Why the world needs to implement a carbon tax

If I may, from one of the many environmental discussions going on every day on Reddit:

Climate Science AMA: PLOS Science Wednesday: We’re Jim Hansen, a professor at Columbia’s Earth Institute, and Paul Hearty, a professor at UNC-Wilmington, here to make the case for urgent action to reduce carbon dioxide emissions, which are on the verge of locking in highly undesirable consequences, Ask Us Anything.

Top question, from achjapuntdrie:

“I’ve looked at Tim Wise’s paper here[1] , about how much grams of CO2 per dollar of GDP produced has to decline, if we want to continue to grow our economy.

According to Wise’s calculations linked to above, if we want to stop climate change, but also want 9 billion people by 2050 to have the standard of living the EU has in 2007, CO2 per dollar of GDP will have to decline from 768 in 2007, to just 14 grams per dollar by 2050.

That looks really difficult to me on first sight, so I have the following questions:

Is it really possible to reconcile the desire for economic growth with the desire to address climate change?

Should we look at a steady-state economy, that no longer grows, as a solution to climate change?

Why does the IPCC seem to assume in all its scenarios that the economy will keep growing?”

Answer, from Jim Hansen:

“This may be the most important question. If the most sensible policies are adapted, it will not cost anything — on the contrary the economy will be strengthened. Sounds strange? Not at all.

Presently we subsidize fossil fuels and do not make them pay their costs to society. Your child gets asthma from air pollution — you pay the bill, not the fossil fuel company. Climate impacts – you or the government (using your tax dollars) pays the tab. The economy will be more efficient if prices are honest, so these costs should be added to the price of the fossil fuel.

We have a lot of infrastructure in place, so we cannot suddenly increase the price of fossil fuels, and we cannot do it as a tax with the money going to the government, because a tax deadens the economy. If we do it that way, yes, it is costly. The way to do it is to add a gradually rising carbon fee, collected from fossil fuel companies at the source, the first sale from domestic mines or ports of entry.

Very simple, small number of sources, start at say $10/ton of carbon, going up $10/ton each year. That money should be distributed to the public, equal amounts to each legal resident – so the person who does better than average in limiting their fossil fuel use will make money. The monthly (or quarterly or annual) dividend will be distributed electronically to bank accounts or debit cards – so very little overhead cost.

With present energy use, two-thirds of the public will come out ahead, but a person with multiple houses or who flies around the world a lot will pay more in increased prices than he gets in the dividend – but he can afford it. However, if a person wants to stay on the positive side of the ledger, he will need to pay attention to his purchases, but that is not too difficult, mainly it requires looking at the price tags, which will be changing.

Food imported from New Zealand to the U.S. will become more expensive – the nearby farm will be favored. The most important effect will be on business people and entrepreneurs – they will have a huge incentive to develop low-carbon and no-carbon energies and products. This will spur the economy and create millions of new jobs. An economic study of just the above fee rate has been done by REMI (Regional Economic Modeling Inc.), who find that it reduces U.S. carbon emissions 30% in 10 years and more than 50% in 20 years, in the process creating several million jobs and increasing the GNP.

Why do some economists say that it will cost money and depress the economy to address climate change? Because they assume we will do that in a stupid way, by making more government regulations. One example: governments choose technologies and impose those on the public and utilities, e.g., via “Renewable Portfolio Standards” and subsidies. The subsidies are paid by all taxpayers whether they like it or not and higher electricity prices fall on the ratepayer. So, yes, if we do things in a stupid way it will cost a lot of money.

Is it conceivable that liberals and conservatives could sit down together and come to agreement on a revenue-neutral carbon fee (this is advocated by CitizensClimateLobby.org), as described above? Maybe we are getting close to that point – but if they won’t it is time to throw out both parties and start with a new one – in the U.S., I would call it the American Party, a party that works for the public instead of for special interests. BTW this “fee-and-dividend” approach to phase down carbon emissions is mildly progressive, so it helps a bit to address growing income disparities.”

*throws mic up into the air and walks off stage*

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