Yesterday, I had a couple of interesting conversations about fairness and climate change. One of the problems is that in order to reduce climate pollution, society will probably have to put a price on emissions. The price could come in the form of a carbon tax or a carbon permit or something else entirely. But the basic idea is that to reduce pollution, we’ll have to charge for the privilege of emitting carbon.
So far so good? Not really, because putting a price on emissions means that energy costs go up. That’s regressive—it hits poor folks hardest—because lower income people spend a greater share of their income on energy than do higher income people. But what can we do?
The good news—and I take this to be very good news indeed—is that it’s possible to distribute revenue (from a carbon tax or auctioned permit) to solve the regressivity problem. Toward that end, I wanted to share with readers an excellent position paper from the Center for Budget and Policy Priorities. It lays out clearly how one could address regressivity in climate pricing.
Even better, perhaps, is that it’s possible to make strategic investments of the revenue that could benefit lower income families and the climate simultaneously. Imagine, for example, upgrading all the inefficient furnaces and water heaters overnight with super-efficient replacements: consumer energy spending could go down (because people would need to buy less energy) even while prices are rising.
Finally, there’s another point that sometimes gets overlooked. Arresting climate change is not mostly an environmental issue, at least not in the way that word has often been construed in the past. It’s a question of justice. As recent research from the IPCC reveals, climate change is likely to hit the poor hardest. So while protecting low income consumers from price increases is important, protecting the world’s poorest from losing their homes and livelihoods is paramount.
Obviously, there’s lots more to say about this; and today’s post is just the tip of the iceberg. But stay tuned: Sightline’s going to be diving into these questions in the coming months. In the meantime, we’d welcome your comments and thoughts.
Matt the Engineer
Here’s my plan:Give everyone the same amount of carbon credits when they’re born. These credits can be sold, kept, or used. That’s it. The exact rules, including number of credits and trading systems, would be controled by some governing body. This could be used in one country, or cooperatively around the world.How this would play out is that polluters would need credits to be able to produce their goods and services (electricity, for example). They would offer money for credits, and people would sell their credits accordingly. This means that if I drive a Hummer on a 90 mile commute, I’ll make some money on my carbon shares but will quickly spend far more than that on increased fuel prices. But if I’m a farm worker that takes a bus to work, I’ll get money from my carbon shares and never have to pay anything back.It would be a self-balancing, controllable system that uses market systems along with a “the world belongs to everyone” concept. It not only isn’t regressive – it begins charging the rich polluters a fair (as determined by the market) rate for their lifestyle.
eldan
I really, really like Matt the Engineer’s idea in principle. For it to work, though, we’d need to come up with solutions to a few problems:- how to get the whole world to participate- how to educate people born in remote areas, where literacy is limited, about the windfall they’re entitled to- how to actually get the money to the unbankedI’m sure there are others, but this is what I can think of right now. I hope solutions can be worked out, because in principle this idea is beautiful and fair and very appealing.
MichelleV.P.
I second Matt’s idea, too.After graduating from college where I was a typical penny-pinching student, I moved to Singapore’s booming Asian economy in the early 1990s, and quickly stopped counting pennies. And, I learned that when “money talks,” people with a reasonable amount of extra money “stop listening.” In other words, it’s fairly typical for well-off people to start thinking, “Why should we listen to what carbon taxes are saying, when we can so easily pay them off? Another tax? Yeah, so what?”Therefore, anything that gets wealthy people to start listening again—especially about pollution and climate change—is a very good thing and should be implemented worldwide. As Matt said, “The world belongs to everyone.”
Matt the Engineer
eldan,The first issue you bring up is a tough one. It’s going to take a lot of willpower and good politics to get much of the world to really cut carbon emissions. Looking back to all of the grain we’ve shipped around the world to help fight hunger gives me hope that rich nations can do the right thing (though sometimes for the wrong reasons). However, we don’t have to wait for the world to work together since this plan is modular. If we want the US to decrease carbon emissions by, say, 20% than we do exactly that. Give out 20% less carbon credits per person. Your other two issues will solve themselves. You’ll quickly see middlemen walking through villages offering money for credits. Although this point makes me wonder if distributing credits annually would make more sense than once per lifetime – so you don’t waste all of your credits at once.
Morgan Ahouse
This is all great, but I find personal carbon credits an outrageously complicated and complex proposition that has little chance when exposed to air.To what I think was Eric’s original (climate justice) – I just scanned the report by Center for Budget and Policy Priorities and agree. Still, I would like to understand better why tax shifting, an idea at least 20 years old, never caught hold. I would like to see the resulting revenues from carbon pricing plowed back into programs like the ones Eric references, but I’d be even more pleased to see them directed as investments to retool our energy systems. Redistribution, while a necessary and useful policy tool, is just a temporary fix for a system that is producing so many undesirable outcomes. The sooner we can get off oil and coal, the sooner we might actually resolve these dilemmas. Doing so will require no less than completely rethinking our energy production and delivery systems in addtion to how we consume/degrade energy.
Mike S.
The website http://www.carbonshare.org talks about the idea of giving equal per capita emission rights to people. The Shares are sold to upstream companies via banks or brokerages. The outcome is similar to the Cash Dividend you would get from revenues from an auction of permits to companies. I think the Dividend and the Share can co-exist with a check box on your tax form: How would you like your climate allocation: Dividend, Tax Rebate, or Share?Also, the group FEASTA, based in Ireland, has been promoting Cap and Share at http://www.capandshare.org.