Author(s): Stanton, E.A., and Ackerman, F.
In: Stanton, E.A., F. Ackerman (2010). Emission reduction, interstate equity, and the price of carbon. SEI-US ; Ecotrust.
Link to SEI author(s):
Emission Reduction, Interstate Equity, and the Price of Carbon
Efforts to pass climate legislation failed in the U.S. Congress this year due, to a great extent, to economic concerns. A new study by SEI-U.S. Centre economists, however, shows that a simple approach that puts a price on carbon, then returns most of the revenue to households, could effectively reduce greenhouse gas emissions without hurting most Americans' incomes.
The study, released by Economics for Equity & Environment (the E3 Network) and SEI, modeled the potential impact of climate policies on households in each state, based on their current incomes, energy consumption, and the source of their electricity — since coal power, now very cheap, would be most affected by a price on carbon emissions.
It found that despite dramatic differences in states' current emissions, and in the additional costs households would face from higher utility rates, gasoline prices, and consumer-goods prices, if 85 percent of the carbon-policy revenue is returned to households on a per capita basis, the median household in every state would come out ahead. Overall, four-fifths of U.S. households, including all those with lower-than-average incomes, would gain more from climate rebates than they would pay in higher prices.
Just as important, the study found, as long as enough of the revenue is returned to households, the actual price put on carbon (via permits, a fee, or a tax) doesn't change the outcome: The average family of four in every state still comes out ahead even at 75USD per ton, the price the authors estimate would be needed to effectively reduce emissions.
Along with the report, authors Elizabeth A. Stanton, Ph.D., and Frank Ackerman, Ph.D., produced a white paper, No State Left Behind: A Better Approach to Climate Policy, offering key questions to gauge the effectiveness of proposed climate policies.
Download the study here (pdf, external website)