This article relayed the findings of an investigation into how the costs of climate policy affect households. I found it interesting that they looked at two scenarios, optimistic and pessimistic outcomes, under the Waxman-Markey bill. They noted that the allocation scheme has multiple possible outcomes, which speaks to the fact that uncertain provisions of the bill could or could not lead to more efficient results. The estimates for average household burden range from $138 in the optimistic version of Waxman-Markey to $436 in the pessimistic scenario. While they address that “we are describing two versions that we feel bound the likely range of outcomes and illustrate the range of possibilities,” it seems to me like the estimates are such a wide range that it is difficult to make a strong conclusion about the true burden to households. This exemplifies the challenge that economists consistently face when attempting to draw conclusions while dealing with uncertainty.
It was particularly interesting reading the lack of negative effects of climate change policy on older individuals. I had previously considered, and we've mentioned in class, the benefit of lower-income households. It was emphasized throughout the paper and refreshing to hear, especially with poorer individuals often receiving the bad end of the stick with policies. However, older individuals don't come up often, so it was interesting reading the results. The reasoning the article gave for this was the automatic indexing of the Social Security program to inflation. If this provided a benefit, how would wages play a role? Would accurately adjusting real wages as done with SS, reduce the burden of the middle-class? By how much would it reduce it, if at all? Would it lead to more negative effects in the long or short run? I'd also be interested in seeing if this would change anything among age groups, as the younger ones were more negatively affected.
While reading this paper, I found it very interesting and positive that the proposed bill would allocate the allowances to offset the extra expenditures from low-income households. In fact, it states that there would actually be a net gain for those in these situations. I believe that this is very important as we've discussed how lower-income households, communities, and countries have the hardest time adapting to climate positive technologies and policies. I also found it very interesting that those over the age of 75 are the ones who would be most benefitted from the cap-and-dividend scheme, as normally those who are in the older age groups are more opposed to climate change reform policies. The reason that we have not yet widely implemented any such policies is demonstrated rather nicely in the paper, as they state that the benefits of reducing greenhouse gases will not be reaped until the future, but the cost of it we have to pay now. This "cost but no benefit" situation is not easy to pass in Congress or through the public. Creating policies like the cap-and-dividend scheme can help to fight this by incentivizing people to reduce emissions and at the same time reducing the cost of doing so.
I thought that this paper was intriguing as it is a deep dive on the effects of climate policy on different age groups, socioeconomic status, and regional location. It was interesting to read that the allocation of emission allowances has a bigger effect on distributional outcomes than initial cost. Households with those 65 and older incur relatively less cost than other age groups due to automatic inflation indexing of social security. I learned that low income households spend a larger fraction of earnings on energy than wealthier households, which I could have guessed. I also saw that lower income households will be ok in this regard as distribution of allowance value and indexing of government programs offset this spending. After speaking in class today and reading about it in this article it was interesting to me that the cap-and-dividend approach benefits low-income households relatively more than high-income households, and that middle income households get the short end of the stick as they do not receive low income rebates nor value through ownership of capital stock. It made sense that it doesn’t necessarily affect high income households that much because it is a small percentage of their total income or assets. It also surprised me that older households (75+) are generally better off under climate policy than other households under both Waxman-Markey or the cap-and-dividend process. I think it is really interesting that this paper addresses the consequences of climate policy by not only socio economic status and income, but also by age group and regional location. I also appreciated how they looked at these outcomes on both ends of the spectrum, on the optimistic side and the pessimistic side. It allows the public to know the “worst” and “best” possibilities regarding the burden of climate policy; however, the range of burden per socio-demographic group is still relatively wide which leaves people still uncertain of the specific costs that they might have to bear under certain climate policies.
