles traveled.

Because transportation and traffic does not account for all noise and air pollution, changes in health effects may be challenging to quantify and evaluate. Effects on sleep and cardiovascular health are more difficult to determine as there are many other variables besides noise exposures that impact these health outcomes, although, noise is linked to insomnia and increased blood pressure.

Improvements to air quality will certainly have benefits to health, especially to susceptible populations defined as children and persons living closest to busy roadways. However, the magnitude of impact will be small and gradual. Longer-term application of the tax may yield greater impacts when people have more opportunities to take prices into effect when making long-term decisions (Victoria Transport Policy Institute, 2009).

Table 6D: Assessment of HIA Health Outcomes, Quality of Evidence and Magnitude of Impact Health Outcome of communities living nearest to busy roadways

Quality of Evidence3

Rating of magnitude4

Reductions in asthma related events Reductions in air pollution mortality Improvements in sleep secondary to reductions in noise Improvements in cardiovascular health secondary to reductions in traffic related noise Decrease in pedestrian injuries Decrease in automobile accidents

This column provides a scale judging the quality of evidence from 0 – 3, where 0 = minimal/ inconsistent evidence and 3 = consistent evidence demonstrating significant associations 3

4

This column provides a scale or significance ranging from 0-3, where 0 = no impact and 3 = significant impact.

California Carbon Tax: A Health Impact Assessment - 28 -

6.6 Discussion A carbon tax on gasoline and diesel will generate upwards of $18 billion in revenue within the first 5 years of implementation and lead to a 3.33% reduction carbon dioxide emissions and 2.65% reduction in PM10 emissions. This will lead to an overall net benefit, it will be seen in terms of reduction in injuries related to traffic, reduction in noise effects closest to busy roadways, and decrease in carbon dioxide and PM10 emissions. The evidence supporting the health benefits of these reductions are present, however, it is uncertain how effective the carbon tax will be in creating enough of a reduction in these endpoints to actually generate significant observable health benefits. However, it is fairly clear that the biggest net beneficiaries of improvements in health will be those communities living closest to roadways since they are already so highly impacted.

Although the tax may not change consumer behavior it may stimulate additional programs aimed at mitigating GHG emissions via tax revenue redistribution for cleaner and more efficient public transit.

This assessment highlighted the transportation sector as a major contributor to poor air quality and associated health endpoints. Future research in effective interventions for mitigation of GHGs in the transportation sector is advisable.

7.0

Food & Agriculture

Climate change produces more severe and more frequent extreme weather events, such as droughts, flash floods, heavy rains, hurricanes, and heat waves (IDWG 2007, USEPA), and is expected to decrease crop yields in California by the end of the century (California Climate Action Team, 2009). Reduced crop yields parallel economic strains and could mean large losses for California, where the agriculture sector is a $36.6 billion industry with $100 in related economic activity (CDFA). As climate change worsens, seasonal weather patterns become more unreliable (IDWG, 2007). Governor Schwarzenegger recently proclaimed a State of Emergency in the Central Valley Region, the state‘s largest producer, due to a severe drought resulting in diminished reservoirs, crop loss, unemployment, and increasing prices of most crops (Governor of the State of California, 2008).

By introducing a carbon tax, California hopes to mitigate climate change, protect crop yields, and cushion the State‘s economic vitality; however, a carbon tax has other potential consequences. We anticipate the industry to offset the new costs to consumers, thus increasing food prices. Raising food prices may burden specific communities in California, especially low-income populations. Based on demand and income elastiticies we calculated the impact of higher beef and dairy prices on consumption and found the increase costs to have a minimal impact on consumption and therefore health. The following sections describe our methods, findings, and recommendations for the food and agriculture sector.

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7.1 Existing Conditions California is one of the most agriculturally productive states in the US, with 88,000 farms and ranches (CDFA). Although constituting only about 4% of total farms in the US, California output is substantially higher than the national average (CA Agricultural Resource Directory, 2007). According to the 2002 Census of Agriculture‘s ranking of market value of agricultural products sold, nine of the nation‘s top 10 producing counties are in California. The state was home to 10 percent of U.S. farms with sales of $500,000 or more during the year. The average California farm operation produces three-times more revenue than the US average (USDA, 2002).

Current fuel use According to California‘s Air Resource Board (CARB) energy use in California‘s agriculture sector totaled 4.86 million tones of CO2eq in 2004 (CARB, 2009), or approximately seven percent of total California emissions (Horwath, 2008). The direct energy inputs in the agriculture sector typically include petroleum-based fuels to operate vehicles and machinery for preparing fields, planting and harvesting crops, applying chemicals, and transporting inputs and outputs to/from market. Natural gas, liquid propane, and electricity also power crop dryers and irrigation equipment. Dairies also require electricity for operating milking systems, cooling milk, and supplying hot water for sanitation (Horwath, 2008). Indirect fuel use, such as fertilizers and pesticides, are not taxed in this plan. The food processing industry in California is responsible for consuming a considerable amount of the energy resources available to the State. Food processing is the third largest industrial energy user in the state, consuming more than 600 million therms of natural gas and over 3,700 million kilowatt hour or 3.51 million tons of CO2eq, including the electricity used in refrigerated warehouses (Neenan, 2008).

Location, output, and sizes of CA farms and processing plants The majority of farms and processing plants are located in just 5 of California‘s counties: Fresno, Tulare, Monterey, Kern, and Merced County. Many of these are located in California‘s Central Valley.

California is first in the nation in production of milk, milk powder/butter, fruits, vegetables, wine, and almonds; second in cheese; fifth in meat; and tenth in grains (CDFA, 2002). It accounts for 20% of U.S. production of milk at 35 billion pounds, 50% of milk powder and butter, and more than 40% of processed fruits and vegetables, with individual commodities estimated as: tomatoes, 95%; black ripe olives, 100%; fruit cocktail, 100%; pears, 40%; prunes, 100%; raisins, 100%; strawberries, 90%; almonds, 100%; and pistachios, 100%. U.S. production of almonds and pistachios is 100% from California, and almonds are the top agricultural export crop in California, representing 13% of the total export value in 2002 (Horwath 2008).

The food processing and manufacturing industry is also a strong presence in California. Building upon the abundant agriculture in the state, food processing in California is a $50 billion industry. The diversity of California‘s agriculture across all sectors of food operations is reflected in the range in size of the processing facilities from small family-run shops to some of the largest operations in the world.

California is home to the world‘s largest single-site manufacturing plant for cheese (Hilmar Cheese, Hilmar); tomato products (Morningstar Packing, Williams); poultry (Foster Farms, Livingston); and wine (E & J Gallo, Livingston). The food processing industry in the state is larger than in any other state California Carbon Tax: A Health Impact Assessment - 30 -

and is an important, diverse, and dynamic industrial sector in California's overall economy (Shoemaker 2006).

Consumer spending on food In California, as is the case in the rest of the country, the amount of money spent on food per month is largely dependent on income. For example, a low-income family of four earning between $10,00014,999 annually, spends about 37.3% of monthly income (~$413) on food. A family earning between $30,000-39,999 spends about 18.3% of income on food whereas a higher income family earning over $70,000 annually, spends about 9% of income on food (Frazao 2007). Given that lower income families spend a larger percentage of their total income on food, a rise in food prices will likely disproportionately affect these groups. Certain foods in the diet, like beef and dairy, are often considered staple foods. The average American consumes 67lbs of beef and 23 gallons of milk per year (Davis 2005, Putnam 2003). Changes in prices may either alter food spending patterns, where consumers continue to spend more of their money on these staple foods at the expense of other foods or finances; or consumers may shift intake, consuming less beef and dairy, for example, and switching to other foods that fall within their budget.

7.2 Scoping California agriculture represents a $36.6 billion industry that generates about $100 billion of related economic activity (CDFA). Agriculture is an energy-intense industry; California alone uses an estimated 4.86 million tons of CO2 equivalents for agricultural activities and emits, conservatively, about 9% of all California greenhouse gases, not including energy intensive food transportation (CARB, 2009).

Accordingly, a statewide carbon tax on fossil fuels would no doubt affect this industry and its related activities. Not only does the California economy depend on successful function and enterprise of this industry, the residents rely on its output—food, in all its forms. Tampering with this system could potentially have deleterious or advantageous effects on the health of consumers. At the same time, increasing GHG emissions strain our environment and must be attenuated. Thus, conducting a health impact assessment of the effects of a carbon tax on California agriculture is relevant and timely.

A carbon tax will invariably increase food prices. Accordingly, we hypothesized three potential pathways explaining how increasing food prices in California will impact health outcomes. The following scenarios are depicted in the flow chart below.

California Carbon Tax: A Health Impact Assessment - 31 -

Figure 7.2A: Food and Agriculture Scoping Diagram

Increased costs of food Imposing a carbon tax on fossil fuels would increase costs of energy-intense foods farmed or raised in California by raising the costs of operations for farms and food manufacturers. This will impact food prices and thus consumption patterns. Subsequently, a decrease in consumption of energy-intense foods, such as meat and dairy, may decrease diet-related diseases. Also, with more income spent on food, consumers will have less to spend on other living expenses, especially health care and other preventive health services. This may disproportionately impact low-income communities.

Changing food production patterns Taxing fuel use in the farming and food-processing sector could stimulate the industry to adopt less energy intense production practices and/or require fewer energy inputs. This may result in a switch to growing or raising less energy-intense products, decreasing petroleum-based insecticides and pesticides, or reformulating processed foods. Each of these has positive implications for environmental and individual health.

