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Is anybody listening about carbon pricing?

I know Tony doesn’t like advice but I feel duty bound to keep trying.

Yet another study has shown the economic benefits of carbon pricing.

This article first appeared in Climate Progress on 4 March 2014

According to a new study out of California, taxing carbon emissions at a whopping $200 per ton would create more jobs in the state than business-as-usual.

The report was commissioned by Citizens Climate Lobby and carried out by Regional Economic Models, Inc. (REMI). The latter used a model of the California economy they’ve developed and combined it with the Carbon Tax Analysis Model — an open-source, Microsoft Excel-based model of carbon emissions and tax revenues at the state level, built off data from the U.S. Energy Information Administration. The resulting simulation looked at three different tax levels: $50 per ton of carbon emissions, $100 per ton, and $200 per ton. All three started at $10 per ton in 2015, then rose $10 annually until they hit their maximum level: $50 in 2019, $100 in 2024, and $200 in 2034.

Lots of previous analyses have tried to model the economic cost of the damage climate change will impose, and $200 per ton of emissions is consistent with several of them. But it’s also way higher than anything lawmakers here or elsewhere have considered. The Canadian province of British Columbia, for example, has a carbon tax of $27.88 per ton. When the Obama Administration estimated the price of carbon, the mid-range of their numbers was around $40 per ton.

Yet not only did the $200 per ton tax create more jobs than the “do nothing” baseline in REMI’s simulation, it created more jobs than the lower taxes did. Anywhere from 236,775 to 286,475 more jobs by 2035, to be specific.

How would this happen? Shouldn’t higher taxes hurt job growth?

Well, one reason a carbon tax is friendly to the economy is that it imposes a price on greenhouse gas emissions but doesn’t specify how the cuts are to be made. As the video below shows (see original article), that turns every business into a laboratory, each one looking for the most effective and least-costly ways to cut emissions that work for them:

But the other reason is what lawmakers do with the revenue. In all its scenarios, the California study set aside the first $4 billion in revenue each year for investment in renewables. Beyond that, it modeled two options:

  • The “across-the-board” model (ATB), which uses the revenue to cut California’s sales, income and corporate taxes by a proportional amount.
  • The “fee-and-dividend” model (FAD), which returns the revenue in equal amounts per person to every household in the state.

When NPR looked into a carbon tax, economists at MIT told them that plowing the money back into the economy like that essentially eliminated any economic drag from the tax. British Columbia went with the ATB option, and their carbon tax shows no signs of harming the province’s economy.

What’s especially interesting about the California study is it breaks down the different results from the ATB and FAD options. Cutting taxes created more jobs than giving out checks: 286,475 more jobs versus 236,775 more. Both increased real disposable income for the average California household by $16,000 by 2035. But cutting taxes resulted in almost $250 billion in additional cumulative GDP by 2035, while handing out checks only added around $60 billion by 2035.

So does a bigger economy mean cutting taxes is the better option? Not necessarily. Imagine an economy with enough productivity that everyone can make enough to support their family working just 20 hours a week. They’d then have more time to spend on friends, family, hobbies, travel, leisure, etc. Or they could sacrifice all that to keep working 40 or more hours or more and make way more income, which would then show up in the GDP data. So a society in which everyone just kept working more would have a larger economy as we measure it. But it’s not obvious it would be a better society in everyday human terms. This is just one of the problems with treating GDP as a proxy for a society’s overall well-being. (Also, while both versions of the carbon tax reduced income inequality, returning the money via checks reduced inequality more.)

The FAD option is strikingly similar to what’s called a universal basic income (UBI) — a policy where everyone in the state or country gets a check for the same amount every year, no strings or conditions attached. Alyssa Battistoni recently argued in Jacobin that a UBI itself would help make society more environmentally friendly, by moving it toward less carbon-intensive work and consumption.

REMI’s study also didn’t account for the health benefits of cutting carbon emissions. Those cuts inevitably reduce other pollutants from fossil fuels life sulfur dioxides and particulate matter, which are linked to asthma and other cardiovascular problems. Reducing those makes for healthier citizens and fewer expenditures on medical care, which also rebounds to the benefit of job creation and growth. So the economic benefits of a carbon tax could conceivably be even higher than what REMI modeled.

Finally, there’s the carbon emissions themselves. According to REMI’s model, the $200 per ton tax would cut California’s emissions between 25 and 30 percent from 1990’s levels by 2035.

Back in 2010, the the National Academy of Sciences and National Academy of Engineering recommended the United States as a whole try to cut its emissions 50 to 80 percent cut below 1990 levels by 2050 — a goal the White House may eventually propose.

As Lord Deben recently said, it is indeed astonishing

“that a country should have become so selfish about this issue that it’s prepared to spoil the efforts of others and to foil what very much less rich countries are doing…

All that pollution which Australia is pushing into the atmosphere is of course changing my climate. It’s a real insult to the sovereignty of other countries…

It’s wholly contrary to the science, it’s wholly contradictory to the interests of Australia and I hope that many people in Australia will see when the rest of the world is going in the right direction what nonsense it is for them to be going backwards.”



