USA: Open letter signed by 150 economists

USA: Open letter signed by 150 economists

150 economists in the United States have signed an open letter that asks for

  • “Direct cash payments are an essential tool that will boost economic security, drive consumer spending, hasten the recovery, and promote certainty at all levels of government and the economy – for as long as necessary….
  • The economic pain is widespread and the need for immediate, bold action is clear….
  • Regular, lasting direct stimulus payments will boost consumer spending, driving the economic recovery and shortening the recession….
  • Automatic stabilizers ensure relief for as long as it is needed, promoting a strong recovery and efficient government.
  • With many unknowns, it is critical to enact policies that will help promote a robust, sustained, racially equitable recovery and will stay in place until Americans are back on their feet….” 

For further details, see Michael Howard’s article on the USBIG website.

USA: Open letter signed by 150 economists

Basic Income activism in the United States

Michael Howard, Co-ordinator of USBIG, has written an article about increasing Basic Income activism in the United States.

Two years ago, if one were to speak of a basic income movement, one might be accused of hyperbole. USBIG was able to muster support for annual congresses, in cooperation with the Basic Income Canada Network, and disseminate information and analysis through the website and newsflash. … Then came the Yang campaign, putting UBI on the national agenda. …

To read the article, click here.

Coordinated activity in the United States

Coordinated activity in the United States

This weekend, April 24-26, the US Congress will be debating and probably voting on the CARES 2 Act, the next phase in the US government’s response to the health and financial crisis brought on by the coronavirus. A coalition has been formed, under the leadership of the Income Movement, and including USBIG, Humanity Forward, the Fund for Humanity, the Economic Security Project, the Universal Income Project, the Humanity First Movement, and others, to appeal to Congress to include an emergency Basic Income in this legislation.

If you would like further details on this story, then click here for an article by Michael Howard.

 

 

 

 

 

 

 

 

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Conservative Carbon Dividend Proposal is a Welcome Development for Introduction of Partial Basic Income

Conservative Carbon Dividend Proposal is a Welcome Development for Introduction of Partial Basic Income

The Climate Leadership Council just put forth a proposal for a carbon fee and dividend, as a key policy to combat climate change. The authors are conservatives, including Republican former Secretaries of State James Baker and George Schultz, Treasury Secretary Henry Paulson, and two Chairs from the Council of Economic Advisors in the Reagan and George W. Bush administrations. While there are some aspects of the proposal to question, progressives should get behind the main idea: a steadily rising carbon fee and dividend.

First, the proposal is a very welcome development for the effort to fight climate change, and for the introduction of a partial basic income. At a time when the President and many Republicans in Congress make light of or outright deny the problem of anthropogenic climate change, it is encouraging to see such concerted effort by people with impeccable conservative credentials proposing a policy that is also favored by many progressive Democrats and environmentalists like Bill McKibben. The dividend would be a significant benefit especially to poor and working class families, and, if revenue-neutral, would more than compensate for the regressive income distribution effects of a carbon tax.

How effective this particular carbon tax and dividend proposal will work depends on details not spelled out in the proposal. The proponents propose starting at $40 per ton of CO2, and a lot depends on how quickly the tax rises. They claim that a commission will decide after five years whether to raise the tax, and if it is flat for five years, that would not be adequate. One analysis of the proposal assumes that if the tax rose by $5/year, it would reduce US carbon emissions 40 percent below 2005 levels by 2030. While not as much as we need, it would be a big step beyond the status quo, and could be strengthened as the political will rises to do so.

The authors propose a tradeoff between the carbon tax and regulation. The authors claim, “To build and sustain a bipartisan consensus for a regulatory rollback of this magnitude, the initial carbon tax rate should be set to exceed the emissions reductions of current regulations.”

