Yesterday, I had a couple of interesting conversations about fairness and climate change. One of the problems is that in order to reduce climate pollution, society will probably have to put a price on emissions. The price could come in the form of a carbon tax or a carbon permit or something else entirely. But the basic idea is that to reduce pollution, we’ll have to charge for the privilege of emitting carbon.
So far so good? Not really, because putting a price on emissions means that energy costs go up. That’s regressive—it hits poor folks hardest—because lower income people spend a greater share of their income on energy than do higher income people. But what can we do?
The good news—and I take this to be very good news indeed—is that it’s possible to distribute revenue (from a carbon tax or auctioned permit) to solve the regressivity problem. Toward that end, I wanted to share with readers an excellent position paper from the Center for Budget and Policy Priorities. It lays out clearly how one could address regressivity in climate pricing.
Even better, perhaps, is that it’s possible to make strategic investments of the revenue that could benefit lower income families and the climate simultaneously. Imagine, for example, upgrading all the inefficient furnaces and water heaters overnight with super-efficient replacements: consumer energy spending could go down (because people would need to buy less energy) even while prices are rising.
Finally, there’s another point that sometimes gets overlooked. Arresting climate change is not mostly an environmental issue, at least not in the way that word has often been construed in the past. It’s a question of justice. As recent research from the IPCC reveals, climate change is likely to hit the poor hardest. So while protecting low income consumers from price increases is important, protecting the world’s poorest from losing their homes and livelihoods is paramount.
Obviously, there’s lots more to say about this; and today’s post is just the tip of the iceberg. But stay tuned: Sightline’s going to be diving into these questions in the coming months. In the meantime, we’d welcome your comments and thoughts.