Food Transportation A tax on fossil fuels used by the California agriculture industry would not only affect the food transportation system, but it would also affect purchasing decisions of food retailers, including wholesalers, grocers, and restaurant/fast food businesses. With an increase cost of California foods, retailers may opt to purchase foods from untaxed areas, such as out-of-state or from other countries. This

California Carbon Tax: A Health Impact Assessment - 32 -

could further decrease demand for California food products while also increasing consumers‘ exposure to food-borne pathogens and increasing overall distance of food traveled.

7.3 Potential Health Impacts We predict that a carbon tax on fossil fuels in the food and agriculture sector will be passed on to the consumer and effectually increase the cost of some foods. Energy-intense foods, like beef and dairy, might be disproportionately affected by the tax compared to other foods. These two commodities are also relatively high in calories, saturated fat, and cholesterol, nutrients often associated with diet-related diseases. Eating meat less frequently is associated with numerous health benefits, such as lower body mass index (BMI) and an improved ―good‖ cholesterol (Slattery, 1991; Burr, 1988). Furthermore, the health benefits of reducing beef consumption include decreased risk of cardiovascular disease (CVD), obesity, some cancers, diabetes, and all-cause mortality (Key, 1999; Burr, 1988; Slattery, 1991).

Evidence of diet-related diseases associated with dairy consumption demonstrates the opposite of beef.

In a review of 10 prospective cohort studies, milk consumption was inversely associated with heart disease and stroke risk (Elwood et al., 2004). Furthermore, in a large, prospective population-based study, Periera et al. (2002) found a strong inverse association with dairy consumption and major risk factors for heart disease and type 2 diabetes, including obesity, insulin resistance, hypertension, and glucose intolerance. With an increased cost of beef, we anticipate that the carbon tax will encourage small reductions in beef consumption and thus, over time, decrease the risk of diet-related diseases in California. On the other hand, with an increased cost of milk and dairy products, we might predict that consumption will also decrease, but detrimental to the health of Californians.

As stated earlier, income is one of the most significant factors in determining per capita food expenditures. Individuals with higher incomes not only spend more on food, but they have the ability to make markedly different food choices than individuals with lower incomes (Blissard, 2002). Those with higher incomes are more likely to purchase fresh fruits, vegetables, and prepared foods and are more likely to choose foods based on quality and convenience versus price as compared to lower-income Americans. Considering the lower percentage of income that higher-income families spend on food (~9%), increases in food prices are less likely to impact food buying and consumption patterns. This may not be the case with lower income families who, at the lowest income levels, spend upwards of 37% of income of food (Frazao, 2007).

In addition to a higher percentage of income spent on food, we also see the highest rates of obesity occurring among population groups with the highest poverty rates and the least education. This occurrence may be mediated, in part, by the low cost of calorie-dense foods. The inverse relationship between the calorie-density of foods and its associated energy cost means that diets based on refined grains, added sugars, and added fats are more affordable than the recommended diets based on lean meats, fish, fresh vegetables, and fruit (Drewnowski, 2004). With a rise in food prices, it is likely than low-income families may rely more on the lesser expensive, higher calorie foods. This perpetuates the high risk these population experience for obesity and other diet related diseases.

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7.4 Research Questions & Methods From the logic model presented above, we developed two main research questions: (1) How will carbon tax affect food prices and (2) žHow will carbon tax affect food consumption? For the first question, we chose to specifically address beef and dairy since those are two main commodities in California and because diets high in these ingredients are also high in saturated fat and cholesterol, two primary risk factors for cardiovascular disease. For the second question, we decided to investigate demand elasticities and consumer spending patterns for beef and dairy in order to predict the impact of a carbon tax on consumption, and thus health. Data sources for answering these questions include: Energy Information Administration's Annual Energy Review (Official Energy Statistics from the US Government) US Dept of Energy Best Practices for Energy Efficiency of Industry ERS/USDA CA Agriculture Resource Directory Government reports Current spending on dairy and beef Price elasticity calculations of dairy and beef Carbon footprint of dairy and beef Available academic articles/empirical evidence

7.5 Assessment of Magnitude, Direction, and Certainty of Health Impacts To assess health impacts associated with increasing food costs, we chose two food products as examples, milk and beef, due to the links between consumption and health, the large amount of emissions involved in livestock production, and the large scale of production of these foods in California. We expect the tax to increase the price of California-grown food due to the surging cost of fuel inputs to produce food. We estimated the price increase for a pound of beef and a gallon of milk, assuming that 100% of the tax is passed on to the consumer. This section details the anticipated impacts of the carbon tax on the price of beef and dairy (see Appendix 7.5A for calculations).

Increased costs of food We used demand elasticities to help predict changes in consumption in response to price changes.

Elasticities of a product are not constant and depend on a number of factors. The table in Appendix 7.5B uses beef as an example to describe factors that contribute to elasticity and changes in consumption (Sheffrin, 2003). Elasticity measures are relative to change in consumer demand, other products, and changes in income: Demand elasticity: Measures the change in consumer demand relative to the change in a product‘s price.

Highly elastic products (closer to -1.0) considerably impact purchasing patterns.

Inelastic products (approaching 0.0) are less effected by price changes.

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Values ranging from 0 to -1.0 are considered relatively inelastic (See Appendix 7.5C for demand elasticities).

Income elasticity: Measures how purchasing changes relative to income changes.

Beef averages to 2.72, meaning that with a 1% increase in income, consumers will spend 2.72% more on beef.

The inverse is also true: a 1% decrease in income yields a 2.72% decrease in consumption. This is especially relevant today, as consumers spend less during tough economic times (United States Department of Labor, Bureau of Labor Statistics, 2009).

The income elasticity of dairy, on the other hand, is much smaller (0.117) and thus much less affected by changes in income (see Appendix 7.5D for income elasticities).

Cross-price elasticity: Predicts how other foods would respond to changes in beef and dairy prices.

Beef: as the price of beef increases people consume replacements such as cheaper staple grains; positively, fat consumption would decrease by 0.02% in response to each 1% increase in the price of beef (ERS, 2008).

Dairy: as the price of dairy increases there is a slight increase in fat (0.002%), possible due to increased consumption of dairy products with fat. Fruits and vegetables, however, would decrease by about 0.07% and 0.006% with each 1% increase in the price of beef and dairy, respectively (ERS, 2008).

To determine estimated consumption changes we used carbon footprint approximations of hamburger and milk. Estimates of the carbon footprint of 1lb of beef average to 2.93 pounds of CO2eq, not including biogenic emissions. The last tax phase of $30/ton CO2eq will add $.04 to each 1lb of beef, increasing the price by 1.11%, and reducing consumption 1.20%. Estimates of the carbon footprint of one gallon of milk are about 2.43 pounds of CO2eq, not including biogenic emissions. The last phase will add $.036 to each gallon of milk, increasing the price by 1.05%, and reducing consumption by 0.75% (see Appendix 7.5A for all calculations). Based on annual consumption trends among Americans (67 lbs beef/capita, 23 gallons milk/capita), changes in consumption by the last phase of the carbon tax are associated with a 12-ounce decrease in beef (about 3 quarter-pound hamburgers) per person per year, and a 2.75-cup decrease in milk, per person, per year. Thus, the increase in food costs is not likely to be substantial enough to generate a large shift in dietary patterns or dramatically affect health outcomes associated with diet-related diseases, such as cardiovascular disease, diabetes, and some cancers.

We also anticipate that certain populations will be impacted more than others. A carbon tax on beef has the potential to be most beneficial to low-income people, who, as a group, consume more beef (USDA, 2003) and may be more likely to reduce consumption due to increased sensitivity to higher prices (Mytton et al., 2007). The increased cost of milk could negatively affect the health of low-income populations, as milk is a primary source of calcium, vitamin D, and protein. Fortunately, consumption is not expected to decrease a large amount (0.75% by the last tax phase).

Food production patterns Modifications in food production patterns in response to the carbon tax, and reinvestment of tax dollars into greener technologies may have a greater impact on actually carbon emissions than on health. We anticipate three ways by which the tax may influence food production patterns: 1) encourage farmers and food processors to adopt new technologies or practices that use less energy (for example, methane California Carbon Tax: A Health Impact Assessment - 35 -

sequestration to create energy); 2) food prices will increase as tax expenditures are passed on to the consumer with no attempt at mitigating current practices; or 3) food processors and farmers will move out of state to avoid taxes, not impacting carbon emissions.

The gradual phase-in of the carbon tax grants farmers and food processors time to adjust to increases in production costs, an important strength of the tax. Initial revenue reinvestment will promote green technologies, and other energy saving/climate mitigating adaptations for farmers and food processors.

Reinvestment of the revenue in the initial phases of the tax can support infrastructure in the food sector, including methane/carbon dioxide sequestration or wind and solar power to generate energy. As the tax is minimal, we anticipate that producers and farmers in California will not move out of state to avoid the tax, and that adoption of climate change mitigation policies is feasible.

Food Transportation As food travels farther from farm to plate, emissions and money spent on the tax increase. We anticipate an increased reliance on local foods, especially if a portion of the revenue is used to assist the supply chain in acquiring and selling local foods. Considering the fairly local distribution system of fresh produce grown in the Central Valley, we anticipate that it will still be cheaper for grocers and other whole-sale distributors to purchase foods from California that are subject to the carbon tax, rather than foods transported from out of state due to the increased cost of gas to transport food over a longer distance.

