Support for putting a price on carbon is growing rapidly, especially in the business community. This is due in part to the effective debunking of myths about carbon pricing.
Below, is the first in a series of blogs explaining why the most common criticisms of carbon pricing do not hold up.
Consider the record. British Columbia has had a carbon tax since 2008. It has reduced carbon emissions by 12.9 percent per capita, while emissions in the rest of that country fell by only 3.7 percent during that period. Meantime, British Columbia’s GDP growth has outperformed Canada’s.
California has had a cap-and-trade system since January 1, 2013, and its record has "drained away some of the fear-mongering" about cap-and-trade, Severin Borenstein, an energy expert at UC Berkeley's Haas School of Business, told the Los Angeles Times in June 2015. California's GDP grew faster than the nation's in the program’s first two years, while emissions declined four percent during the first year of the program.
Anyone who believes that putting a price on carbon would threaten growth should spend a few minutes with a survey of 365 economists who have expertise in this field. A December 2015 report by NYU Law School's Institute for Policy Integrity said that those economists have concluded that it would be far more expensive to allow climate change to continue at its current rate.
Among the findings:
More than three-quarters of respondents believe that (without meaningful action) climate change will have a long-term, negative impact on the growth rate of the global economy.
Respondents believe that numerous sectors of the U.S. economy will be harmed by climate change. A majority predicted negative impacts on agriculture (94%), fishing (78%), utilities (electricity, water, sanitation – 74%), forestry (73%), tourism/outdoor recreation (72%), insurance (66%), and health services (54%).
Naturally, as the Congressional Budget Office (CBO) noted in May 2013, the effects of a carbon fee on the U.S. economy would depend on how the revenues from the fee were used. If half of the proceeds were used to reduce the corporate tax rate, we could expect a spur to growth. Harvard’s Dale Jorgenson, in his book Double Dividend: Environmental Taxes and Fiscal Reform in the United States, told the Partnership for Responsible Growth that his analysis concluded that if all of carbon fee revenue were applied to business tax cuts, there would be a net 25 percent increase in the rate of GDP growth. When we asked what would happen if half of the funds were applied to business tax cuts, he estimated that half that rate of growth, or 12.5 percent, would result. So today’s 2 percent growth becomes 2.25 percent growth!