Climate Policy as Wealth Creation
"Climate Policy as Wealth Creation"
James K. Boyce
Department of Economics & Political Economy Research Institute, University of Massachusetts, Amherst
March 31, 2014
University Club, Ballroom B
123 University Place, Pittsburgh, PA 15260
Carbon pricing can be a key instrument in the clean energy transition, helping to drive investment in renewables and energy efficiency. There is an important difference, however, between carbon pricing and conventional environmental regulations: with regulation polluters pay the costs of abatement, but with carbon pricing they pay not only abatement costs but also a price for the pollution they do not abate. Both types of costs are ultimately passed along to the consumer, but the latter will be much larger than the former. While abatement involves resource costs for retrofitting buildings, development of alternative energy sources, and so on, carbon pricing does not. Instead it is a transfer – a payment of scarcity rent for use of the biosphere’s limited carbon storage capacity. If and when we price emissions, via a carbon tax or a cap-and-permit system, a crucial economic and political question is who will get the money? One possibility is that the government will keep the revenue and use it to fund public spending or cut other taxes. A second possibility is that corporations will get permits for free and reap windfall profits as a result. A third possibility is that the money will be recycled to the public as equal per person dividends, in keeping with the ethical principle that nature’s gifts belong in common to us all. All three options have featured in proposed legislation in Washington.
A moderated panel discussion will follow the lecture featuring:
Erica Cochran, Carnegie Mellon Univesity
Christina Gabriel (moderator), University Energy Partnership
Paul Ohodnicki, National Energy Technology Laboratory
Stephen Rose, Carnegie Mellon Electricity Industry Center
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