I thought it was interesting that the largest burden as a percentage of income falls on the middle class, but it makes sense. Lower-income households benefit from programs like the Low Income Energy Rebate Program in the Waxman-Markey bill and the per-capita rebate in the cap dividend option. Middle-class households do not qualify for these and, in turn, absorb more of the cost. The upper class has a higher concentration of "shareholders" or owners of firms that receive accrued benefits from the relief of allocations. The middle class gets the short end of the stick. As Jessica said, it was refreshing to hear poor households are protected under all scenarios presented. It is nice to read about some policies that are directed directly or indirectly at benefiting lower-income households. This, coupled with the older demographic being harmed less by climate policy, is very fortunate to hear. The regional aspect of the study did not show conclusive evidence for me, but it would be interesting to see this on a global level. This would be hard because of different national policies but seeing climate policies compared from different regions of the world opposed to regions of America would be interesting.
One of the things that stuck out to me in reading this article was how many different but similar plans there are to create cap-and-trade restrictions on greenhouse gas restrictions, some of which had bipartisan support. I try to be a pretty politically engaged person and yet, despite these many proposed policies, I don’t often see updates on these policies in the news. Similarly, on social media, I often see my friends sharing updates on issues they care about, I have never once seen people posting about cap-and-trade policies. It seems like there is no strong, sustained political will power behind this bill, the kind that could help these bills become laws. This is despite the fact that climate change is among the most important issues to young people today. Why is this? One possibility is that cap-and-trade policies are not flashy enough to draw attention during a time where success in mainstream media is indicated by the amount of attention you draw. Another possible reason for this lack of attention is that the huge problem that climate change presents can feel overwhelming, and a cap-and-trade program, though useful, will only address a small part of this issue. Because a cap-and-trade program represents one step in addressing climate change, people might feel like it’s not worth even trying to enact the proposed changes.
One thing I really enjoyed about this paper was the pure focus on fiscal implications. I think sometimes the narrative that gets pushed by environmental-focused policies tends to reflect more of the social cost mitigation and how expenditures now will be beneficial in the future. As rational as it may seem to want to save the world from climate change and global warming, people just aren’t willing to give up money now for something they might not even notice in the future. I appreciated that this paper addressed those concerns from a different angle by bluntly estimating how much different cap-and-trade programs will cost the individual consumer. The authors’ conclusions affirmed what we discussed in class Tuesday, and the reporting on statistics helped make it even more approachable. The decision to report the percentage of income that a proposal may impact is a key one, as it helps put the hard value in perspective for those unfamiliar with a certain tax bracket. Overall, strictly speaking about the impacts on individual’s income negates arguments against a cap-and-trade system that say we can’t understand how this will affect people. I also felt like some of their estimates may have been slightly inflated. Because the implementation is likely to occur over time, it’s reasonable to predict that companies will become more efficient and innovate, further driving down costs.
I think that this paper did a great job of taking the readers through the effects of climate policy on households. I found it very informative how the authors examined the effect by age, income, and region. In addition, I thought that it was both very interesting and beneficial for the authors to evaluate the legislation through two lenses, pessimistic and optimistic. First, like some of my classmates have said, it is very encouraging to read that these policies protect low-income households in all cases. As we have discussed in class, low-income households often are more vulnerable to climate change, but are the least responsible for it in most cases. The paper pointed out that low-income households spend a higher percentage of their income on energy compared to wealthier households. This makes sense, and it would generally be of concern that climate change would then, as a result, be more burdensome for these households. However, the policies talked about in this paper ensure that “the allocation of allowances offsets the increase in energy expenditures for an average household in the lowest income quintile, leading to a net gain for low-income households.” It left me very optimistic to learn that average low-income households are actually better off under climate policy. This made me think back to our discussion in class yesterday about the fact that in British Columbia, low-income households were less likely to support the carbon tax. Given, the policies discussed in this paper and the one that was implemented in BC are different. However, both papers discuss how policies can look out for low-income households. This makes me wonder if we make more efforts to educate low-income households about climate change and the consequences of climate policy for their families, then maybe this group would increase their support. Similarly, I found it interesting to learn that older households, who are also a more vulnerable group to climate change, incur less costs than other age groups from both the Waxman-Markey and cap-and-dividend policy. This is due to the automatic inflation indexing of Social Security, meaning that Social Security payments increase to this group when the pricing of carbon leads to inflation. Overall, I think that this paper did a great job of taking a deep dive into how burdens of climate policy are distributed amongst different age groups, income quintiles, and regions.