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  1. Kaye Lee

    And in another incomprehensible decision….

    Up to 200 more public servants at the Environment Department are set to lose their jobs as the government strips the agency of funding and responsibilities.

    The department’s environmental assessment division will be almost wiped out with the survivors acting as a rubber stamp for state environmental approvals in line with the Abbott government’s policy of cutting “green tape”.

  2. Kaye Lee

    and yes…we have more…

    Prime Minister Tony Abbott has declared that too many of Australia’s forests are “locked up” and vowed to set up a new advisory council to support the timber industry.

    “We have quite enough national parks. We have quite enough locked up forests already. In fact, in an important respect, we have too much locked up forest.

    “Why should we lock up as some sort of World Heritage sanctuary country that has been logged, degraded or planted for timber?

    “Getting that 74,000 hectares out of World Heritage Listing, it’s still going to leave half of Tasmania protected forever, but that will be an important sign to you, to Tasmanians, to the world, that we support the timber industry.”

    Presumably the timber industry will liase with the Green Army in a co-operative divison of duties – you plant ’em, we cut ’em down.

  3. girlseule

    Really interesting, I am going to have to remember some of these points next time someone starts harping on about the carbon tax destroying jobs.

  4. CMMC

    There are also the lunatics who want the right to graze livestock, hunt and drive 4WD’s through National Parks.

    They are constantly allowed to rant on Radio National rural programs, so I guess they have the Governments’ indulgence.

  5. mikisdad

    Is anybody listening? – Not many and of those that are most are already aware.

    Although really a tautology, the Covey quote does explain why most talk appears to fall on deaf ears.

    It is interesting to note that the Tasmanian forest industry does *not support* the removal of protection for that area and have stated that they believe it will not benefit the industry there.

    I don’t think it is useful to mock those who support environmental conservation with such devices as “the green army”.

    I think that it is understandable that people whose lives for generations have revolved in almost a “cottage industry” way around logging, are likely to be upset when that life is threatened.
    The best way, in my view, to resolve conservation v industry type issues is through genuine dialogue and cooperation of the stake-holders. Government alliances that skew that dialogue unfairly in one direction or another are unhelpful and, again in my view, will only lead to a resurgence of problems in the future.

    Thank you, Kaye, for your articles. The strength, succinctness and balance of your articles has progressed significantly over the last six months or so, in my view, and that is a credit to you as I assume that it is an intentional change rather than an accidental one. I apologies if you think the preceding comment is “patronising” for it is not meant that way but rather a genuine acknowledgement of effort and worth that I perceive to be there; nothing more, nothing less.

  6. Stephen Tardrew

    Fantastic article Kaye.

  7. Kaye Lee

    The day we stop learning and evolving is the day we die.

    I would not say I have made any “intentional change”. I listen and learn.

  8. Kaye Lee

    I hasten to remind you that I did not write this article. I reposted it in its entirety because I also found it interesting.

    I am more a collator than a creator. My posts are 95% perspiration and 5% inspiration. My aim is to pass on information, to start a discussion, and for us all hopefully to learn something. There are a lot of smart people out there who can help find solutions to problems rather than just impotently crying about them.

    I appreciate the opportunity that Michael gives us all by providing the venue (at personal cost) and I appreciate the informed commentary.

  9. Stephen Tardrew

    For anyone interested.

    Enough is Enough: Building a Sustainable Economy in a World of Finite Resources.

    Robert Dietz and Daniel O’Neill

    Abundance: The Future is Better Than You Think.

    Peter H Diamandis and Steven Kotler

    Both great reads very practical and innovative.

  10. jasonblog

    Excellent article. The Abbott government is going to cost Australia dearly.

  11. John Stevens

    Excellent article. The great majority know this article is the truth. Abbott and his altar boys will say it is all lies.

  12. lawrencewinder

    Good article ..I’ll be sending it on to an aquaintance who thinks the IPA has some brains!
    Liarbrils, can Australia afford them any more?

  13. mars08

    You don’t want a wimp running the environment! (…or should that be ruining the environment?)

  14. Keith

    As time passes the Abbott gang are looking more and more inept in relation to their stance on climate change. The few months after the the release of the IPCC document, more scientific papers have been produced showing climate change is a real factor . Much has been written about the Arctic area and how the high temperatures there are having a huge impact.
    What is becoming more and more apparent in relation to the Abbott gang is their lack of vision; there is no plan for the future. Another prime matter is lack of creative thought. Matters are still being discussed in Parliament in relation to how the carbon tax is reflected in almost everything discussed, or so it seems. The Abbott gang have a insular view on many matters driven in part by debts they owe to the mining fraternity; by the IPA, and taking a book keeper view of how things should be administered.
    The Abbott gang are playing Russian roulette with us in relation to climate change with more than one bullet in the pistol chambers.

  15. doctorrob54

    Reposted or not,thanks very much Kaye.Really shows the full circle and done properly how everyone benefits.Hope you dont mind I am reposting it also.Cheers and thanks again.

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