Implementation

Yale implemented a university-wide carbon charge program beginning in July 2017. Read more about the events leading up to this on the History page.

The Basics

Fossil fuel use, land use changes and agriculture are causing emissions of CO2 and other gases that are changing the climate. Climate change harms human health, property and ecosystems across the world through heat waves, floods, wildfires, crop decline, infectious diseases, violence and conflict. These events have significant economic costs that can be quantified. According to Yale Professor William Nordhaus, the Social Cost of Carbon (SCC) is “the economic cost caused by an additional ton of carbon-dioxide emissions or its equivalent.” To account for these costs, Yale is putting a price on its building-related carbon dioxide emissions. The price is based on the 2013 estimate by the White House’s Interagency Working Group on Social Cost of Carbon. 

How it Works

Energy Meters Enable Reporting

Yale meters electricity, chilled water, natural gas, and steam consumption from its buildings. Starting in September 2017, each participating building is sent a monthly report detailing its energy consumption and the resulting greenhouse gas emissionsmeasured in metric tons of carbon dioxide equivalent (MTCDE). The top-level administrative unit a building reports to is charged $40 per MTCDE emitted.

Administrative Units Have Two New Budget Lines

The Yale carbon charge is revenue neutral at the university level, which means the university center retains none of the charge revenues.  In fiscal year 2018, each participating administrative unit has two new budget lines: A charge line for the unit’s carbon charges, and a return line to allow a percentage of the university-wide carbon charge total to be returned to that unit.

A Building Must Outperform Yale to Receive a Net Return

If the aggregate emissions of all participating Yale buildings increases in the current year compared to historical performance, then consider three building scenarios:  

  • If building A increases emissions by the same percentage Yale did, then its charge and return lines will be identical and will receive no net charge.  
  • If building B increases its emissions by less than Yale did, or decreases its emissions, its charge will be less than its return and it will receive a net return.  
  • And if building C increases its emissions by more than Yale did, its charge will be greater than its return and it will receive a net charge.

Alternatively, if Yale’s emissions decrease in the current year, a building will have to decrease by a greater percentage than Yale did to receive a net return.

The Charge and Return Lines are Disassociated

For many people, the next question is whether increasing a building’s emissions increases that building’s return. Note that the calculations driving the charge and return are independent from one another, so a building’s activities impact its charge substantially while having very little effect on its return.

This Approach Creates an Incentive on the Margin and Reduces University Budget Risk

This revenue-neutral approach has important benefits.  First, though each participating administrative unit will ultimately pay or receive only a fraction of its gross carbon charge, each administrative unit will be have nearly $40 more for every ton of emissions it eliminates. Second, the university center faces neither the risk of a budget shortfall nor the question of what to do with a budget surplus.