For me, the most interesting part of this paper was the conclusion and discussion on who would ultimately be most affected by these policies. In studying Environmental Studies, the inflated effects burdening the poor are often discussed. I am not familiar with much policy regulating this type of thing, but with taxes and other regulations I have always been concerned with regressive effects. I was pleased to read about both the carbon tax system in BC and now these bills which take this into account, also supporting the elderly. In fact, I was surprised to read that in some predictions households may actually be better off after this policy than before, particularly elderly people with low incomes. I was interested by the conclusion that high income will not generally be affected due to their more frequent ownership of firms, which will benefit from the allowances distributed. The fact that the middle class will have to bare most of the effects surprised me, as I would've thought it would be manipulated in a way to prevent that. I understand that the rebate programs often cut them out early in the timeline, but I wonder if there is any solution to this, or if it just makes more sense to allow this phenomenon to happen. It seemed at the end of the paper that they had concluded that these effects do not "pose an insurmountable challenge" to their design of policy, but in the case of the pessimistic outcome, how much support will they be able to maintain from the middle class? I could certainly imagine pushback from this. Overall, however, I thought this was an exciting conclusion and I appreciate the current concern with creating policy that protects the most vulnerable households.
I think its especially important that all three cap-and-trade policies examined ensure that low-income households are protected through means such as the Low-Income Energy Rebate Program and per-capita rebate. As mentioned many times in class, policymakers and those opposed to raising the price of emissions often argue that it’ll disproportionately impact lower-income households who cannot afford this price raise with their already tight budget. I’m unsure if the last reading mentioned this explicitly, but I wonder if the main reason that low-income households were more likely to support this type of policy than higher-income households was because of the slight financial gain the most extremely poor would experience. However, I find it interesting that middle-income households bear the highest burden and find that this might inhibit these types of policy from being supported or passed because I feel like policymakers tend to try and appease the middle-class the most in their campaigns. Additionally, because it is necessary to give firms and households sufficient time to make changes in implementing more efficient technologies, I also found it beneficial that the cap gradually becomes more stringent over time. I think this certainty of knowing that the cap will become more stringent will help encourage people to make good decisions in a world with so much uncertainty of the future in terms of climate change and its impacts.
I find the discussion in these paper about the potential conversion to WWS energy very interesting. From what I have experienced, it seems as if the majority of our current population either thinks that WWS is not a viable option for our future because they either believe that such a form of energy collection is economically unpractical with regard to transformation to such facilities , or that it simply would be too expensive once the conversion has happened. However, I these articles Delucchi and Jacobson point to the contrary. They state that conversion to WWS is actually more of a political and social issue rather than a technological or economic issue. They also discuss how if we transitioned to WWS, the cost of energy would be roughly the same. This points to the idea that if such a transition were to actually be put into place, it would benefit the environment greatly while simultaneously posing far less troubles than many think.
I thought the literature this week on the implementation of carbon taxes was very informative. The problem with implementing such a policy really comes down to short term incentives and politics. However, it is difficult for a politician to get the funding and votes by campaigning for a tax. It is a political death sentence. I remember facing this diffiulty when trying to propose a cap-and-trade system in a Model UN conference. The idea of taking that tax and giving it directly back to the people is an excellent way to get around this! Sure, a politician isn't going to get fossil fuel funding. On the other hand, they will be getting more votes and money by suggesting a net financial benefit to consumers and businesses in other sectors of the economy.
I was happy to see that the article tried out several models based on varying forms of legislation. Too often in economic studies can the parameters be set to create a favorable conclusion through the data. The conlcusions drawn from both optimistic and pessimistic scenarios proves the strength of this study.
Something that I found interesting with this debate was not just the impact on individuals, but the entire economy in general. The studies are expecting a negative impact on the economy based on historical notions. However, if one thinks about a lack of a carbon tax as a subsidy on the carbon-emmiting industries over the true cost of their emissions, then it becomes clear that a carbon tax would actually make the economy more efficient. A further effect of putting this money into the hands of the government is that it gives them more money to work with and a better hand to guide the economy in a politically favorable direction.
