Discussion 4

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1 Discussion 4 . Yemi Ogunmilade PSCI 415/515: Public Policy Alternatives, Advocacy, and Agenda Setting 3/26/2023.

2 Introduction of Carbon Tax in the United States. Carbon tax is a policy instrument that is designed to put a price on greenhouse gas emissions, such as carbon dioxide, in order to encourage individuals and businesses to reduce their carbon footprint. The basic idea behind a carbon tax is to make activities that create carbon emissions more expensive, so that people are incentivized to reduce their use of fossil fuels and shift to cleaner energy sources. Economic efficiency . The benefits of a carbon tax in the United States outweighs the costs over the long term. One key benefit of a carbon tax is that it would provide a market-based mechanism for reducing greenhouse gas emissions (Center for Climate and Energy Solutions, n.d). By placing a price on carbon, the tax would create an economic incentive for individuals and businesses to reduce their carbon footprint, either by shifting to cleaner energy sources or by reducing their energy consumption. This, in turn, could lead to a reduction in the negative impacts of climate change, such as more frequent and severe natural disasters, which have significant economic costs. Another potential benefit of a carbon tax is that it could generate revenue that could be used to invest in clean energy infrastructure, research and development, and other projects that would further reduce greenhouse gas emissions. This could, in turn, create jobs and stimulate economic growth. While there may be some short-term costs associated with a carbon tax, such as higher energy prices for consumers, research suggests that the long-term benefits could outweigh these costs. For example, a 2018 report by the U.S. Congressional Budget Office estimated that a carbon tax starting at $25 per metric ton of CO2 and increasing annually by 2% above inflation

3 would reduce emissions by 34% below 2005 levels by 2030, while only reducing GDP by less than 0.5% over the same period (Congressional Budget Office, 2018). This suggests that the economic benefits of reduced greenhouse gas emissions and increased investments in clean energy would likely outweigh the costs of a carbon tax in the long run. It is worth noting, however, that the specific costs and benefits of a carbon tax will depend on the details of the policy design, such as the tax rate, how the revenue is used, and any potential exemptions or rebates. Therefore, careful consideration of these factors will be essential in evaluating the economic efficiency of a carbon tax proposal in the United States. Effectiveness . While there is no guarantee that a carbon tax would be effective in achieving its intended results, there is evidence to suggest that similar policies have been successful in reducing greenhouse gas emissions in other countries and jurisdictions. Therefore, a carefully designed carbon tax policy in the United States could potentially be an effective tool in addressing the issue of climate change. Several countries and jurisdictions around the world have already implemented carbon pricing policies, including carbon taxes, and there is evidence to suggest that these policies can be effective in reducing greenhouse gas emissions. For example, Sweden has had a carbon tax in place since the early 1990s, and it has been credited with reducing the country's greenhouse gas emissions by nearly 25% since then. Similarly (Tax Foundation, 2022), British Columbia implemented a revenue-neutral carbon tax in 2008, which has been associated with reduced greenhouse gas emissions and increased investment in clean energy technology.

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4 In the United States, there have been some examples of state-level carbon pricing policies, such as California's cap-and-trade program, which has been credited with reducing greenhouse gas emissions from covered sectors by nearly 10% since 2013 (California Public Utilities Commission, n.d). There have also been several proposals for federal carbon pricing policies in the United States, including the Carbon Fee and Dividend proposal, which would impose a gradually increasing fee on carbon emissions and return the revenue to citizens in the form of dividends. In terms of the potential impact of a carbon tax on the economy and society, research suggests that the economic impact of a carbon tax will depend on the specific design of the policy. For example, a revenue-neutral carbon tax could be designed to offset any potential negative economic impacts by returning the revenue to citizens in the form of dividends or by using it to fund other pro-growth policies. Ethical Concerns . One concern is that a carbon tax could disproportionately impact low-income households, who may spend a larger share of their income on energy and may not have the financial resources to invest in cleaner technologies. This could lead to an increase in energy poverty, where individuals and families struggle to afford basic energy needs. Another concern is that a carbon tax could have negative impacts on certain industries and communities, such as those that rely heavily on fossil fuel production or transportation. This could lead to job losses and economic dislocation, especially in regions where these industries are concentrated. A carbon tax policy that is designed with consideration for equity and justice can help to ensure that the benefits of the policy are shared fairly across society, while still achieving the

