WSJ Opinion – Editorial: Economists’ Statement on Carbon Dividends vs. Fossil Fuels

by admin on January 21, 2019

Carbon Dividend looks like the better choice for everyone

Economists have bipartisan agreement on how to combat climate change

From the Climate Leadership Council, Wall Street Journal, January 17, 2019

Global climate change is a serious problem calling for immediate national action. Guided by sound economic principles, we are united in the following policy recommendations.

I. A carbon tax offers the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary. By correcting a well-known market failure, a carbon tax will send a powerful price signal that harnesses the invisible hand of the marketplace to steer economic actors towards a low-carbon future.

II. A carbon tax should increase every year until emissions reductions goals are met and be revenue neutral to avoid debates over the size of government. A consistently rising carbon price will encourage technological innovation and large-scale infrastructure development. It will also accelerate the diffusion of carbon-efficient goods and services.

III. A sufficiently robust and gradually rising carbon tax will replace the need for various carbon regulations that are less efficient. Substituting a price signal for cumbersome regulations will promote economic growth and provide the regulatory certainty companies need for long- term investment in clean-energy alternatives.

IV. To prevent carbon leakage and to protect U.S. competitiveness, a border carbon adjustment system should be established. This system would enhance the competitiveness of American firms that are more energy-efficient than their global competitors. It would also create an incentive for other nations to adopt similar carbon pricing.

V. To maximize the fairness and political viability of a rising carbon tax, all the revenue should be returned directly to U.S. citizens through equal lump-sum rebates. 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.

>>> George Akerlof, Robert Aumann, Angus Deaton, Peter Diamond, Robert Engle, Eugene Fama, Lars Peter Hansen, Oliver Hart, Bengt Holmström, Daniel Kahneman, Finn Kydland, Robert Lucas, Eric Maskin, Daniel McFadden, Robert Merton, Roger Myerson, Edmund Phelps, Alvin Roth, Thomas Sargent, Myron Scholes, Amartya Sen, William Sharpe, Robert Shiller, Christopher Sims, Robert Solow, Michael Spence and Richard Thaler are recipients of the Nobel Memorial Prize in Economic Sciences.
>>> Paul Volcker is a former Federal Reserve chairman.
>>> Martin Baily, Michael Boskin, Martin Feldstein, Jason Furman, Austan Goolsbee, Glenn Hubbard, Alan Krueger, Edward Lazear, N. Gregory Mankiw, Christina Romer, Harvey Rosen and Laura Tyson are former chairmen of the president’s Council of Economic Advisers.
>>> Ben Bernanke, Alan Greenspan and Janet Yellen have chaired both the Fed and the Council of Economic Advisers.
>>> George Shultz and Lawrence Summers are former Treasury secretaries.

>>> More information is available from the Climate Leadership Council:


‘This is not controversial’: Bipartisan group of economists calls for carbon tax – The Washington Post, January 16, 2019


Commentary: Carbon dividend is best investment in Earth’s future, Austin Statesman, December 26, 2018

{ 2 comments… read them below or add one }

Mary Wildfire January 21, 2019 at 10:59 am

The Church of Economism has spoken. Don’t get me wrong, I think carbon fee & dividend is a good idea, and better than cap and trade. But better than regulation?

Modern mainstream economics is not a science, it’s a religion, and one of the key precepts is that regulation is bad and to be avoided if at all possible. Another is that growth is good, growth is God, or at any rate a sign of God’s favor.

Some things I’ve read suggest that a carbon tax can’t work because proposals are always to set it much too low, and if set high enough to actually reduce carbon emissions it would crash the economy. Sooner or later we will have to recognize that there is no room for growth on a finite planet already overfull of humans and our works.

Sooner would be better, ideally before we run even more species into extinction, pollute even more aquifers and rivers and do more severe and dangerous damage to the oceans and the Amazon forests. I’m afraid to avert catastrophe and mass human deaths, and to preserve some of the benefits of modern civilization, we would have had to do it yesterday.

There was a move in this direction in the late 70s and early 80s, when it could have led to a gentle transition — but Reagan nipped it in the bud, celebrated to this day by short-sighted and selfish people.

