Present-Day Benefits of Climate Policy

James Boyce

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Alejandro Reuss: This is Alejandro Reuss, co-editor of Triple Crisis Blog and Dollars & Sense Magazine. We have with us today James K. Boyce, professor of economics at the University of Massachusetts-Amherst and director of the Program on Development, Peacebuilding, and the Environment at the Political Economy Research Institute. Welcome, Jim.

James K. Boyce: Thanks, Alejandro, happy to be with you.

Alejandro Reuss: Great. So, with the United Nations Climate Change Conference underway now in Paris, undoubtedly climate policy is at the forefront of many people’s minds. Now, we often hear climate policy debates framed by the question of whether the current generation will be willing to sacrifice their standards of living—by reducing energy use and achieving emissions reductions—for the benefit of future generations. You’ve criticized that sort of framing of climate issues.

James K. Boyce: That’s right. I mean, that framing is almost ubiquitous. One of the reasons why these international negotiations have proven so difficult is that if everybody believes that this is going to be a painful thing to cut our carbon emissions, then they all want somebody else to go first. It’s like a global free rider problem—no one wants to be the one who cuts emissions more than someone else because they’ll bear the pain and everybody else farea in the game. I think that framing of the problem has been a huge obstacle to progress, and it’s not true. In fact, it is, on the contrary, true that we can design climate policies that in fact benefit the majority of people here and now, in the present generation. So instead of always wanting somebody else to go first, if we designed the policies right, everyone will want to go first, and I think that’s a critical piece of the conversation that needs to be lifted up.

Alejandro Reuss: Well, one of those benefits that you’ve talked about and written about is called “air quality co-benefits” of climate policy. So what are air quality co-benefits, and why are those important?

James K. Boyce: Well, when we burn coal, oil, and natural gas, the fossil fuels, we not only release carbon dioxide into the atmosphere, which is the most important of the greenhouse gases propelling climate change, but we also release a lot of other really nasty stuff: particulate matter, sulfur dioxide, nitrogen oxide, a host of air toxics- things that are hazardous to people here and now when we breathe them. And by cutting down on our use of fossil fuels we’ll not only help to protect the climate for future generations, by reducing CO₂ emissions, but we’ll also help to improve air quality for the present generation, and those improvements can be really substantial. In fact, people who’ve tried to calculate how much, in terms of dollars, the public health benefits of cutting carbon emissions would be find magnitudes of benefits that are as big, or even in some cases bigger, than the dollar values that have been put on reducing greenhouse gas emissions. So we’re talking about big benefits here, even in a country like the United States which has relatively good air quality regulation.

My grad student Brandon Taylor and I, for example, recently did some calculations on the clean air benefits—the public health benefits—that would come from implementing one of the climate bills that’s been introduced in the current session of Congress, the Healthy Climate and Family Security Act, that was introduced by Congressman Chris Van Hollen from Maryland. And Van Hollen’s bill would put a cap on carbon emissions, auction off the permits, give the money back to the people, and reduce the use of fossil fuels by 80% by the year 2050. And we estimated that over that period, between now and 2050, implementation of that bill would save about 700,000 lives in the United States. That is to say it would avert 700,000 premature deaths—that’s about what, 250 times the number of people who died in 9/11? We’re talking about a lot of preventable mortality that could be averted by moving forward in the clean energy transition. When you then look at countries like China or India, where the air quality problems are even worse, the co-benefits—the public health co-benefits—of a clean energy transition, are that much greater.

So I think this is something that really needs to be part of the conversation. When we’re talking about cutting back on the use of fossil fuels, we’re really talking about making cleaner air for everybody on the planet today, and improving public health, preventing premature deaths, preventing respiratory diseases, cancers, heart problems, asthma, a host of other illnesses that are related to air pollution from fossil fuel combustion.

Alejandro Reuss: Just to follow up on that point, probably a lot of our listeners will have thought about the so-called export of pollution, that is to say the relocation of high polluting activities and processes from high-income countries like the United States to elsewhere in the world, and the insulation of people in high-income countries—especially affluent people in high income countries—from the effects of pollution arising out of those activities from which they benefit. And yet, the argument that you make really says, well that may be true but still there’s a lot of benefit to be gained even in countries like the United States from an air quality and public health standpoint.