7.6 Discussion In order to determine the impacts of a carbon tax on food in California we had to make certain assumptions. The price increase of beef and milk does not account for inflation over the five-year tax phase-in, or other unpredictable events such as extreme weather events and economic recessions that may affect food prices. Additionally, not all food sold and consumed in California, including beef and dairy, is actually grown and processed in California, thus affecting the changes in consumption patterns.

Nevertheless, the proposed carbon tax will not likely drastically change food consumption patterns and will have a minimal impact on diet-related health outcomes.

A considerable weakness of the tax is that it explicitly precludes biogenic emissions as part of the enumeration. Biogenic emissions, which include the large amounts of methane and nitrous oxide exuded from cattle, manure, burning forest for land, and the tilling of soil for cattle feed, significantly contribute to GHG emissions. Methane and nitrous oxide exuded from CA dairy cattle and US beef cattle account for 74% and 88%, respectively, of milk and beef carbon footprints (Johnson et al., 2002). If biogenic emissions were included in the tax, the consumption of beef and dairy is expected to decrease by 10% and 3%, respectively, at the final stage of the tax (as opposed to the current tax that amounts to 1% and 0.75% decreases in consumption). For the health and climate change mitigation benefits (and resulting food security benefits) described above, we propose an alternative tax that includes biogenic emissions.

Despite this major barrier, we expect the tax to generate a large sum of money; by the final phase of the carbon tax, the revenue will reach nearly $150 million per year solely from the California food sector.

Rather than redistributing the tax revenue, we recommend the following reinvestment strategies:

California Carbon Tax: A Health Impact Assessment - 36 -

Distribute revenue as an annual stipend to California specialty crop growers (fruit, vegetable, nut, bean, and legume), requiring stipends passed on to the consumer.

Award revenue as grants to farmers who want to increase local production and/or increase sustainable practices. This may include financing the purchase of green technologies. Farms must evaluate effects of grant funds.

Fund the development and efforts of a ―Green Health Business Team,‖ which will: 1) assist California farms in adopting more environmentally friendly practices; 2) connect farms with local food retailers to boost the California agricultural market, focusing on small farmers who want to expand distribution; 3) help California restaurants serve healthier, more locally grown and environmentally sustainable foods; and 4) provide technical assistance to grocery stores and supermarkets to sell more locally grown, affordable specialty crops The carbon tax is likely to affect climate change mitigation in the food sector by both changes in food production patterns and changes in transportation of food. The tax may encourage farmers and manufacturers to adopt more fuel-efficient practices or switch to less fuel intensive crops.

Since we do not anticipate major price changes or consumption reductions in beef and dairy, the demand of these fuel intensive products will likely not decrease to the point that production patterns will change.

The proposed carbon tax may not act as an efficient climate change mitigation strategy for the agriculture sector in California.

8.0 Home Energy__________________________________________ In 2007, the U.S. Census estimated a total of 13,159,358 households in the state of California with a total population of 36.5 million people (U.S. Census Bureau). The population in California is expected to grow to 38.1 million people by 2010, creating a rise in total home energy demands during a time when we are attempting to reduce carbon emissions, overall energy use, and maintain energy prices that are affordable to all (U.S. Census Bureau). The proposed carbon tax will directly impact the cost of home energy use for natural gas air and water heating and cooling, as well as cooking in California.

With an initial tax rate of $10 per ton of CO2 produced, residential natural gas and electricity costs will increase for Californians, and the impacts on consumption of these rising costs will depend on various factors including: whether you live in an urban or rural area; how much your household earns; how many people are supported in your family; what condition your home or apartment is in; and what climate zone and region you live in. In this chapter we will discuss how increased home energy prices would influence health among at-risk Californians, as well as demonstrate specifically how a carbon tax would affect the price of home energy, have no impact on home energy consumption behaviors, and serve as a source of significant revenue generation.

California Carbon Tax: A Health Impact Assessment - 37 -

8.1 Existing Conditions Low-income households already experience health disparities that are aggravated by high residential energy prices. The four most concerning inter-related home environment determinants of health include: low socio-economic status (SES)-related health trade-offs; housing affordability and instability; poor housing quality and maintenance; and insufficient home energy for heating and cooling. We describe these issues as they currently exist in this section. We did not consider the current economic downturn which increases the already high number of households that apply for federal assistance and do not receive support.

Health trade-offs among low SES households Lack of access to healthcare and insurance, poor housing quality, poor indoor air quality, housing instability, and household energy and food insecurity are all associated with low SES, and can be adversely affected by an increase in home energy cost. Low SES households are forced to make tradeoff decisions between paying for household energy and for health-related needs. For example, housing energy insecurity, defined as the inability to pay monthly energy bills, is associated with greater odds of household and child food insecurity, child developmental concerns, poor school performance, and increased hospitalization (Cook et al., 2008). Furthermore, the 2005 National Energy Assistance Directors (NAEDA) Program survey of low-income US households eligible to receive federal home energy assistance found that 78% of families reduced basic expenses for household necessities in order to afford their energy bill. Thus, low expendable income and health trade-offs are indicators for carbon tax–related health impacts.

Housing affordability and instability Housing instability is common among households that struggle to pay their energy bills. In the US, single parent households experience the least stable housing security and they are least likely to be able to afford a home in the area in which they live (U.S. Census Bureau, Housing Affordability). In comparison, among married couples with children under 18 years old, approximately 30% cannot afford a modestly priced home in the area in which they live in the Western United States (U.S. Census Bureau, Housing Affordability). Indeed, homeownership remains a dream and California‘s homeownership rate, at 58.4 percent, was the second lowest among the 50 states in 2006 (CBP, 2004).

According to National Low Income Housing Coalition, 43% of households in California are renter households, and 26% of renters spend over 50% of their income on rent (NLIHC, 2007). In order to afford the Fair Market rent in California for a two-bedroom apartment, a household must earn $49,940 annually (Pelletiere, 2008). Lack of home ownership in California poses a serious problem for children‘s environmental health because renter families typically have less control over the quality and improvement of their living environments partly because the landlord is responsible for building upkeep.

Renter families may also have less accumulated wealth than homeowners (JCHS, 2008), and therefore they may also not be able to afford efficient ventilation system installations, to build with nontoxic materials, to pay their energy bills on time, nor to exercise the power of choice over which neighborhood they live in (Pelletiere, 2008). One example of this is that higher blood lead levels are found among inhabitants of rental housing as compared to owned homes (Lanphear, 1996). Thus, housing instability and affordability are key determinants of carbon tax–related health impacts.

California Carbon Tax: A Health Impact Assessment - 38 -

Poor housing quality and maintenance Poor housing conditions and quality of indoor environment can impair children‘s health and development. Average US children spend 80-90% of their time indoors (Brysse et al., 2004) and a healthy indoor home environment is essential for children‘s normal development. Unfortunately, in low income Californian households, substandard housing conditions exist where various indoor contaminants pose a risk to child health (Brysse et al., 2004, Jacobs et al., 2009). For example, when housing conditions are poor, multiple asthma irritants may be present simultaneously which is concerning because half of asthmatic children have multiple allergen sensitivities which makes controlling their environmental triggers even more challenging (Eggleston, 2000; Huss et al., 2001).

Asthma rates are higher among low income households, particularly those without heating and air conditioning systems, prevalence of broken windows, and bars on windows, where poor ventilation, environmental tobacco smoke (ETS), and urban air pollution may build up (Jacobs et al., 2009). In the US, more than 17% of low-income children have blood lead levels above the allowable limit and children with higher blood lead concentrations score significantly lower in arithmetic and reading scores compared to children with blood lead concentrations (Bellinger and Needleman, 2003; Canfield at el., 2003; Lanphear et al., 2000). Stark racial disparities in quality of housing exist and the resulting health disparities in the US have been constant over the past few decades (HUD; Kawachi et al., 2005; Jacobs et al., 2009).

Insufficient home energy for heating and cooling Inability to pay residential energy bills for temperature control can result in an increased use of improvised, unsafe energy sources such as heating the house by opening the kitchen stove (NAEDA, 2004). Children are particularly susceptible to improvised unsafe energy sources, which leads to increased rates of burns, carbon monoxide (CO) poisoning and respiratory illness (Cook et al., 2008).

Inadequate home insulation and warmth can impair the health of household inhabitants by increasing mold and humidity-related allergen sensitizers as well as impair immune response and the ability to fight illness during cold winter months (Jacobs et al., 2009). Poor health can then affect important social outcomes such as educational success, job retention, and family cohesiveness. Low-income families in California often go without temperature control during heat waves and cold winter months, which lead to financial strains on their health and the healthcare system, such as in 2006 when at least 140 people died from extreme heat (Bernard and McGeehin, 2004). These mortalities were more common among low-income at-risk, elderly and isolated populations (Bernard and McGeehin, 2004) and the risk of heat waves which cost billions of dollars to combat, are expected to increase as a result of global climate change (Bernard and McGeehin, 2004; AMS Study, 2005).

