This is the fourth installment of a five-part series on climate policy adapted from regular Triple Crisis contributor James K. Boyce’s March 31 lecture for the Climate Change Series at the University of Pittsburgh Honors College. This installment focuses on how the revenues from a carbon price will be distributed: Who gets the money? The first three installments of the series are available here, here, and here.
The full lecture and subsequent discussion are available, as streaming video, through the University of Pittsburgh website. Click here or on the image below.
Who Gets the Money?
How much money are we talking about, when we put a cap on carbon emissions? What I want to share here are some “back of the envelope” calculations. Don’t take these to the bank, but they’ll give you some idea of the ballpark we’re talking about, what kinds of prices are likely to be associated with what levels of emission reduction. These are figures that trace the trajectory if we’re going to achieve an 80% cut in emissions by the year 2050.
In the first five years of the policy, if we were to have such a policy in 2015, we’d be emitting on average about 6 billion tons of carbon dioxide per year, a little bit less than in the absence of a policy. The price associated with that would probably be in the neighborhood of $15 a ton, so we’d be talking about $90 billion a year, or about $540 billion over those first six years. In the next decade, we’d be ratcheting those emissions down further to about 4.5 billion tons. To do so, the price would have to be about $30 a ton, generating a total cost to consumers and therefore a pot of money of about $135 billion a year, or $1.35 trillion over the decade. In the next decade, getting down to about 3 billion tons of carbon, we’d be raising the price to about $60 a ton, generating about $1.8 trillion over the decade. And the last decade, ratcheting down further to 1.5 billion, perhaps somewhat optimistically assuming here that the price needed would be only $120 a ton—that would assume that a lot of R&D has happened, a lot of new technologies come online, investments in public mass transit are online, etc., so you don’t have to push the price through the roof—that would generate another $1.8 trillion.
You add it up and over that 35-year period, we’re talking about something to the order of $5.5 trillion. Economists have a technical term for it—“a hell of a lot of money.” So the question is: Who owns that atmospheric parking lot and, therefore, who will get the money?