Published on January 21st, 2019 | by Steve Hanley0
Economists Agree: Carbon Fee Simplest, Most Effective Way To Reduce Carbon Emissions
January 21st, 2019 by Steve Hanley
A group of 45 prominent economists have submitted a letter to the Wall Street Journal arguing that a a fee on carbon coupled with a rebate program that returns most of the money collected to the citizenry is the way out of the box that liberals and conservatives have built for themselves in which they argue perpetually about whether government regulations should or should not be used to address the issue of climate change that is strongly associated with rising carbon emissions. [Editorial aside #1: Why publish a letter at the Wall Street Journal which requires a subscription to read? Is this some sort of economists’ joke?]
That debate will go on until the sun explodes into a giant supernova in a few billion years. Engaging in the debate is like rearranging the deck chairs on the Titanic just before it sinks beneath the waves. The carbon fee proposed by the economists would accomplish the goal of reducing carbon emissions virtually overnight. People make economic choices all day every day, whether it is deciding which brand of corn flakes to buy or which electric car to own.
[Editorial aside #2: I refuse to call it a carbon tax. The word “tax” sends shock waves through the central nervous system of all humans. Calling any proposal — no matter how sensible — a “tax” is to guarantee that it will never get serious consideration.]
According to the Washington Post, which apparently does have a subscription to the WSJ, the letter was signed by virtually every chair of the Council of Economic Advisers since the 1970s, including Alan Greenspan, Ben Bernanke, and Janet L. Yellen along with several Nobel laureates in economics. The signatories said, “A carbon tax offers the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary,” calling climate change a “serious problem” that needs “immediate national action.”
“Among economists, this is not controversial,” said Greg Mankiw, the chair of the Council of Economic Advisers under George W. Bush. “The politics is complicated, the international relations is complicated, but the economics is really simple.”
The fee, says the Post, “would add to the price of any good or service that uses carbon, especially fossil fuels. It means energy bills, gas and flying would cost more, at least at first. But the economists call for the government to return all the revenue raised from the tax directly to U.S. citizens, with a goal of effectively paying people to help address climate change.”
The letter goes on to say, “The majority of American families, including the most vulnerable, will benefit financially by receiving more in ‘carbon dividends’ than they pay in increased energy prices,” the letter states. Janet Yellen, who chaired the Federal Reserve until recently, says “There is a substantial rebate. It’s estimated that if we were to start with something like a $40 a ton carbon tax that would amount to $2,000 per family, so it is a very substantial rebate.”
Some CleanTechnica readers may be experiencing déjà vu at this point. What the economists are recommending is pretty much the carbon fee system instituted by the Canadian province of British Columbia in 2008. Canada as a whole has begun a carbon fee program, although it is mired in internecine rivalry between the various provinces and the federal government and has uncertain political support.
Assuming the average family gets a rebate of $2,000, some will put that money to work to purchase even more environmentally friendly technology while others will blow it all on the purchase of a new Belchfire 5000. That’s how economics works.
The carbon fee proposal is not as complex as a “cap and trade” program, which makes it largely self administering. The fee establishes the choices available and people make their own decisions based on what they perceive to be in their own best interests. Can’t get much more “free market” than that, can we?
The politics of putting a carbon fee in place are complex and daunting. Matthew Rooney, a
conservative reactionary thinker at the George W. Bush Institute in Texas tells the Post, “There is no appetite on our side to do” a carbon tax, “Maybe if Mar-a-Lago gets washed away, that will change.” Rooney is head of something called the economic growth initiative at the institute. [Editorial aside #3: Isn’t “George W. Bush Institute” an oxymoron?] [Editorial aside #4: There are no sides, Rooney, you jackass. There is life on Earth and there is no life on Earth. Which “side” are you on?]
“We think this can pass in 2021,” says Ted Halstead, chief executive of the Climate Leadership Council, which helped circulate the letter. “We want to get [a carbon tax and dividend] introduced this year. We think this becomes the consensus, bipartisan solution in the 2020 election cycle.”
The letter does not specify the initial price that should be set on carbon, but does suggest it be “sufficiently robust and gradually rising,” although Janet Yellen has mentioned $40 a ton in her public comments. “I actually think a carbon tax together with rebates is, in some sense, the most conservative way to deal with climate change,” says Greg Mankiw said. “Everything else means more intrusive government.”