Compared to some of the bleak reading we saw last week, these papers give me a lot of hope that change is possible.
In reading the paper assigned for today, I was particularly struck by the length to which the largest burden falls upon the middle-income households. Of course, this makes sense, as they receive neither low-income rebates nor value through ownership of capital stock. Before reading this paper, I most likely would have assumed that the lower-income households bear the brunt of the costs of climate policy, so it was definitely a relief learning that lower-income households benefit – either directly or indirectly – from the different programs and policies that the paper mentioned, such as the Lower Income Energy Rebate Program. Thus, while it is still unfortunate that the middle class endures the burden of higher costs of climate policy, I’m glad that lower-income households are somewhat protected and that, according to the paper, “the most vulnerable groups of the population are not harmed.” Further, I liked how the study integrated the element of optimistic and pessimistic scenarios. In doing so, this would make the results more realistic, as some element of uncertainty would be understood and determined. Despite this aspect, however, the differences between such optimistic and pessimistic scenarios are quite large; in the optimistic scenario, the average household pays $138, but in the pessimistic scenario, the cost is $436 – a difference of just under $300. As Izzy points out, this incredibly wide range merely confirms the convoluted challenges that uncertainty brings.
This article brought up a few ideas that I had never considered when looking at some of the ways benefits of Climate policy would be distributed. Specifically when looking into the effects of houses and their income/age. I was not surprised to hear that those in the upper crust were not strongly affected if any at all. However, it never crossed my mind that one reason for this is because those individuals might be the ones that are stakeholders in the actual policy that would affect them. With this said, I was surprised to see that those at the bottom of the income bracket especially those over the age of 65 were those that benefited the most. Such benefits came from those individuals receiving such a high rebate value and other government support. However, these benefits went away at a rapid pace as income increased. Therefore making those in the middle class have more negative effects than the lower/upper class. It was also interesting how regardless of income over the age of 75 social security posed benefits.
Lastly, I thought it was very interesting how under the Waxman Markey policy there was a price floor to regulate how cheap firms could sell their permits on Carbon. While on the other hand, the Kerry Boxer had both a floor and a ceiling to regulate carbon. I understand there is a need for a price floor but don't see any reason for a ceiling in this specific scenario.
I found this paper to be extremely informative on the legislative implications of the four major climate bills. Additionally, by looking at how the effects of climate policy would affect households in a pessimistic sense versus an optimistic sense was useful to think about. Seeing the range of costs almost reminded me of a confidence interval that is used in econometrics. The range of the Waxman-Markey bill was relatively small, at between 0.23% of household income to 0.73% of household income. My first thought was that lower income households would be disproportionally affected by these potential costs, but was surprised to learn that low-income households are protected by these effects because increased expenditures from higher energy prices could be
more than offset by the distribution of allowance value and indexing of government programs. Also it was interesting to see that households with the age range 50-64 bear a much larger portion of the burden. It was nice to see that groups that could potentially struggle more with costs such as the age group above 50-64 and lower-income households don't suffer as much because of social security benefits and the Low Income Energy Rebate Program.
This article answered one of the questions asked most frequently when it comes to provisions to limit emissions: what is it going to cost? After reading through the estimates provided, $138 per household in the optimistic version of Waxman-Markey, $436 in the pessimistic version of Waxman-Markey, and $235 in the cap-and-dividend policy, I was surprised that the number was so low. Now, of course this cost can be a signifigant burden for low income households, but the authors were quick to point out that the redistributive measures placed in the bills would make it such that there was no burden on these low income households. Instead, the burden would fall mostly on middle class households. The question remains: what are you willing to pay for clean air and lower emissions? Let me draw a comparison here. An Amazon Prime membership is $139, almost exactly the same household price as the optimistic scenario of Waxman-Markey. It is estimated that over 60% of households pay for an Amazon Prime membership. Surely then, middle class households should be willing to pay a similar amount for concrete action that will limit immense future costs of climate change. Free two day delivery is appealing but I think I will take the existence of our coastlines instead.