James K. Boyce: Yea, that’s absolutely right, I mean you can’t export burning gasoline in your automobile, you can’t export emissions from burning coal, oil, and natural gas to generate electricity—those things are going to be in your own country, and we’ve still got a lot of that here in the United States. And despite having relatively strong air quality legislation under the Clean Air Act, we’ve still got thousands of premature deaths every year that are attributable to burning fossil fuels. So, the only way to really drive down those public health costs is to transition away from what really, when you think about it, is an awfully primitive technology. It’s digging up poisonous stuff that’s been buried under the ground for millions of years and burning it to generate heat and power. Really, I think people are going to look back on that in a hundred years and say, “Boy, people were sure primitive back in the 19^th and 20^th and early 21^st century” if that’s the way they were generating their power, where we now know that in fact it’s possible to generate energy very cleanly, at very low cost, by tapping the sun, the wind, geo-thermal sources of power, and so on. So I think we’re not only talking here about trying to improve for people yet to be born, we’re talking about improving the environment for ourselves.

Alejandro Reuss: Very good. You’ve also written a lot about climate policies like a carbon tax, or auctioned carbon permit system, and argued that those could be designed in a way that would yield net income benefits to most people. Now again, in the sort of current discourse, the idea is, well, you’d impose a carbon tax or some other price on carbon, and that would hurt most people in the pocketbook, in particular lower-income people who tend to spend larger percentages of their incomes on fuel and the like. So how is it that most people would end up benefitting from such policies, properly designed?

James K. Boyce: Well this is another really important part of the conversation because the fact that a carbon price is one of the most important instruments to achieve reductions and emissions by making fossil fuels more expensive, is again part of the reason why people think, “Oh, it’s going to be painful for us to reduce our use of fossil fuels because we’re going to have to pay more for these things.” Well it’s true we’re going to have to pay more but the important thing to realize is that money doesn’t disappear from our economy. When consumers pay more for oil, coal, natural gas, and everything that’s produced and distributed using them, for electricity, for gasoline for their cars, etc., right? That money doesn’t get shipped to Saudi Arabia, it doesn’t get buried in a tin can in your backyard, it doesn’t get shot to the moon—it gets distributed somewhere, and the question is: who gets the money? In effect, by putting a limit on the amount of carbon we’re burning, we’re converting the atmosphere for something that was free, that you didn’t have to pay to use, into something that’s limited and we have to pay to park carbon in that limited atmospheric space.

And the question then is, well if we’re going to pay, who should get the money? Who does that space belong to? Who owns the parking lot, so to speak, the atmospheric parking lot for carbon emissions? And I would submit that it’s not owned by the corporations, it’s not owned by the government, it’s owned by all of us in common and equal measure. And consistent with that principle then, the money that’s collected by auctioning permits, or by charging a carbon tax, ought to go back to the people as the rightful owners of the resource we’re paying to use. And if you did that, what would happen is that people who have smaller carbon footprints, as they’re called—who don’t burn as much fossil fuel—or mainly low income people because they can’t afford to burn as much fossil fuel. A lot of low income people in this country can’t even afford to drive a car- they certainly don’t have 4,000 or 8,000 foot houses that they’re heating, they certainly don’t fly off in airplanes to take vacations in sunny places in the middle of the winter, right? They don’t burn as much carbon, and so they’re carbon footprints are relatively small compared to the more affluent people who have bigger houses, bigger cars, fly around in airplanes, etc., etc. By putting a price on carbon, everybody pays in proportion to their use of the scarce resource, that limited ability of the atmosphere to absorb emissions, and by recycling that money to the people as equal per-person dividends, everybody gets paid back the same amount regardless of the size of their carbon footprint.

So what that means is that people who have smaller carbon footprints come out ahead, and people who have bigger ones come out behind. And when you do the math, what you learn is that the majority of the American people would actually benefit through a recycling of the money: the low income households would come out ahead, middle income households, the middle class, would be kept whole, so their real incomes wouldn’t suffer by virtue of the rising prices of fossil fuels, and the wealthier households would end up paying more than they get back. But you know what, they can afford it.

Alejandro Reuss: I think that one of the reactions that people have when they hear a description of that policy is a favorable reaction to the clarity and the simplicity of it: you pay in proportion to the carbon emissions that are embedded in what you consume, and then you get back an equal share of what everyone pays into that pool. Now, suppose though, you have people who are differently situated, say that some people maybe who live in an area where the electrical utilities are all using coal-fired plants, and it’s a kind of emissions that’s very difficult for them individually to avoid. You know, if they need to use electricity they end up using a fairly high-carbon intensity kind of electricity. Is there an argument in favor of, say, putting people, in effect, in different pools where, well, if you’re stuck in that kind of area paying for a high-carbon intensity electricity, that you ought not to be penalized for that. Maybe what you pay in is proportional to other carbon emissions embedded in other forms of consumption but you’re sort of given a pass on that kind of thing. What would you think about arguments pro and con on that kind of adjustment to this sort of policy?