8.2 Scoping Our carbon tax HIA will focus on those impacts associated with natural gas consumption. The household is our unit of analysis. Public buildings, such as hospitals, schools, and industrial sites would provide too broad of a parameter for which health data isn‘t as closely connected. By focusing on individual and population wide household energy consumption, we can examine how different family units will be affected by a carbon tax based on their standard of living characteristics. Residential data includes household income, family size, household energy sources, climate zone and regional data, number of children in the home, and health insurance coverage among other variables. We use Pacific Gas and Energy (PG&E) and California Energy Commission (CEC) consumption data for natural gas California Carbon Tax: A Health Impact Assessment - 39 -

use because consumption across building ages and type (multi- or single-unit) is relatively consistent with competing California gas companies San Diego Gas and Electric (SDG&E) and Southern California Gas (SoCalGas) (KEMA-XENERGY, 2004). Electricity use per household is important to consider in future analyses because air conditioning is the main driver of its consumption in California, especially among newer households; electricity will not be considered here due to limitations in scope and the complex network of electricity distribution across state borders. We do provide a populationwide estimate for revenue raised from state residential electricity consumption.

Given a time frame of approximately three months, narrowing the scope of analysis in the energy sector is justified: a thorough examination of the entire energy sector would require immense resources and many more hours of analysis than there are available in our time frame. Additionally, average household natural gas consumption in California fluctuates less than electricity consumption from month to month because it is widely used for essential purposes such as space, cooking and home water heating throughout the year. This quality strengthens our assessment of the impacts on health across regional climate zones (CEC, 2009). The scope of the home energy-related health impacts we will discuss are described in figure 8.2A on the next page.

California Carbon Tax: A Health Impact Assessment - 40 -

The carbon tax in California will directly impact the cost of household energy in California residences as illustrated below. The increase in cost will directly affect consumption and disposable income with indirect impacts on health, particularly for susceptible populations such as low-income families. A reduction in disposable income can lead to housing insecurity, which can cause homelessness, overcrowding, and result in stress and poorer health outcomes. Likewise a reduction in disposable income may reduce access to quality health care, which limits preventative care and also leads to poorer health outcomes. The cost of energy increase might also decrease consumption, which lowers the amount of pollutants in the air, and improves overall respiratory health in the surrounding communities.

There is always the possibility that the increase in cost of energy results in no change in consumption and incurs trade-offs with other health-related essential needs among low-income households, or no impact on the household when combined incomes are well above the poverty line.

Figure 8.2A: Home Energy Scoping Diagram

Carbon Tax

Increase cost of energy

Reduced access to health care

Less preventative and early stage care

Reduction in

disposable income Housing Insecurity Overcrowding

No change in consumption

Decreased consumption

Increase in homelessness Poor health

Trade-offs with other basic needs

Decrease in air pollutants

Improved respiratory health

California Carbon Tax: A Health Impact Assessment - 41 -

Stress

Current Natural Gas Use Natural gas use in the home is an essential good, and it is used every day in more than 71% of California households across our climate zones (U.S. Census Bureau, 2009). Natural gas is used in 78% of primary space heating systems (figure 8.2B) and 79% of home water heating systems (KEMAXENERGY, 2004). The average California household spends approximately $44.53 a month on gas, of which 91% is then used for essential space, water, and cooking heat (figure 8.2C) (KEMAXENERGY, 2004).

Figure 8.2B:

Figure 8.2C:

Source: KEMA-XENERGY, 2004 The average Californian household‘s PG&E residential gas bill ranges seasonally from $20 each summer month to $97 during each winter month and is forecasted to remain relatively constant with slight decreases over the next 2 years (Figure 8.2D). Weekends typically use more energy than weekdays also because people spend more time in the indoor home home environment.

Figure 8.2D:

Source: KEMA-XENERGY, 2004

The cost for an average Californian household‘s winter months residential gas bill varied over the last ten years (Figure 8.2E). Annual winter months (Nov-Mar) varied from $43 to $104 since 1999 (Pacific Gas and Electric, 2009), so it is important to consider the effects of a carbon tax on the susceptible populations during the coldest winters when consumption is the greatest rathern than simple averages.

California Carbon Tax: A Health Impact Assessment - 42 -

Figure 8.2E: Pacific Gas and Electric Company Residential Average Winter Gas Bills

$120

[1999 - 2010 Nov-Mar*] ($/month)

$100

$104

$80

$81 $73

$60

$73

$78 $64

$62 $56

$40

$47

$43

$20 $0 1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

2007-2008

2008-2009

Rate fo recast is based o n M anagement's estimates regarding gas rate co mpo nents, including adjusted fo rward prices fo r gas co mmo dity as o f M arch 18, 2009. The rate fo recast and estimates o n which it is based are subject to change. Rate represents class average vo lumetric equivalent o f charges. Gas P ublic P urpo se P ro grams (P P P ) mandated gas so cial pro grams. B ills based o n Rate Schedule G-1 average use. *M ay 2009 thro ugh December 2010 Fo recast

Source: KEMA-XENERGY, 2004

Key Question: Are there any people in California who cannot afford an increase in the cost of energy and electricity?

The burden that household energy costs place on any household is best described as the proportion of total household monthly income (see figure 8.2F in the appendix for an example of this breakdown from British Columbian households). Considering that low income families spend a larger portion of their monthly income on basic needs such as home energy bills, trade-offs will occur because less money remains to satisfy other basic needs and services that directly affect health. However, households with greater expendable income are protected from gas price fluctuations even in the coldest winter months.

8.3 Potential health impacts from a carbon tax Because changes in general health status are due to factors such as education, greater health awareness, lifestyle changes, economic cycles, housing affordability, health insurance status, marital status, aging population, tendency of youth to engage in risky behaviors, occupation, and chronic illnesses (Zahran et al., 2005), we do not claim that home energy insecurity is the sole cause of health disparities.

However, the impacts of a rising residential natural gas prices resulting from a carbon tax are closely related to these as well as the determinants of health. Improvements in air quality outlined in the transportation chapter (6.0) and the mitigation of future health impacts of global warming such as extreme weather events and geographical changes are cited as the main impetus for instituting a carbon tax (Carbon Tax Center, 2008). While these improvements will provide health benefits in the longterm, a carbon tax will have immediate and long-term health drawbacks related to home energy use.

The health effects associated with low socioeconomic status and home energy instability can only be aggravated by such a policy unless action is taken to mitigate the harms. The health impacts of increased home energy costs are summarized below (Table 8.3A).

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Table 8.3A: A carbon tax increases residential gas bills and harms low income household health Mechanism High energy costs force low SES household budget trade-offs that jeopardize health Family spends less on food, healthcare, transportation in order to pay high energy costs

Short-term impacts -―heat or eat‖ nutritional risks -seasonal food insecurity during children‘s development

Medium & Longterm impacts -Children experience poor growth, increased infection and illness from malnutrition, as well as malnutritionrelated child cognitive, developmental and academic performance impairment at school, particularly during coldest winters when consumption is highest -chronic stress, anxiety, depression, decreased sleep, immune system deficits, increased illness -decreased education attainment, job retention, family cohesiveness

High energy costs are unaffordable for low SES families so housing is unaffordable and instable Families already unable to pay energy bills can no longer afford rent in the area they live

-increased number of forced evictions and homelessness -less control or choice over where to live leading to disempowerment

High energy costs lead to trade-offs with home environment quality Unaffordable home energy takes budget from repair and maintenance to pay bills so unhealthy home living conditions develop

-decreased ventilation quality -increased neurotoxic chemical exposures (ETS, pesticides, and lead) -increased dampness, mold, and asthma irritants in the indoor environment

-increased asthma attacks, emergency room visits, missed school and work days, and difficulties keeping up in school -increased risk for lead poisoning, asthma incidence and overweight -increased ETS exposure prenatally means increased risk of low birthweight babies, impaired neurodevelopment, growth and dysfunctional behavior.

High energy costs lead to inability to exercise climate control over heating and cooling; and interrupted energy services Low income households are less well equipped to handle extreme temperatures nor have healthy alternatives for home heating and cooling

-increased improvised home energy uses such as open stoves which have high particulate matter emissions and pose risk to children -increased risk of house fires -potential cold exposure

-increased CO poisoning, burns, and respiratory illness -increased morbidity and mortality during heat waves, especially for elderly -economic impact of preventable hospitalizations -increased risk of developing illness from inadequate heating

Sources: Pubmed article search, NAEDA 2005 survey, and a previous HIA report (CHIWG, 2007)

8.4 Assessment of Magnitude, Certainty, Direction, and Impact We assessed the magnitude of three primary health impacts by considering how many people were affected by the health impacts as well as qualitatively weighing the societal value of the impact. For example, effects to vulnerable populations, such as children living in low income households who do not have control over their home environment during development, will have a greater magnitude of perceived societal value than health effects on healthy resilient young adult populations with healthcare and insurance. The direction of the health impacts is the described improvement or worsening of health factors, and the certainty of the health impacts is a value judgment based on whether existing evidence is applicable and sufficiently supports this prediction. We rated certainty levels higher when supporting evidence was California-based, local, and based on historical trends rather than forecasts, as well as from credible academic research sources such as peer-reviewed article journals rather than non-profit, opinion, industry, or political organizations.