5 intended environmental goals (Burke, 2017). For example, utilizing progressive revenue allocation. Revenue generated from the carbon tax could be used to fund programs that help to alleviate energy poverty, such as weatherization assistance and low-income energy assistance programs. The revenue could also be used to support the transition to cleaner energy sources, such as through investments in renewable energy and energy efficiency projects. These programs could be designed to ensure that the benefits are targeted towards low-income households and other vulnerable. Infringement of individual or group rights . It is possible that the introduction of a carbon tax in the United States could be viewed as infringing upon individual or group rights, particularly the right to use and consume energy as desired. However, it is important to note that these rights are not absolute and must be balanced against the need to address the serious environmental and public health risks associated with greenhouse gas emissions. To address concerns about the potential infringement of individual or group rights, a carbon tax policy could be designed to minimize the impact on individuals and groups who may be disproportionately affected. For example, the policy could be designed to include exemptions or rebates for low-income households or for energy-intensive industries that are particularly vulnerable to the impacts of the carbon tax. Serving the Common Good . The introduction of a carbon tax can serve the common good in several ways. First, it would help to reduce greenhouse gas emissions, which are the primary cause of climate change. By putting a price on carbon emissions, the carbon tax would create incentives for individuals and businesses to transition to cleaner and more sustainable energy sources, which would help to

6 reduce the impact of climate change on the planet and on vulnerable communities. Second, the revenue generated from the carbon tax could be used to fund programs and initiatives that promote the common good, such as investments in renewable energy and energy efficiency, support for low-income households, and programs to help workers and communities transition to a low-carbon economy. These programs could help to create new economic opportunities and ensure that the benefits of the transition to a low-carbon economy are shared fairly across society. Risk Assessment. In the context of the introduction of a carbon tax in the United States, several approaches to risk assessment would be useful for making the case for the policy proposal and for evaluating its potential impacts. One of them is quantitative risk assessment. This approach involves using quantitative methods to estimate the likelihood and severity of the risks associated with greenhouse gas emissions and climate change. For example, scientists can use models to estimate the potential impacts of climate change on ecosystems, public health, and the economy. This type of risk assessment can help to demonstrate the urgent need for action to address climate change and provide evidence to support the case for a carbon tax. Conclusion . The introduction of a carbon tax in the United States can be an effective policy solution for addressing the urgent and pressing issue of climate change. The best available evidence suggests that the costs of the proposal would be outweighed by its benefits, including reduced greenhouse gas emissions, new economic opportunities, and support for vulnerable communities. Moreover, the potential ethical concerns and concerns around individual and group rights can be

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7 addressed through thoughtful policy design and implementation. The policy proposal also promotes the common good by creating a more sustainable and equitable future for all members of society. Approaches to risk assessment such as quantitative risk assessment can be used to further strengthen the case for the policy proposal and to ensure that it is implemented in a way that maximizes its potential benefits while minimizing potential risks. By taking bold action on climate change, we can help to create a better and more sustainable world for future generations.

8 References. Burke, M. J., & Stephens, J. C. (2017). Energy democracy: Goals and policy instruments for sociotechnical transitions. Energy research & social science , 33 , 35-48. California Public Utilities Commission. (n.d.). Cap-and-Trade Overview. Retrieved April 23, 2023, from https://www.cpuc.ca.gov/industries-and-topics/natural-gas/greenhouse-gas- cap-and-trade-program#:~:text=Cap%2Dand%2DTrade%20Overview&text=The %20California%20Air%20Resources%20Board%20(CARB)'s%20Cap%2D,reaches %20its%20emissions%20reduction%20goals . Center for Climate and Energy Solutions. (n.d.). Carbon Tax Basics. Retrieved April 23, 2023, from https://www.c2es.org/content/carbon-tax-basics/ Congressional Budget Office. (2018, December). Options for Reducing the Deficit: 2019 to 2028 - Energy and Environment. Retrieved April 23, 2023, from https://www.cbo.gov/budget-options/58638 Tax Foundation. (2022, February 14). Sweden’s Carbon Tax Revenue Exceeds its Greenhouse Gas Emissions. Tax Foundation. https://taxfoundation.org/sweden-carbon-tax-revenue- greenhouse-gas-emissions/

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