A practical carbon “Fee and Dividend” policy to increase jobs and cut greenhouse gases is in the hands of Congressional leaders and their staff (see the article of the Citizens Climate Lobby event in this edition of the Empire Press). The “Fee and Dividend” (F&D) policy is detailed in a report co-authored by Scott Nystrom of Regional Economic Modeling, Inc. (REMI) and Patrick Luckow of Synapse Energy Economics.
Based on my information, F&D looks attractive to me, especially instead of carbon taxes or “Cap and Trade” policies.
Two citizens groups, the Citizens Climate Education Committee and the Citizens’ Climate Lobby commissioned the report and publicized it. REMI is a nonpartisan firm which has conducted econometric models since 1980. Synergy Energy Economics is a research and consulting firm that specializes in energy, economic and environmental issues.
The REMI model analyzed the economic impacts for 160 industries in nine Census Regions based on federal data and energy demand forecasts from 2016 to 2035. The study compared results assuming no carbon fee versus results assuming energy producers paid a carbon fee of $10 per ton of CO2 emissions in 2016 that would increase $10 per year.
One hundred percent of the fees would be redistributed to households every month. The Alaska Permanent Fund collects taxes for oil producers and distributes dividends to qualified Alaska residents. The concept works.
Besides REMI’s proprietary model, the study used two well-established econometric models from energy research institutions, all with methodologies published in peer reviewed journals. The results were consistent across models.
The model assumes capitalism will motivate energy users to cut increasingly costly carbon costs with energy saving technologies and purchase existing alternative sources improved by investors, instead of complex regulations. The report didn’t presume benefits from unforeseen renewable energy sources.
The highlights of the results include positives and negatives by 2035. Positive results are significant declines in CO2 emissions, 227,000 fewer deaths from pulmonary diseases associated with nitrogen oxides and sulfur oxides, increases in real disposable income per capita and a net increase of 2.8 million jobs.
Negatives results include higher costs of living until 2025 when energy costs begin to decline, although dividends estimated to be $288 per month by 2025, would cover cost-of-living increases. Some industries will suffer, such as coal mining, and there would be slightly negative impacts on the agricultural, forest, farming and ranching industries.
In my opinion the model understates economic and health benefits because it does not include the secondary costs of escalating CO2 emissions. Drought conditions would drop water levels and agricultural yields. Increased wildfires would pollute the air and cost lives and money. Reducing those costs would generate even more savings.
One question was why the F&D model predicts positive economic growth when other studies on carbon taxes, such as the May 2013 Congressional Budget Office report, showed job losses with a flat tax of $20 per ton.
The REMI study is a superior study. The F&D model is a revenue-neutral policy. Instead of capturing the carbon tax, the federal government redistributes 100 percent of it and people would spend it. Carbon tax models don’t assume an increasing fee to cut usage. Other models have not studied health benefits.
As a check on the REMI model’s accuracy, the co-authors used it to study the assumptions of the $20 flat rate carbon tax. The results were comparable to the CBO study, so the CBO and other econometricians should analyze F&D assumptions and compare results to the REMI study.
The report states, “The biggest take-home from this study is that there is no economic argument against Fee and Dividend. It creates jobs, grows the economy, saves lives and makes Americans richer. It does this while also reducing CO2 emissions.”
Encourage Congress to study a Fee and Dividend policy and see if we can agree to save money and lives and create more jobs.