California Carbon Tax: A Health Impact Assessment - 44 -

Table 8.4B: Certainty ratings of three main health impacts: Health Impact from a carbon tax’s rising home energy costs for low SES populations in CA

Rating of Certainty

Implications and mitigations for local public health policy or statewide? (mitigations)

Data Source/Indicators to measure to assess this health impact

Children’s development -rising home energy costs impairing neurodevelopment via forcing trade-offs with malnutrition, housing quality (pesticide, ETS, and allergen exposure)

Support for programs that decrease the already existing health disparities that are driven by poor quality housing among low income families via welfare, subsidies, and social support programs such as food stamps, home energy assistance, and education about exposure prevention

Reduced nutrition, stress, decreased parent-child social interaction time. Although the evidence is CA-based for the neurological effects of pesticides as well as school performance deficits from poor housing quality-related respiratory emergency room visits and missed school, the certainty decreased because this outcome is more longterm and difficult to track/less routinely measured across the general population

Increased respiratory disease (asthma) particularly among children

Garners support for home weatherization programs that increase insulation to decrease mold and humidity allergen sensitizers, and low income indoor housing quality improvements and interventions sponsored by the CA Lung Association

Air pollutants decrease/increase ambient air and indoors; poor upkeep of indoor housing environment (pub med article searches)

Heat wave morbidity and mortality among low income households and the elderly

City preparedness funds for heat waves such as support phone lines for families to be picked up and taken to a cool shelter during hot days, as well as fund energy efficiency upgrade programs

Number of deaths due to heat waves by subgroup of the population in California report due to inability to afford home energy; these numbers are available from natural disaster response reports

Diagram Key: The certainty star rating system 1 star means low level of certainty 2 stars means fairly certain 3 stars means high level of certainty

Evidence that doesn‘t consider the effects of climate change in California decreased our certainty of the impacts, where different regions already have (Reiss, 2002), and will continue to have regionallydependent heterogeneous home energy consumption needs and elasticity over the next 100 years (Figure 8.4G in appendix). For example, electricity-powered air conditioning and pool heat generation in California is already higher in some areas (Reiss, 2002) so it is important to consider that rural California Carbon Tax: A Health Impact Assessment - 45 -

populations living in Southern California may have even more extenuated circumstances that predispose them to the health impacts of rising energy costs.

8.5 Discussion and Research Questions We will now discuss our three main questions and conclude that taxing home energy in the short run is not an effective way to change residential natural gas consumption behaviors. The dilemma that accompanies the establishment of a carbon tax with the goal of reducing consumption lies in the necessary severity of the tax.

Will the carbon tax result reduce residential natural gas consumption?

Several reports demonstrate that residential natural gas consumption in California does not change when prices fluctuate, even across income groups and regions (CEC, 2009; Bernstein and Griffin, 2006; West, 2003). In agreement with these previous reports, a recent California-specific report showed that the elasticity of natural gas use in the home is actually lower than experts thought, at -0.22 and calculated adjusting for incomes, racial groups, and other factors that impact behavioral elasticity in California (CEC, 2009). Only a tax that makes a noticeable financial impact on the consumer will serve to curb energy use where feasible. For low-income households, that threshold is much lower than for middle and upper income households and consumption behaviors are less elastic because home energy is an essential need. A rise in price won‘t change behaviors when people lack the financial means and choices to increase consumption efficiency (Snyder, 2008). Conversely, households earning middle and high incomes will not change their consumption nor will they experience residual health impacts because there are no financial stressor on their other basic needs (Angus Reid report, 2008).

Several recent meta-analysis review articles of the literature indicate that residential natural gas is inelastic both in the short term and the long term (Joutz and Trost, 2007; Bohi and Zimmerman, 1984; Espey and Espey, 2004). However, a carbon tax would result in a significant change in household cost as the tax becomes more punitive in the long term. The effect of high home energy cost will most likely result in less use in the long term, but strategies that promote greater reliance on clean fuels are necessary to prevent an increase in cost burdens to low income households while moving consumers away from fossil fuel dependence (see Appendix section 8.55 for further home energy elasticity details).

How much will the price of residential natural gas increase among low income households?

As previously described, natural gas prices are expected to remain relatively constant for the next five years from 2008 to 2012. The average annual cost for gas with and without the addition of a carbon tax has been calculated for the average California household considering inelasticity of consumption and price projections (figure 8.5H). Figure 8.5G depicts the annual cost for low income households remaining fairly constant over the next five years which follows a decreasing trend. On average, the carbon tax will increase annual costs of residential natural gas by 4.7% each year over the next five years.

California Carbon Tax: A Health Impact Assessment - 46 -

Figure 8.5H Annual Cost of Natural Gas Per Household 680

Annual Cost ($)

660 640 620 600

Without carbon tax

580

With carbon tax

560 540 520 500 2008

2009

2010

2011

2012

Year

How much revenue will be raised from residential natural gas and electricity consumption?

Given the inelasticity of residential natural gas consumption, the following total revenue would be raised from home energy across the state over the proposed five years of the carbon tax: a) Revenue generated from a carbon tax on residential natural gas: The residential sector accounts for 22% of natural gas use in the state of California. Households in California used a total of 5,027 million therms of natural gas in 2007 (CEC, 2007). When natural gas is burned, CO2 and water are released along with heat. Approximately 11.7 lbs of CO2 are produced per therm of natural gas used (American Forests, 2008). The total revenue generated by taxing these emissions based on the total residential natural gas use in 2007 is $294 million in the first year, and a total of 287 million over five years (see Table 8.5C).

Table 8.5C

Total revenue raised due to the carbon tax per year

2008

2009

2010

2011

2012

$294,092,413

$436,895,478

$576,286,581

$712,900,435

$846,556,760

b) Residential electricity raised dividends from a carbon tax: In 2006, California produced approximately 13.5 percent of the natural gas, 38.8 percent of the petroleum and 78.1 percent of the electricity it uses (EIA, 2009). Natural gas is used to produce the bulk of electricity generated in CA. Approximately 56% of electricity in California is generated using natural gas (CEC, 2008). The production of electricity through natural gas produces approximately 86% of CO2 emissions in the electric power industry in 2006. These emissions would be taxed by the proposed carbon tax, and generate a substantial revenue stream to be added to revenue received from other sectors affected by the carbon tax. Looking at electricity home price increases is outside the scope of this HIA, but the money generated will be considered for the health impacts of the carbon tax policy generated state revenues. In 2006 65,446,678 tons of CO2 emissions were produced by California Carbon Tax: A Health Impact Assessment - 47 -

electricity production in California, which at a carbon tax rate of $10/ton of CO2 emissions generates $654 million in revenue each year assuming the consumption remains constant (EIA, 2008).

9.0 Assessment of Alternatives for Revenue Redistribution__ We estimate that the tax will generate more than $26 billion dollars over the first five years of implementation (See Table 9.A).

When considering how the revenue is spent, we considered the main goals of 1) reducing carbon dioxide emissions and 2) mitigating the negative health consequences of the carbon tax on low income communities and households. Because the tax affects multiple sectors, the burden on an average low income Californian household3 will be an estimated $758 total over 5 years, or an average of $151.60 per year (see Fig 9.A as well as the appendix for calculations). This estimate is predicted for urban low income 4-person Californian families with 2 working parents and does not include externalities such as residential electricity and public building energy use costs that aren‘t included in our analysis. Thus, in reality these costs will be much higher, especially for rural families, and can have significant impacts on low income health care affordability if this is where budget trade-offs may occur. For example, how does the price of a child‘s asthma inhaler compare to $151 a year, and may it be sacrificed if household budgets face constraints? We recommend consideration of both long and short term effects of reinvestment of funds, with special consideration for low income families.

Figure 9.0B Figure 9.0A

Total Revenue Raised from carbon tax in five years $18,278,360,373 $2,866,731,669 $4,860,000,000 $26,005,092,040

Source of revenue

Gas and diesel fuel Residential natural gas use Agriculture production Total

9.1 Reinvestment in Renewable or Cleaner Technology We have three reinvestment strategies to consider, namely improvements in transportation, home energy, and agriculture:

3

defined as having 2 working parents earning between $44,100 to $48,000 annually total combined with 2 children under 18 years of age, and living near to California‘s 3 main urban centers (SD, LA, or SF) California Carbon Tax: A Health Impact Assessment - 48 -

Invest in affordable, energy efficient, accessible public transportation. This includes but is not limited to the following key recommendations: Expand bus and high speed train services to low income areas Stabilize affordable prices of public transportation for low income, students, and elderly Support state-wide transit-oriented development Invest in home energy credits for low income households, and improving home energy use efficiency. This includes but is not limited to the following key recommendations: Provide energy efficiency upgrades to low income families‘ appliances and home heating and cooling, such as integrated heating/cooling into one system (central A/C and heating) Support LEED-gold certified home and public building renovations and weatherization programs for low income households Invest in public education programs to complement these services to provide incentives for lowering home energy bills Invest in local farmers producing healthy foods. Rural households may experience the greatest financial strains as a result of the carbon tax, so in order to maintain the vitality of our agriculture industry these communities need monetary investment. Costs of producing food grown or processed in California will increase as a result of a carbon tax. In order to promote healthy food consumption in California and protect the health of Californians, we recommend that revenue generated from the tax be reinvested into California agriculture. The following reinvestments strive to promote reduced prices of healthy specialty crops, and environmentally sustainable practices throughout the production line (farm, to factory, to market): Subsidize California specialty crop growers (fruit, vegetable, nut, bean, and legumes) Award grants to farmers who increase local production and/or increase sustainable practices Fund the development and efforts of a ―Green Health Business Team,‖ that will assist in adopting more environmentally friendly practices, connect farms with local food retailers, help California restaurants serve healthier and locally grown foods, and provide technical assistance to grocery stores interesting in selling more locally grown specialty crops Together, these strategies may improve health in the long-term. The recommendations span a variety of geographical areas and sectors. They will make more income available to families, decrease exposure to indoor and outdoor air pollution, and make nutritious foods more available.