Mary Wildfire, Roane County, WV


Robert Samuelson January 22, 2019 at 12:10 pm

Why I’m (slightly) less pessimistic about global warming

By Robert J. Samuelson, Columnist, Washington Post, January 20, 2019

On global climate change, I’ve changed my mind — just slightly. I’ve written about this issue for more than two decades, and my theme has been monotonously consistent. As a starting point, I’ve accepted the prevailing scientific view that man-made greenhouse gases contribute to global warming.

But I’ve been routinely pessimistic and skeptical that we can do much about it. That is, we can’t easily control the forces that worsen global warming.

We have yet to discover or create some low-cost fuel that would replace fossil fuels (oil, natural gas and coal), which provideroughly 80 percent of the world’s energy. Most nations aren’t willing to scrap the energy status quo — the very basis of modern civilization — before having a practical substitute.

Thus, despite the enthusiasm for non-fossil fuels (wind, solar, hydro, nuclear), global greenhouse-gas emissions are higher today than, say, in 1990. This raises the atmospheric concentration levels of those gases, which in turn trap heat above the Earth’s surface. From 1990 to 2018, the concentration level of carbon dioxide rose from 354 parts per million to 409 parts per million.

The emissions continue. Poorer countries (China, India, Indonesia and the like), where most energy growth now occurs, won’t condemn their populations to perpetual poverty to satisfy hard-to-attain environmental goals. Many governments — rich and poor — resist inflicting pain on today’s voters, in the form of higher energy prices or more regulations, for imprecise future gains. Politics is present-oriented.

Implicitly, I’ve been critical of much media coverage, which has portrayed the climate-change story as a struggle between good guys and bad — climate-change believers vs. deniers. The real story is our relative helplessness. Still, we should do something. We need to learn how much, if at all, we can influence emissions.

Last week, a large group of economists, including 27 Nobel Prize winners, 15 former chairs of the White House Council of Economic Advisers and two former treasury secretaries — Democrats and Republicans — issued a manifesto endorsing what’s been called a “carbon dividend” plan. This would be a good start.

Here’s how it would work. The government would tax CO2 emissions. The idea is to prompt Americans to use less fossil fuels and to prod businesses to focus on renewables and energy efficiency. That’s a standard carbon tax. What defines the “carbon dividend” plan is that all the money collected would be rebated to households.

Under one proposal, the government would slap a $43 tax on each ton of CO2. That would equal about 38 cents on a gallon of gasoline, says economist Marc Hafstead of Resources for the Future, who studied the plan. It would raise about $180 billion in the tax’s first year, he says. If the “dividend” — the tax rebate — were distributed evenly, that would be about $1,400 per household.

Meanwhile, if the tax were increased 3 percent annually, there would be (according to the estimates) a dramatic reduction in U.S. fossil fuel use and greenhouse gases. Without the tax, projected CO2 emissions would be 5.4 billion metric tons in 2035. With the tax, the total would be 3.6 billion metric tons, a 33 percent decline. Still, this would hardly eliminate greenhouse-gas emissions.

Assuming the tax works this way, the lesson would be that we can, up to some point, curb emissions without hugely disrupting the economy. As Hafstead notes, the initial increase in gasoline prices of 38 cents a gallon is within normal market fluctuations. The rebate would sweeten the tax. Consumers who cut fossil fuel use would come out ahead.

The tax has another advantage. It decentralizes decision-making to individual companies and people. The alternative of regulations would centralize more power in Washington. This would be complicated, costly and potentially corrupting.

Given President Trump’s hostility toward anything “climate change,” it’s unlikely that major legislation will pass this Congress. We will have to wait until at least 2021.

None of this has changed my long-standing skepticism that, without some major technological breakthrough (safer nuclear power?), it will be exceedingly hard to halt the increase in atmospheric concentrations of greenhouse gases. The required changes in lifestyle and economic activity are simply too great. But something less grandiose than “solving” the problem is plausible. It may be possible to slow the increase in greenhouse gases.

We need firsthand experience with these problems rather than repeating an increasingly futile and familiar debate. (For the record: I have long favored a carbon tax without a dividend. Revenue would go to cut budget deficits. But I recognize the dividend’s political appeal.)

All in all, my thinking on global warming has shifted slightly, as I said. I haven’t gotten more optimistic. But I am less pessimistic.


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