Pete Buttigieg's Climate Change Plan

Feb 28, 2020 | Other Spending| Taxes

Democratic presidential candidate and former South Bend, Indiana Mayor Pete Buttigieg has proposed a climate change plan with an end goal of getting to net zero carbon emissions across the electrical system, transportation, and industry by 2050. He would seek to accomplish this through a tax on carbon emissions and a variety of policies to invest in clean energy development and adoption. His primary offsets mentioned in connection with the plan are the elimination of fossil fuel tax subsidies and the increase in royalty rates for fossil fuel production on public lands.

Overall, the campaign has said that Mayor Buttigieg's plan would cost $1.5 trillion over ten years, and we find a similar cost. This estimate is the net effect of gross costs from clean energy investments and a relatively small amount of revenue raised from eliminating fossil fuel subsidies and raising royalty rates. His carbon tax is designed to be deficit neutral, as it rebates all revenue to consumers.

This policy explainer is part of US Budget Watch 2020, a project covering the 2020 presidential election. In the coming weeks and months, we will continue to publish analyses of candidate proposals that are having the greatest impact on the debate over our nation’s future. You can read more of our policy explainers and factchecks here. US Budget Watch 2020 is designed to inform the public and is not intended to express a view for or against any candidate or any specific policy proposal. Candidates’ proposals should be evaluated on a broad array of policy perspectives, including but certainly not limited to their approaches on deficits and debt.

What's in the Climate Change Plan?

Mayor Buttigieg's plan includes policies intended to meet a series of goals related to clean energy production and climate change. These goals include doubling clean electricity production by 2025; having zero emissions from electricity and new passenger vehicles by 2035; having net-zero emissions for larger vehicles, buses, rail, ships, and aircraft and developing a robust carbon removal industry by 2040; and finally, achieving net-zero emissions from the rest of industry by 2050.

Mayor Buttigieg's plan includes several policies with major fiscal effects. These include:

  • Enacting a carbon tax and rebating the revenue to Americans
  • Quadrupling federal clean energy research and development (R&D) funding and increasing advanced manufacturing R&D to capture and store carbon
  • Creating three new funds for clean energy technology and projects in the U.S. and abroad
  • Increasing spending on weatherization and creating a home energy efficiency rebate
  • Extending and enhancing expiring clean energy tax credits
  • Increasing funding for transit and electric vehicle tax credits
  • Providing a fund for workers affected by the transition to clean energy
  • Promoting resilience to climate change
  • Increasing spending on global climate initiatives
  • Increasing funding for agriculture R&D

Mayor Buttigieg would tax carbon and automatically increase the tax each year. There would also be a border adjustment that would apply the tax to imports that were not subject to a carbon tax in the country they were produced. Neither the level of the tax nor the rate of increase is specified, but the revenue would be rebated such that "low- and middle-class households will...be better off economically than they were before." The campaign links to a 2018 academic paper that shows a few different deficit-neutral rebate policies, including a flat lump-sum rebate and a payroll tax cut, to accomplish this goal.

Mayor Buttigieg would also significantly increase federal investment in clean energy development and use through existing R&D programs and three new federal funds. He would quadruple clean energy R&D funding in four years through programs in the Departments of Energy and Defense and spend $1 billion per year on advanced manufacturing R&D. He would also institute an American Clean Energy Bank with $250 billion in initial funding to finance clean energy development and deployment projects, a $250 billion Global Investment Initiative intended to be matched with equivalent private investment to finance clean energy projects in other countries and combat China's Belt and Road Initiative, and an American Cleantech Fund with $50 billion in initial funding to finance new clean energy technologies.

His plan would increase funding for energy efficiency changes in several different ways. Specifically, it would double Weatherization Assistance Program funding (about $250 million in 2019), increase Low-Income Home Energy Assistance Program funding by $1 billion annually, create a 30 percent rebate for home energy efficiency improvements, and create a tax credit for commercial building improvements that meet LEED Gold or Platinum standards. In terms of the latter two policies, two credits currently exist for home energy efficiency improvements – one for energy efficiency improvements and one for clean energy specifically – but both are set to expire within the next two years, and a deduction exists for commercial buildings, but it has different standards than the one Mayor Buttigieg proposes and is little used.

The plan would extend several clean energy production and deployment tax credits that are set to expire in the next few years. The largest is the section 48 credit for clean energy improvements, while others include the production credit for renewable electricity, the credit for alternative fuel vehicle refueling property, and a few very small clean energy vehicle credits.