9.2 Redistribution to Low-Income Families The carbon tax credit in the form of money is not successful at mitigating the potential health impacts that will be placed disproportionately on low-income populations. For example, in British Columbia, only 5% of individuals who received a carbon tax $100 credit spent their dividend on environmentfriendly purchases (Angus Reid, 2008). According to online blogs, many spent it on excessive energy consumption, such as road trips and extra gas mileage and 60% of British Columbians polled in a recent report said that the tax wouldn‘t do much to reduce fossil fuel use in the province or change their energy consumption behaviors at all (Angus Reid, 2008). Additionally, 68% of respondents said that they thought that the carbon tax hurts low-income families, singles and seniors, due to rising energy costs, and only 28% think that it is the best way to curb climate change (Angus Reid, 2008). To California Carbon Tax: A Health Impact Assessment - 49 -

mitigate the regressive nature or disparate health impacts on susceptible populations of the carbon tax, as well as mitigate carbon emissions, we suggest reinvesting revenue in environment-friendly and energy efficiency programs as well as providing $50 annually to adults and $25 to children in lowincome households in order to mitigate the cost of the tax.

The financial strains will occur disproportionately among rural, low income, and elderly populations (Angus Reid, 2008) in California. As shown in figure 9.2B, California households in rural and small towns have lower median incomes and spend a greater portion of their income on transportation needs.

Small tax rebates and investment in programs that serve all Californians, such as public transportation and home weatherization will mitigate the burden on low-income families.

Figure 9.2B

Source: Oil Price Information Service, U.S. Census, NY Times, 2008 US

California Carbon Tax: A Health Impact Assessment - 50 -

Appendices Appendix 1.0A

California Carbon Tax: A Health Impact Assessment - 51 -

Appendix 2.1A Carbon Tax Rate by Fuel Type Units Liquid Fuels Gasoline Diesel Light Fuel Oil Heavy Fuel Oil Aviation Gas Jet Fuel Kerosene Gaseous Fuel Natural Gas Propane Butane Ethane Pentane Coke Oven Gas Still Gas Solid Fuels Coal – US Bituminous Coke Petroleum Coke Tires - shredded Tires – whole

July 1, 2008

July 1, 2009

July 1, 2010

July 1, 2011

Cents/gallon Cents/gallon Cents/gallon Cents/gallon Cents/gallon Cents/gallon Cents/gallon

9.13 10.46 10.46 11.79 9.29 9.93 9.70

13.72 15.69 15.69 17.70 13.91 14.89 14.56

18.26 20.92 20.92 23.57 18.57 19.90 19.40

22.85 26.11 26.11 29.49 23.19 24.86 24.26

Cents/GJ Cents/gallon Cents/gallon Cents/gallon Cents/gallon Cents/GJ Cents/GJ

49.88 5.80 6.67 3.71 6.67 42.31 51.22

74.82 8.72 10.04 5.53 10.04 63.47 76.83

99.76 11.60 13.38 7.39 13.38 84.62 102.44

124.70 14.52 16.71 9.25 16.71 105.78 128.05

$/Ton $/Ton $/Ton $/Ton $/Ton

24.39 24.87 3.67 23.91 20.80

36.58 37.30 5.51 35.87 31.20

48.78 49.74 7.34 47.82 41.60

60.97 62.17 9.18 59.78 52.00

* BC Carbon Tax Factsheet

California Carbon Tax: A Health Impact Assessment - 52 -

Appendix 6.4 A Elasticity Calculations and Short-Term Effects from Carbon Tax: Gasoline Business as usual (BAU) Year Average net taxable gasoline per gallons in CA/ year (b) (k) *** Average VMT/ year (in billions of miles) (h) Tons of CO2 generated from gallons of gasoline consumed (c) PM10 co-emissions (tons) (i)

2008

2009

2010

2011

2012

Totals

15,811,858,589

15,966,085,889

16,120,313,189

16,274,540,489

16,428,767,789

80,601,565,945

182

185

188

191

194

940

153,375,028

154,871,033

156,367,038

157,863,043

159,359,048

781,835,190 70,870

13,808

13,808

14,418

14,418

14,418

Projected fuel price/ gallon (d)

$3.21

$2.28

$2.84

$3.02

$3.17

Revenue from fuel consumption/ year

$50,684,833,571

$36,439,884,389

$45,771,840,559

$49,214,338,577

$52,144,842,782

$234,255,739,877

Carbon Tax Carbon tax per gallon of gasoline (a) Average Fuel price/ gallon with carbon tax added (d) % Increase in fuel cost/ year with carbon tax added

Traffic Volume (f)

Fuel Consumption (e)

Revenue generated from carbon tax/ year Short term % change/ year (m) Average net taxable gasoline per gallons in CA/ year (b) CO2 emissions/ year (tons) (g) Short term % change/ year (l) Average VMT/ year (in billions of miles) (h) PM10 co-emissions (tons) (i)

$0.0970

$0.1455

$0.1940

$0.2425

$0.2910

$3.30

$2.43

$3.03

$3.27

$3.46

3.03%

6.38%

6.83%

8.02%

9.17%

$1,522,147,256

$2,288,388,084

$3,032,475,483

$3,763,246,803

$4,470,242,085

-0.76%

-1.59%

-1.71%

-2.00%

-2.29%

15,692,239,756

15,727,753,155

15,631,316,922

15,518,543,519

15,361,656,648

77,931,510,000

152,214,726

152,559,206

151,623,774

150,529,872

149,008,069

755,935,647

-0.30%

-0.64%

-0.68%

-0.80%

-0.92%

181.45

183.92

185.77

187.52

189.03

927.68

13,766

13,724

13,637

13,544

13,435

68,107

$15,076,499,711

Elasticity Calculations and Short-Term Effects from Carbon Tax: Diesel Business as usual (BAU)

Year Average net taxable gasoline per gallons in CA/ year (b) (l) Average VMT/ year (in billions of miles) (h) Tons of CO2 generated from gallons of gasoline consumed (c) PM10 co-emissions (tons) (i)

2008

2009

2010

2011

2012

Totals

2,827,526,205

2,900,826,205

2,974,126,205

3,047,426,205

3,120,726,205

14,870,631,025

182

185

188

191

194

940

31,668,293

32,489,253

33,310,213

34,131,173

34,952,133

166,551,067

14,370

14,370

14,370

14,370

14,370

71,850

California Carbon Tax: A Health Impact Assessment - 53 -

Projected fuel price/ gallon (d)

$3.72

$2.63

$2.75

$2.97

$3.18

Revenue from fuel consumption/ year

$10,527,402,629

$7,629,598,730

$8,177,073,552

$9,052,157,830

$9,930,806,396

$45,317,039,137

Carbon Tax $0.1110

$0.1665

$0.2220

$0.2775

$0.3330

Average Fuel price/ gallon with carbon tax added (d)

$3.83

$2.80

$2.97

$3.25

$3.52

% Increase in fuel cost/ year with carbon tax added

2.98%

6.33%

8.07%

9.34%

10.46%

Revenue generated from carbon tax/ year

$311,516,151

$475,995,944

$640,889,638

$805,281,393

$968,177,536

Short term % change/ year (m)

-0.75%

-1.58%

-2.02%

-2.34%

-2.62%

Average net taxable gasoline per gallons in CA/ year (b) CO2 emissions/ year (tons) (g)

2,806,451,814

2,858,834,497

2,886,890,259

2,901,914,929

2,907,440,049

14,361,531,548

31,432,260

32,018,946

32,333,171

32,501,447

32,563,329

160,849,153

Short term % change/ year

-0.30%

-0.63%

-0.81%

-0.93%

-1.05%

Average VMT/ year (in billions of miles) (h)

181.46

183.93

185.79

187.31

188.58

927.07

14,327

14,284

14,194

14,079

13,948

70,833

Traffic Volume (f)

Fuel Consumption (e)

Carbon tax per gallon of gasoline (a)

PM10 co-emissions (tons) (i)

$3,201,860,662

(a) Based on $/ton of CO2; gasoline produces 19.4 pounds of CO2/ gallon (b) California Taxable Gasoline: State Board of Equalization (http://www.boe.ca.gov/sptaxprog/spftrpts.htm); 2008 gasoline data based on calculation of average from 2005 - 2007 (c) Calculation: [Net taxable gallons/ year X 19.4 pounds of CO2/gallon of gasoline]/ (2000 pounds/ton) (d) US EIA Forecasts & Analysis, US Data Projections (http://www.eia.doe.gov/oiaf/forecasting.html) (e) Fuel consumption (total) elasticity (Goodwin, 2004): -0.25 (f) Traffic volume (total) elasticity (Goodwin, 2004): -0.10 (g) Calculation: [Reduction in gallons consumed/ year X 19.4 pounds of CO2/gallon of gasoline]/ (2000 pounds/ton) (h) California VMT: California Department of Transportation (http://www.dot.ca.gov/hq/traffops/saferesr/trafdata/monthly/VMTHIST1.pdf); 2008 data based on calculation of average from 2005-2007; projections based on trended analysis from 1987 - 2007) (i) CARB: yearly PM10 emissions in tons from mobile on-road gasoline sources; http://www.arb.ca.gov/app/emsinv/emssumcat.php (j) Calculated reduction of PM10 emissions as equivalent to the percentage reduction seen with decrease in VMT (k) Projections based on 1987 to 2007 trended data of taxable gasoline (l) Projections based on 1999 to 2007 trended data taxable diesel (m) Short term < 1 year *** Taxable gasoline gallons include aviation gasoline, so projected changes in fuel consumption may be an overestimation of the true effects of carbon tax on on-road mobile gasoline.

