What About Our Economy?

We have to keep our economy strong — that’s a given.  Beyond the obvious reasons of keeping people working, keeping investment growing, and maintaining standard of living, keeping the economy strong is also required to allow the significant investment we’ll need for the transition from fossil fuels to alternatives.  We can’t move from fossil fuels to alternatives all at once. Right now nearly 75-80% of our energy comes from fossil fuels.  We’re already on the path to alternatives.  Investments in wind, solar, and other alternatives are growing rapidly.  Putting a price on carbon will accelerate that investment in a very positive way.

Does it Work?  We don’t have a long history of how economies and emissions respond to carbon pricing.  Since most systems are very recently instituted, and economic and energy influences are numerous and complicated, it is difficult to point unequivocally to carbon pricing as “the reason” for emissions reductions.  Nevertheless, data to date are positive and economists agree it is an inexpensive and efficient system to reduce emissions.

What About Jobs?

A 2014 study by the Regional Economic Models, Inc (REMI) shows that a U.S.-wide, revenue neutral carbon tax could create 2.8 million jobs and increase GDP by $1.3 trillion.  It further shows that personal disposable income would increase under a revenue-neutral carbon tax in every region except for a slight decrease in the petroleum-heavy region including the states of Texas, Louisiana, Oklahoma, and Arkansas.  See a succinct summary here.

We Need Efficient Systems

We can’t afford inefficient approaches.  As stated by the OECD, “The climate change challenge we face is so enormous that we cannot afford inefficient policies: countries need the most cost effective policy instruments.”

Acting Now is the Best Protection

The path to build the alternative energy economy is significantly cheaper than the path of ignoring climate change.  The Stern Review, written in 2006, estimates the cost of doing nothing at 5% of global GDP each year, which could rise to 20-33% of GDP or more.  And the cost of doing nothing are costs that are generally not productive, like rebuilding after hurricanes, substituting high cost transported water, and health costs.  Contrast this with the cost of acting now (2006) of 1% of global GDP each year.  Not only is acting now less costly, it can be costs that help the economy, building alternative fuels, building jobs, building a world that is sustainable.

More recent work by Risky Business shows much the same result.

And finally, a report by the Brookings Institution by McKibben et al., shows not only that delay is more costly than immediate action, but also that “an immediate carbon tax could significantly strengthen the economy if it were used to reduce distortionary taxation.”


Does Carbon Pricing Really Reduce Emissions?

When polled , many economists  agree  that carbon pricing is an effective way to reduce emissions,  whether it is cap and trade or carbon tax – and it is cheaper than other alternatives.   Further, However, a truly free market is necessary for the best result, i.e. without freely granted preferential allowances, unverified offsets, etc. Of the carbon […]

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Energy Sources

About three-fourths of our current energy consumption is from fossil fuels.  The figure shows actual and projected energy consumption if we continue on our current path.   We are currently consuming over 550 quadrillion BTUs of energy annually, and are on the way to over 700 quadrillion BTUs.  Clearly we cannot continue on this path. […]

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