If this is indeed the effect, the tradeoff might be worth it with respect to the EPA’s Clean Power Plan. According to Charles Komanoff of the Carbon Tax Center, “well over 80 percent of the plan’s targeted reduction in electricity-sector emissions for 2030 had already been achieved by the end of 2016,” so an economy-wide carbon tax is the logical next step. But worrisome is the Climate Leadership Council’s apparently wider scope of reduction of regulatory power of the government, which serves many other purposes unrelated to climate change. And unless the carbon tax is set high enough and is assured of rising regularly, to give away the EPA’s authority to regulate carbon emissions might be a fool’s bargain. The challenge for progressives and environmentalists is making sure that any tradeoff gives us a robust climate fee and dividend.

A deeper question is whether a carbon fee and dividend will stimulate growth. The model suggested here does not give us enough detail, but a similar proposal by Citizens’ Climate Lobby is projected to create millions of new jobs in clean energy, and not inhibit growth. However, as we steadily use up our carbon budget, the level and pace of reduction in greenhouse gases necessary to avert catastrophic climate change may not be compatible with sustained economic growth.

This leads me to question whether the challenge of climate change — more than two decades after the international community became aware of the problem and initiated treaties to address it — can now be addressed through a carbon tax alone. We may also need direct investment in research and development of alternative technologies. We need to make good on our promise in the Paris Agreement to aid poor countries in the transition to a non-carbon future, so that they do not face an intolerable dilemma between economic development and environmental safety. And we may need to manage a scaling down of our consumption in a manner that does not cause widespread misery.

But there should be little doubt that a carbon tax is a key pillar in the battle against climate change, and using the revenue for dividends is an equitable and politically prudent policy. For basic income supporters, it is the closest analogue on the national scale to Alaska’s Permanent Fund Dividend that we can hope for in the near term.


Reviewed by Kate McFarland

Photo: CC BY-NC-ND 2.0 macwagen

Size of a Citizens’ Dividend from Carbon Fees, Implications for Growth

Size of a Citizens’ Dividend from Carbon Fees, Implications for Growth

An emerging proposal for a carbon fee and dividend would yield a substantial dividend payment, eventually exceeding the amount of Alaska’s Permanent Fund Dividend, to American households. Citizens’ Climate Lobby (CCL) is proposing a revenue-neutral carbon fee. This would be collected from the companies operating hydrocarbon mines and wellheads, wherever carbon is first introduced into the economy, from which 100% of the revenue would be returned to the citizens as dividends. CCL’s proposal starts with a fee of $15 per metric ton of carbon, then would raise the fee by at least $10 per year (higher if faster carbon reduction is warranted) until environmental target reductions are met.

Using a carbon tax and dividend calculator at the Carbon Tax Center, I calculated what the individual and household annual dividends would be for selected years from 2016 (the hypothetical initial year) to 2039 (the last year available in the calculator). Households are assumed to contain an average of 2.6 people.

Individual Household Carbon Emissions, % below 2005 Levels
2016 $264 $686 13
2017 433 1185 15.2
2025 1,613 4,194 30.7
2030 2,247 5,843 38
2039 $3,325 $8,646 48

Although not a full basic income by any means, a carbon dividend promises to be a significant addition to individual and household incomes, surpassing the average amount of the Permanent Fund Dividend in less than a decade. By 2039, it is estimated the proposed carbon fee would reduce CO2 emissions 48% from 2005 levels, substantially more than the reductions projected for the EPA’s Clean Power Plan.

That sounds impressive, but is it enough? Citing experts at the Tyndall Center for Climate Change Research in her compelling vision for remaking the economy to combat global warming, This Changes Everything, Naomi Klein claims that “our only hope” of keeping global warming below 2°C, “is for wealthy countries to cut their emissions by somewhere between 8-10 percent a year….This level of emissions reduction has happened only in the context of economic collapse or deep depressions” (21).