Totals GASOLINE SUMMARY Fuel consumption (gallons) Average VMT (in billions of miles) CO2 emissions (tons) PM10 emissions (tons)

BAU 80,601,565,945 940 781,835,190

tax 77,931,510,000 927.68 755,935,647

% change -3.3127% -1.3106% -3.3127%

70,870

68,107

-3.8994%

California Carbon Tax: A Health Impact Assessment - 54 -

Totals DIESEL SUMMARY Fuel consumption (gallons) Average VMT (in billions of miles) CO2 emissions (tons)

BAU 14,870,631,025 940 166,551,067

tax 14,361,531,548 927.07 160,849,153

% change -3.4235% -1.3755% -3.4235%

PM10 emissions (tons)

71,850

70,833

-1.4163%

Appendix 7.5A Calculating Impacts of Carbon Tax on Milk and Beef *Milk carbon inputs: 26% of carbon footprint(Johnson, Phetteplace, & Seidl, 2002) *Beef carbon inputs: 12% of carbon footprint(Johnson et al., 2002) Estimated price increase from carbon inputs and biogenic emissions (recommended tax) a. Milk - 1 gallon AVERAGE: 9.3 lbs of CO2eq4 X/9.3 lbs = $10/2000 lbs 2000X = 9.3 X = 0.0465 for $10 tax $10 tax; X = additional $ 0.0465 on 1 gal milk Average price of a gallon of Reduced Fat Milk (2009) = $3.39/gallon 0.0465/3.39 = 1.37% price increase Own-Price Elasticity = -0.703 Decrease in consumption (1.37*0.703)= 0.96%

Estimated price increase from carbon inputs alone; excludes biogenic emissions (current tax)

2.43 lbs of CO2

$0.012/gallon

0.36% price increase 0.25% consumption decrease

$20 tax; X = $ 0.093/gallon

$0.024/gallon

$0.093/$3.39 = 2.74% price increase Decrease in consumption = 1.93%

0.71% price increase 0.50% consumption decrease

$30 tax; X = $ 0.1395/gallon

$0.036/gallon

$0.1395/$3.39 = 4.12% increase in price Decrease in consumption = 2.89%

1.07% price increase 0.75% consumption decrease

b. Beef - 4 oz hamburger patty AVERAGE: 6.1 lbs of CO2eq5/4 oz beef X/6.1 = $10/2000

2.93 lbs CO2eq/lb beef

2000X = 61 4

Sources used to average the carbon footprint of milk: 8.5 lbs of Carbon: http://openthefuture.com/2007/07/milks_hoofprint.html 12 lbs of carbon: http://www.extension.org/pages/Dairy_Carbon_Footprint_Dropping 7.6 lbs of carbon: http://www.evolvingexcellence.com/blog/2008/10/fun-with-statis.html 5 Sources used to average the carbon footprint of beef: 4.1 lbs of CO2: http://www.jacksonville.com/tu-online/stories/042207/lif_9369051.shtml 4.02 lbs of CO2: http://www.breitbart.com/article.php?id=CNG.e36a67d49c1127a8c17cc38ed4a4c27e.211&show_article=1 9.17 lbs of CO2: http://www.telegraph.co.uk/news/uknews/1557846/Eating-beef-is-less-green-than-driving.html California Carbon Tax: A Health Impact Assessment - 55 -

$10 tax; additional $ 0.0305 on 4 oz beef $0.0305/4 oz $0.0305*4 = $0.122/lb [$3.97/lb beef (2008)] $0.122/$3.97 = 3.07% price increase

$0.0037 per 4 oz beef $0.015/lb 0.37% price increase

Own-Price Elasticity = -1.086 Decrease in consumption = 3.34%

0.40% consumption decrease

$20 tax; additional $0.061 on 4 oz of beef

$0.007 per 4 oz beef

$30 tax; additional $ 0.0915 on 4 oz of beef

$0.01 per 4 oz

$0.061*4 = $0.244/lb $0.244/$3.97 = 6.15% increase in price Decrease in consumption = 6.67% $0.366/lb beef $0.342/$3.97 = 9.22% increase in price Decrease in consumption = 10.01%

$0.029/lb 0.74% price increase 0.80% consumption decrease $0.04/lb 1.11% price increase 1.20% consumption decrease

Appendix 7.5B Factors that Affect Elasticity Factor Substitutes: are there other foods that can replace beef?

If so, elasticity increases.

Percentage of Income: are people spending a large percentage of their income on beef? If not, elasticity decreases.

Necessity: is beef considered essential to the diet? If no, beef elasticity increases.

Duration: is the price of beef increased for a short period of time? If not, beef elasticity increases.

Breadth of Definition: Is beef a broad category?

Effect on Beef Beef is more elastic because there are many meat and non-meat protein sources that can replace beef (pork, beans, soy, chicken).

Wolghenant (1985) found that elasticity of meat was highly dependant on changes in the price of poultry; if the price of beef decreased, but the price of poultry decreased at a higher rate, then consumption of beef decreased (Wohlgenant, 1985).

Most people can afford a minimal tax resulting in a 4 cent/lb increase in the price of beef, reducing its elasticity.

Low-income Californians will be more impacted by the tax on beef, because a higher percentage of their income would be spent on beef (Kim & Kawachi, 2006). Considering that low-income populations in the U.S. consume significantly higher amounts of meat, calories, saturated fat, and cholesterol than other groups, this may actually have progressive health benefits (Mytton, Gray, Rayner, & Rutter, 2007).

The current economic recession may contribute to a larger percentage of income spent on beef.

Consumption of beef may be less elastic among groups who believe beef is an absolute necessity, though it is not. Promoting ―Eat Less Beef‖ may be an effective strategy for these groups.

Since the tax is permanent, spending more on beef isn‘t a one-time expense—increasing the product‘s elasticity.

People are less likely to spend more on beef over the long-run.

Beef is probably less elastic because all beef raised in California is taxed; if the consumer wants beef, it will be hard to avoid the tax.

Stores that sell beef raised in other states would not be impacted by increasing prices, potentially making California beef more elastic (but the cost of transporting beef from other states may offset the tax).

California Carbon Tax: A Health Impact Assessment - 56 -

Appendix 7.5C Average Demand Elasticities a

Beef Dairy

Own-Price Elasticity -1.086 -0.703

IncomeElasticity 2.719 0.117

Fat CrossElasticity -0.025 0.002

Fruit CrossElasticity -0.069 -0.006

Vegetable Cross-Elasticity -0.074 -0.006

Adapted from Sheffrin, 2003

Appendix 7.5D Projections of Tax‘s Effects on Beef and Dairy Price and Consumption

Beef Price /lb Price (percent) Consumption 6 Milk Price /gallon Price (percent) Consumption 7

$10/ton CO2eq

$20/ton CO2eq

$30/ton CO2eq

$0.015 0.37% -0.40%

$0.029 0.74% -0.80%

$0.040 1.11% -1.20%

$0.012 0.36% -0.25%

$0.024 0.71% -0.50%

$0.036 1.05% -0.75%

Appendix 8.5A The annual cost of natural gas was calculated using the annual average amount of gas used per California household as reported by the California Energy Commission (CEC, 2008). The Energy Information Administration provides forecasts of expected natural gas prices; the prices in the March 2009 report on Natural Gas Supply, Disposition, and Prices are presented in dollars per thousand cubic feet (EIA, 2009). The average amount of gas used (471 therms) was divided by 10 to convert usage into 10 therm units, and multiplied by the cost per 10 therms. This provides the annual cost of gas without a carbon tax. Assuming that every therm of gas produces 11.7 lbs of CO2, the average use of 471 therms was multiplied by 11.7 lbs of CO2 and divided by 2000 to translate therms of natural gas used to tons. This was then multiplied by $10 per ton of CO2 emitted to determine increase in cost due to the carbon tax. This figure was then added to the baseline cost of natural gas without the tax to find the cost of natural gas with the tax. Total therms of natural gas consumed in 2007 was retrieved from the CEC Energy Consumption Data Management System, converted to tons, and multiplied by the carbon tax ($10) to determine total tax revenue for each year.

An elasticity of -0.22 was multiplied by the annual percent increase in cost due to the carbon tax to determine percent change in consumption for the following year. This determined the total consumption of natural gas in California for each subsequent year, accounting for the minimal change in consumption due to the carbon tax.

a

The United States Department of Agriculture (USDA) compiles demand elasticities of foods from academic literature, and calculates mean elasticities for various products (Economic Research Service, 2008).