After doing some aditional research into the Waxman-Markey bill, I was sad to see that, despite passing the house, it was never brought to the senate. Unfortunately, lobbying from oil and gas companies that will bear the largest costs have stopped legislation such as Waxman-Markey time and time again.
I found the reading to be very fascinating, especially how the different proposals would affect different households. The part that stood out to me the most was how upper income households can actually economically benefit a significant amount from these proposals. My previous thinking was that wealthier people tend to live more exuberant lifestyles, thus they consume more carbon. This would mean a higher economic cost for their activities. I had not accounted for the fact that wealthy households spend a proportionally much smaller amount of their income on carbon products. This does however make sense. I had also not accounted for the rise in value of greener solutions and that the collective ownership of these clean substitutes is predominantly wealthy individuals. The striking part about the paper was how the middle class seemed to suffer with all of the proposals. Being too wealthy to receive any offsetting tax benefit, these households would incur a large sum of the tax. These households would still be receiving the positive environmental effects of a carbon pricing system yet such policies would be economically harmful. The politics of the issue is also very fascinating. As we know, no carbon pricing method has been implemented on a federal level. I wonder if there would be more success at doing this if such policies were framed as being a tax rebate for poor and middle class americans. I think that politicians on both sides of the aisle would jump at the opportunity to sponsor and support such a rebate. This makes me wonder if the messaging surrounding climate action is too “climate” focused and not painted in an economically positive light.
I believe the paper was very interesting to read. I highly appreciated how it gave us both the optimistic side and the opposite one. I have never thought about how climate change or policies related to it directly could affect households. The Waxman-Markey policy might be very expensive, but from my own experiences in the US I could say that it can be affordable if it sticks to around $139 cost. I was wondering what would this policy or legislation look like in other countries, and if it is even possible to be implemented there. Now, the question would be: What is next, and is there a way to make it cheaper so low-income households could afford it?
I believe politics will play a big role and the future of the policy.
This paper outlines a few of the legislative attempts to limit carbon emissions and gives estimations of the costs of such legislation on households. This plan proposed setting a cap on emissions that would become more stringent over time. In outlining the costs to households, it is revealed that middle income households bear the highest cost to the emissions cap. In an optimistic case, this cost is as low as $138, but in a pessimistic case, this cost could be up to $436. Lower and higher income households bear less of this burden, so the questions of the cost should focus on middle class households. How much of the burden are middle class households willing to take on to reduce carbon emissions? Is it justified to throw the burden on the middle class? The answers to these questions may help partly explain why none of these plans have never passed through the Senate.
The biggest thing about this paper that I was surprised about was the idea that it would be designed so that middle income families are handed the largest burden of payment with the Markey plan. I feel like the answer to this issue could be very easily resolved by having those who make more pay slightly more proportionally. On top of this I knew that Markey had a climate change policy being from MA but had never looked this in depth to the policy and its affects. Another thing that I was shocking to me would be the fact that region with the Markey plan didn't matter enough or fluctuate enough between the optimistic and pessimistic outcomes. Id think that something like that would definitely matter. I keep saying "one more thing" I'm surprised about but the last thing would be the feeling to state the obvious. The costs to stop climate change are current and the effect from lowering emissions is accrued. To think that people use that as a reason not to address it is dumb, it should be a reason to address it since we have already waited this long.
As a few people in class have mentioned in other comments, I too found it refreshing to see that low income households are protected in all scenarios and actually experience a net gain. Older households also fare better and higher income households face a relatively small burden since they consume less carbon as a percentage of income. What is interesting to me was how middle income households have the highest burden. From what I have been hearing for the past few years was that the middle class is shrinking and it has been more difficult for this described group to maintain its standard of living. I also assumed that most new policies coming out, especially relating to climate change, would not only focus on helping the more vulnerable people, but also have wealthier households chipping in more. I'm wondering if it is fair for the cots of climate policy to be placed more heavily on these households when we usually talk about how the wealthy should shoulder more of the costs. It definitely doesn't seem like it.