Kevin Anderson of the Tyndall Center maintains that there needs to be an 80% cut in emissions in the Annex 1 (wealthier) countries by 2030, if we are to meet the 2°C target, and also allow developing countries’ emissions to peak somewhat later. This, he argues further, requires a “de-growth strategy,” a planned period of reduced economic activity. He does not think that carbon pricing will suffice to reduce carbon emissions at the rate required, for the following reasons:

To summarise, if: 

  1.  reductions in emissions greater than 3-4% p.a. [per annum] are incompatible with a growing economy,
  2.  the 2°C obligation relates to a twenty-first century carbon budget,
  3.  a 50% chance of exceeding 2°C is adjudged an acceptable risk of failure,
  4.  and Non-Annex 1 nations peak emissions by 2025 & subsequently reduce at ~7% p.a.,
  5.  then the wealthier nations’ carbon budget is the global 2°C budget minus the poorer nations’ budget,
  6.  and consequently wealthier nations must reduce emissions at 8 to 10% p.a.,
  7. Q.E.D. Annex 1 mitigation rates for 2°C are incompatible with economic growth

 

James Hansen et al., making somewhat different assumptions, also call for steep carbon emission reductions of around 6% per year.

More ambitious projections

Suppose that we need to reduce our emissions 80% by 2039. How much of a carbon fee would be needed, and how much would it yield in dividends? Starting at $20/ton, and beginning in 2016, with increments of $40/ton/year, these are the results from the Carbon Tax calculator:

 

Tax/ton Revenue, $ billions Carbon Emissions, % below 2005 Levels Individual Dividend (100% return) Household Dividend (average of 2.6 people)
2016 $20 $110 14.7 $345 $896
2018 100 451 32.4 1,394 3,624
2020 180 708 43.2 2,153 5,599
2025 380 1,130 60.7 3,309 8,603
2030 580 1,419 70.4 4,010 10,427
2035 780 1,635 76.8 4,476 11,637
2039 $940 $1,785 80.4 $4,802 $12,485

Note that emissions in the US rose around 17% from 1990 to 2005, so to get emissions down to 80% below 1990 levels, the annual increase would need to be at least $45. This would, by 2039, produce emissions 82.7% below 2005 levels, with a fee of $1,055 per ton, yielding revenue of $1,770 billion and an individual dividend of $4,761 ($12,380 for a household). Presumably the lower revenue and dividends compared to the scenario with a $40 increment is the consequence of declining fossil fuel use and a lower tax base. (To reach 82.4% reductions from 2005 by 2030, Anderson’s target date, the fee increment would need to be $70/year. The maximum individual dividend in 2039 would be $4,268).

The carbon fee would constitute a steadily rising percentage of gross domestic product (GDP) in terms of revenue. If GDP were held constant at $19 trillion, the fee would rise from 0.5% of GDP in 2016 to over 9% in 2039. Even if, as is more likely, GDP rises, the fee will still rise at a faster rate than GDP. Estimates for the 2030 US GDP range from $25.5 to $38.2 trillion. The percent of GDP of the carbon fee in 2030 would thus fall between 5.6 and 1.4, respectively.

At first glance, this suggests that the carbon fee would bring a halt to growth, as it would equal or exceed the normal growth rate of the economy (around 2%). However, accounting for the fact that the revenue is being returned as dividends, the effect may be to steer growth in another direction, away from carbon energy, which will quickly become unaffordable.

Of course, all this depends on the soundness of the projections for emissions reductions at various levels of carbon fee. We have no experience with carbon fees accelerating so rapidly. One case study suggests that carbon taxes may not be as effective as one would hope: the Norwegian carbon tax, one of the highest in Europe, resulted in relatively modest reductions of carbon emissions compared to business as usual, and over the 1990s, carbon emissions rose 15%. One problem was exempting industries on account of competitiveness, and another more telling issue was the inelasticity of demand for some forms of carbon use, such as transportation. The record of British Columbia’s revenue-neutral carbon tax is more encouraging, but since it topped out at $30 per ton in 2012, it is hard to extrapolate from that case to the more ambitious targets discussed here.

In the model discussed above, there are no exemptions. But with the more ambitious fee, it may not be possible for demand to shift rapidly enough from carbon fuel to renewables, and the effect of the fee could be mainly to depress demand, and with it economic activity, as has happened in the past when energy prices rise. Then it would appear that rapid carbon emissions reductions would not be compatible with economic growth.

For basic income researchers, I will conclude by noting the tension between analyses such as this, which envision basic income as part of equitable environmental policy and at least a transition period of de-growth, and those analyses that see basic income as an economic stimulus for growth.