Mayor Buttigieg would increase federal support for surface transportation as well. He would provide $100 billion over ten years for urban surface transportation projects and increase the electric vehicle tax credit from $7,500 to $10,000.

To assist workers affected by the transition to clean energy, Mayor Buttigieg would establish a $200 billion fund to provide transitional assistance. The fund would invest in economic development, training programs, and health and retirement benefits for workers while offering loan guarantees to businesses that wish to renovate factories to manufacture low-emission products.

Mayor Buttigieg would increase spending for climate-related disaster relief and prevention efforts. He would establish $5 billion annual grants for climate resilience, and as part of his infrastructure and disaster preparedness plans, he would also create a $50 billion flood protection fund, create a $40 billion Sea Level Defense fund, and expand disaster mitigation funding by $40 billion.

Other policies he proposes include increasing funding for global climate change efforts (including $5 billion annually for collaborative efforts), extending and increasing the carbon sequestration credit, and increasing funding for agriculture R&D and conservation programs to mitigate climate change.

The only policies that would serve as offsets to the above are eliminating fossil fuel tax preferences and raising royalty rates for existing fossil fuel projects on public lands. The plan would also ban new projects on public lands, which would be a small coster.

How Much Would the Plan Cost?

Overall, we estimate Mayor Buttigieg's plan would cost $1.5 trillion over ten years. This cost includes the gross cost of the plan as well as the small amount of revenue raised from eliminating fossil fuel tax preferences and raising royalty rates for public land production.

Several of the policies are easy to estimate since the campaign simply says how much money they will spend. Therefore, the clean energy bank and Global Investment Initiative each cost $250 billion over ten years, the urban transit investments cost $100 billion, the transition fund costs $200 billion, and the resilience grants and global cooperation spending each cost $50 billion.

Other major costs include quadrupling clean energy R&D funding ($135 billion over ten years), extending clean energy credits ($110 billion), establishing rebates for home and building energy efficiency improvements ($35 billion), and increasing funding for climate-related agriculture spending ($35 billion).

Finally, Mayor Buttigieg's plan states that he would expand conservation programs and establish a National Catastrophic Extreme Weather Insurance exchange with subsidies depending on income, but neither of these plans are specified enough for us to estimate. The campaign has said the total cost of the plan is $1.5 trillion, so we assume these policies cost $50 billion over ten years to get us to his estimated $1.5 trillion total.

The deficit-reducing policies in the plan are eliminating fossil fuel tax preferences and raising royalty rates for public lands projects, which we project would save $20 billion over ten years.

Budgetary Effect of Mayor Buttigieg's Climate Change Plan

Policy Ten-Year Cost/Savings (-)
Enact a carbon tax and rebate revenue to consumers $0
Quadruple clean energy R&D funding $135 billion
Establish American Clean Energy Bank $250 billion
Establish Global Investment Initiative $250 billion
Establish American Cleantech Fund $50 billion
Provide transition fund for affected employees/industries $200 billion
Extend clean energy tax credits $110 billion
Invest in urban surface transportation $100 billion
Provide climate resilience grants $50 billion
Pledge $5 billion per year to global cooperative efforts $50 billion
Establishing rebates for home and commercial building energy efficiency improvements $35 billion
Increase agriculture funding for R&D and conservation programs $35 billion
Establish flood protection and sea level defense funds $90 billion
Increase disaster mitigation funding $40 billion
Other spending proposals $45 billion
Eliminate fossil fuel tax preferences and raise royalty rates on public lands -$20 billion
Expand conservation programs and establish catastrophic weather insurance ~$50 billion*
Total $1.5 trillion

Sources: Buttigieg campaign, Congressional Budget Office, Joint Committee on Taxation, Council of Economic Advisors, Department of Agriculture, Department of Energy, Rhodium Group, and CRFB calculations.
*Policies are not specific enough for us to estimate. $50 billion is assumed to get to $1.5 trillion of total costs.

The campaign has proposed over $6 trillion of total revenue increases to pay for all of its proposals but has not said which offsets would specifically be dedicated to the climate change plan. Therefore, it is not clear whether or not the plan is paid for.

Where Can I Learn More?

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With the 2020 campaign now in full gear, the presidential candidates are putting forward many ambitious proposals aimed at solving very real problems and concerns. The voting public deserves to know how much these proposals will cost and what it means for the debt we will be leaving to our children and grandchildren.

This policy explainer is part of our US Budget Watch 2020 series covering the 2020 presidential election. In the coming weeks and months, we will continue to publish analyses of candidate proposals that are having the greatest impact on the debate over our nation’s future. You can read more of our policy explainers and factchecks here