6

See section ‘a. Magnitude and Impact of Increased Food Costs’ for a description and details of how the change in consumption was calculated 7 See ‘section a’ for a description and details of how the change in consumption was calculated California Carbon Tax: A Health Impact Assessment - 57 -

The existence of alternatives can help mitigate the burden of rising energy prices. The elasticity of natural gas consumption will increase only if natural gas can be substituted with cheaper alternatives. Approximately 95% of natural gas delivered to the home is used for cooking, water heating, and space heating, and because of the high cost of replacing the appliances associated with these activities, substituting for natural gas is often not feasible. Interestingly, it has been proposed that consumers are often unaware of the price they are paying per unit of natural gas and of which appliances in the home are actually using natural gas. Because natural gas use is related to essential household activities such as bathing, washing clothes, and washing dishes, and few active monitor systems exist to display usage and price in the home for the consumer, most consumers are fairly unaware of their consumption and cost until the monthly bill arrives (Carter and Milton, 2005).

Appendix 8F

Source: CUPE BC carbon tax report, 2008

Competing demands in a household budget such as nutrition, transportation also impact the elasticity of residential natural gas consumption. The average monthly gas bill for a California household does not provide an adequate measurement of the cost of energy for low-income households. Low-income households will pay a larger amount of their income on all basic needs than higher-income households. The same monetary decrease in a high-income household can have disparate impacts on low-income households that are already struggling to pay for basic needs. As demonstrated in the graph above (fig 8.F), this was indeed what happened in British Columbia where the average low-income household with annual earnings of $16,700 spends twice as much of their income, as a percentage of total income on energy across sectors compared to high income households earning $152,600 annually.

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Appendix 8G: California forecast for residential electricity consumption demands by climate zone

Source: CEC, 2009

Appendix 9.0A: Calculations estimating increases in cost of living during first 5 years of implementation of the carbon tax Increased cost to average low income Californian household Calculations & References: I. HOW MUCH IS CURRENTLY SPEND ON DIFFERENT SECTORS BY HOUSEHOLD (household defined as average ca low income family of four at 200% the poverty level or earning $44,100 per year. each family has 2 working parents, 2 kids (1 boy 1 girl under 19 years old), and live near to caâ&#x20AC;&#x2DC;s 3 main urban areas (LA, SF, and SD) (HHS Poverty Guidelines, 2009) Family budget: Average 200% poverty level $44,100 family budget spendings for CA family of 4 with 2 working parents:

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Of the $9000 spent on transportation, $1903.56 is spent on vehicle gas. Of the $6744 spent on food each year, only a portion of this is spent on beef and milk.

CALCULATIONS: Definition of 200% federal poverty level is $44,100 annual household income, which is less than enough to make ends meet for a family of 4 in CA (need approximately $4000 x 12) = $48,000. (HHS Poverty Guidelines, 2009) Residential natural gas: We calculated $630 annual spending in CA low income households using an average of 471 therms annual HH consumption (California Residential Natural Gas Consumption (2008).

Then, we used natural gas price forecasts to project the natural gas rising costs on the households over the five years of the carbon tax (Department of Energy, 2009).

Transportation: Average 2 working parent household earning approximately $4000 per month in CA 3 main urban areas spends $9000 on transportation (CBP, 2007). **NOTE: $4000 per month x 12 = $48,000 annual income, which is close to $44,100 (best/closest data available to 200% poverty level) Average US household gas consumption is $1675.80 ($44,100*3.8%) (Average family in US spent 3.8% of budget in 2006 on gas (CERA report). This agrees with 4% of income shown in the CUPE BC Carbon Tax report (CUPE, 2008).

The prices of gas in CA are the highest in the country compared to the 49 other states, yet the amount spent on gas is still less of a portion of the household income than in other states. This California Carbon Tax: A Health Impact Assessment - 60 -

means that Californians must drive less than other states. Rural and poor areas across the US were hit the hardest by rising gas prices (Oil Price Information Service, 2008).

Average 2 working parent household earning approximately $4000 per month in CA 3 main urban areas spends $730.62 on food (CBP, 2007).

Average low income household (200% poverty) spends approximately 15.3%, or ~$562/month, of after tax income is spent on food. Expenditures on food eaten at home (as opposed to food eaten away from home) is $322/month. Of this, families spend about $89/month, or 28%, on meat, poultry, seafood, and eggs and about $40/month, or ~12%, is spent on dairy products (Frazao, 2007).

The elasticity calculation looked at the effects on fuel price and behavioral changes secondary to applied carbon tax. We had to make very big assumptions when calculating the effects on low income families: 1. Behaviors over the short term will not change secondary to increasing gas prices 2. The % of family budget spent on gas in the US is the same across the whole countries and across all of CA (urban and rural), and the same across all SES. (This is the biggest one since there is a lot of literature suggesting that lower income families spend a larger % of their budget on transportation (including gas), live further away from the employment centers/ metropolitans areas and thus commute more, and have the least ability to increase energy efficiencies due to limited financial capital to invest in these things.)

Food costs (beef & milk): Average 2 parent, 2 child (one boy, one girl aged 2-19 years) US family consumes 260.4 lbs of beef on average each year.

How did I get this value? ---the average American adult consumes 67 lbs, the average kid aged 2-11 years consumes 50.1 lbs, and the average kid aged 12-19 years consumes 75.74 lbs of beef). Girls aged 2-11 years consume 47.31 lbs and boys consume 54.01 lbs. Girls aged 1219 years consume 56.23 lbs and boys consume 95.24 lbs, making the averaging out of these values for the typical American family). Important to consider that the households with teenage girls may have a lesser impact by the beef portion of the carbon tax than the families with 2 teenage boys (USDA, 2005).

Average 2 parent, 2 kid US family consumes 88.64 gallons of milk.

How did I get this value? --- Average American drinks 83.9 L = 22.16 gallons x 4 = 88.64 gallons per family per year. If the average American consumes 22.16 gallons of milk per year, which times 4 = 88.64 gallons for a family of 4. The data for milk consumption among children was not available (International Dairy Foundation, 2007).

This number agrees with the USDA average value of milk consumed per year by Americans of 23 gallons per year. Ie) by 2001, Americans were consuming less than 8 gallons per person of whole milk, er capita consumption of total lower fat milks was 15 gallons in 2001. TOTAL milk in 2001 per person = 23 gallons per person (Putnam, 2003).

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II. HOW MUCH WILL THE PRICE INCREASE FOR EACH SECTOR WITH THE CARBON TAX? Beef: Year of carbon tax Tax Increase Increase in spending Year 1 $0.015/lb + $3.91 Year 2 $0.022 + $5.73 Year 3 $0.029 + $7.55 Year 4 $0.035 + $9.11 Year 5 $0.040 + $10.42 The tax would add 1.5 cents to the current price of 1lb of beef. We didn‘t include projections for consumption changes because we were not certain about the elasticities given that the beef and milk/dairy industry marketing and lobbying efforts are so strong, so we did not include them in the calculations here.

Low-income Californians will be more impacted by the tax on beef, because a higher percentage of their income would be spent on beef (Kim,Daniel 2006) Considering that low-income populations in the U.S. consume significantly higher amounts of meat, calories, saturated fat, and cholesterol than other groups, this may actually have progressive health benefits (Mytton,Oliver 2007).

Milk: Year of carbon tax Year 1 Year 2 Year 3 Year 4 Year 5

Tax increase $.012/gal $.018 $.024 $.03 $.036

Increase in Spending $1.06 $1.60 $2.13 $2.66 $3.19

The tax would add 1.2 cents to the current price of one gallon of milk. Again, in the calculations of price increase we didn‘t consider reductions in consumption due to elasticity because these elasticities were so small, and these items are staples in Americans‘ diet.

Alternatively, a carbon tax on beef has the potential to be most beneficial to low-income people, who, as a group, consume more beef (United States Department of Agriculture) and may be more likely to reduce consumption due to increased sensitivity to higher prices (Mytton, Oliver 2007). The increased cost of milk could negatively effect the health of low income populations. Fortunately, consumption is not expected to decrease a large amount (0.75% by the last tax phase). As a whole, all US populations consume too few servings of low-fat milk products (United States Department of Agriculture) Promoting low-fat milk consumption may benefit the health of Californians.

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TOTAL FOOD PRICES INCREASES: = total increase in beef spending + total increase in milk spending due to carbon tax = $3.91 + 1.06 = $ 4.96 increase to food costs in the first year, or over 5 years it increases $13.60 in the fifth year of the carbon tax. The total impact on food costs for beef and milk is $47.33 over 5 years, accounting for increases in the carbon tax each year.

Increase in price each Year year: Year 3 Year 4 Year 5 total Average Year 1 2 food 4.96 7.32 9.68 11.77 13.60 47.33 9 transportation 57.60 86.40 115.21 144.01 172.81 576.03 115 residential natural gas 27.56 27.32 27.00 26.71 26.44 135.03 27 total 90 121 152 182 213 758.39 152 percent of low income budget

0.07% 0.14%

0.21%

0.28%

0.35%

1.07%

TOTAL RESIDENTIAL NATURAL GAS COST INCREASES: (see home energy section for calculations) HOW MUCH WILL TRANSPORTATION COSTS INCREASE? Average family in US spent 3.8% of budget in 2006 on gas (CERA report, referenced in above transportation section). We included the elasticity values into these calculations so that we could have accurate reflections of changes in transportation behaviors following the implementation of a carbon tax. $ spent on gas (3.8% of $44,100 for a family of 200% poverty level) = $1675.80 $ increase in gas cost: Year 1 Year 2 Year 3 Year 4 Year 5 $57.60 $86.40 $115.21 $144.01 $172.81 New total $ spent on gas: $1,961.16 $1,441.75 $1,801.35 $1939.79 $2057.66

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