James K. Boyce: Well you’re raising an important point, Alejandro, which is that there are some regional and interstate differences in carbon footprints based, above all actually, on the composition of the electricity supply. So, states like Oregon or Vermont, that don’t use much fossil fuel for electricity, people have lower carbon footprints at a given level of income than people in, say, Indiana or a number of other Midwestern states that use more coal for their electricity supply, so that’s an important issue.

Now, on the other hand, there’s a lot to be said for keeping the policy simple, and even in a state like Indiana which has the most carbon-intensive electricity mix, when you calculate how carbon pricing would affect the households, the majority of households in Indiana would come out ahead if the money’s recycled as a dividend. But it would be a slimmer majority in Indiana than it would be in, say, Oregon.

So for that reason I think it’s desirable to think about other elements of the policy that could specifically try to channel resources to states like Indiana, to the most coal-intensive states, partly to assist those states in driving forward the clean energy transition and to cushion the impact on consumers in those states, and partly because in some of the coal-heavy states you’ve actually got jobs which are linked to the present energy infrastructure and we need to make sure that as we transition to a clean energy economy we don’t penalize the people who’ve been working in the old energy economy, but instead we make sure that they’re able to take advantage of the expanded employment opportunities that come with the building-out of our clean energy infrastructure.

So one way to do that would be to channel 75%, let’s say, of the carbon revenue back to the public as dividends, but to have 25% of it be held as money for public investment, because overall in our economy, about 25% of the investment is public investment—investments by federal, state, and local governments. So, if we do that, which is what Senators Maria Cantwell, Democrat of Washington State, and Susan Collins, Republican of Maine, actually proposed in an act they introduced back in 2009, called the CLEAR Act, if you do this, they proposed to channel 75% back to the public as dividends, 25% for public investment in clean and renewable energy, what you can do then is allocate that public investment in ways that takes these regional differences into account. And I think that’s not a bad idea.

Alejandro Reuss: Well, to sort of bring this back around full circle to really where you started, I mean you talked at the beginning of this interview about the ways in which this narrative of sacrifice, you know, of the pain of enacting serious climate mitigation policy as being something that has politically hamstrung the objective of taking serious steps on climate. What do you see as the potential for a real, significant impact of a reframing the way that people think about this, away from present sacrifice and toward the potential for present benefits? What do you see as the potential in relatively short order for this altering the prospects for serious climate mitigation policy in the United States and in other countries?

James K. Boyce: Well, I think we already see rising awareness around the world and within this country, really across the nation and across the political spectrum, of the fact that climate change is real, that burning fossil fuels is a major contributor to the problem, and that we need to do something about it. So, the political will to do something about it has been building.

What I think’s been holding it in check has been in no small measure the idea that, “Ah gee, but even though we ought to do something, it’s really going to hurt and should we really do it? Should we do it if the Chinese aren’t doing it, should we do it if we don’t know for sure how much the planet’s really going to warm up, etc.?” All these reservations about doing something have held progress back.

So I think bringing out the ways in which we can design climate policy to achieve clean air benefits, which by the way means not necessarily just having carbon reductions happen regardless of where they’re emitted, but also to target the reductions to the places, the industrial sectors and the most heavily impacted communities, to make sure that we get significant reductions in emissions in those places where the air quality and public health co-benefits are likely to be greatest, right? That’s one way to try to break through that resistance, and the other way is to design the policy so that the revenue generated by pricing carbon actually comes back to the people—so people end up, in most cases, financially better off in pocketbook terms, than they would have been without the policy.

Once the public, I think, grasps that not only is this a good thing to do for future generations, for our children and grandchildren and those that will come after them, but it’s actually a good thing for us too—I think at that point we have a foundation for really moving forward on a policy, and a policy that can command bipartisan support. Because it’s not really a matter of red states vs. blue states or Republicans vs. Democrats. It’s not a matter of bigger government or smaller government. It’s a matter of getting the price on carbon to reflect the fact that burning this stuff comes at an environmental cost to the present and future generations, and making sure that that policy is implemented in a way that far from hurting the public today, is going to benefit us.

Alejandro Reuss: Well, Jim Boyce, thank you very much for talking with us today.

James K. Boyce: Okay, Alejandro, very nice talking to you and good luck with all of your work.

Alejandro Reuss: Thanks so much.

James K. Boyce:  Okay, take care.

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