I think it is interesting that this paper talks about the effects of certain policies that would help halt climate change. We have talked all the time in class about what can be done to fix climate change, but I don't think we have talked a ton about some of the tradeoffs that come with these policies. Part of the reason I feel uneducated about it is because there is so much political messaging simply lying for one side or the other's benefit. It does not really surprised me that the middle class would feel a lot of the effects of a cap and trade type policy, but it was interesting to me that the fixed income older individuals would be largely unaffected. For me, I know at the moment that the people bearing the costs of climate change are overwhelmingly the people that are not feeling the benefits, so I personally think some of these effects are going to have to be necessary for long run benefits. The issue is helping support these middle class people in the meantime.
The assigned paper was very enlightening regarding how feasible the implementation of a "pricing of carbon" mechanism is in the United States. I'll admit that I had failed to consider the internal changes that firms would make to accommodate a new "input cost" resulting from a national cap-and-trade program and the impact it would have on households: the topic of the article. However, once I began reading, I could not help but think of the three separate labor markets developed in ECON 180 last semester with you, Dr. Casey, and their relation to the different levels of costs per three income classes: moral being, the middle class is affected the most. The biggest takeaway I had from the paper was that, or so I appeared, the Waxman-Markey bill had so much promise! I was not aware that a national cap-and-trade program had been drafted, let alone passed by the House. I want to take a moment and compare this economic situation with that of advancing artificial intelligence and machine learning. The similarities are straightforward: both the low class and upper class are unaffected/less affected, while the middle class suffers. With the middle class and future of labor, it has been discovered that many of the jobs in this category are "routine," requiring formal and informal education. If one's job is routine, then it follows a pattern, if it follows a pattern, it can be written into code and performed by a machine. The result yields a loss of jobs in the middle class, delivering a financial and emotional burden. With the cap-and-trade bill, the results are not as extreme.
Essentially, the middle class faces the largest burden as a percentage of income (around 0.42%) compared to low (0.29%) and high (0.10%) using the Waxman-Markey optimistic case. The rationale was surprising to read...at least for high income. Households older than 75 would be better off due to the social safety net of social security (ironic?) because the cap-and-trade program would most likely increase the pricing of carbon in the U.S., which would lead to a normative rise in the price of goods and services, inflation. However social security payments do those in this age-bracket increase to adjust for such inflation. On the other side of the income equation, the Waxman-Markey bill included a provision for an energy rebate entitlement program, yielding a net gain for low-income households. Alternatively, the cap-and-dividend program proposed higher return for individuals with low income, which I found more promising given that this group would be "most affected" by additional costs of livelihood. I think Josh makes a key point by pointing out how the annual estimate cost really is in the context of other common expenditures. I find it amazing that Americans will easily pay $7 for a burrito at Chipotle, yet contemplate on spending $1.99 for an iPhone app that really appeals to them. It's all relative and a result of context.
To sum up, I want to highlight a "caution" that the paper made in relation to national legislation. Congress tends to default to the reasoning for lack of support because the benefits of a reduction in greenhouse gases will occur "x" years from now, while the social and corporate costs of the solution to mitigate climate change begin immediately. Yes, elected officials...the short run will "hurt," but temporarily as the massive, invisible (but not for long) social costs of climate change are massive (talking billions) compared to a few hundred dollars per household annually, which could go unnoticed distributed over 365 days. Short-term hurt, for long-term gain, we will have to incur for a better future.
I found it to be relatively comforting that this analysis found that the average household burden for each the pessimistic and optimistic Waxman-Markey plan and the cap-and-dividend policy fell between $138 and $436 dollars for the year in 2016. This represents less than one percent of household income (between .23 percent and .73 percent depending on the chosen strategy). Although these plans would still present significant financial burden, especially for specific groups disproportionately affected by the various strategies, they do not appear to be attempting to spend an impossible-to-receive amount of money. Of course, some household would likely fair better than others; in all three cases the households in the bottom income quintile and the households with a household head older than age 75 are harmed the least, those in the bottom income quintile could even have some monetary gains. These results are slightly concerning on a policy level since they could alienate middle class voters who may feel unfairly targeted by the climate policies. The examination of the three policies also found that households in the Plains region consistently faced higher average burdens for all age groups than households in other regions which means that middle class families from the Plains are most likely to be apprehensive about all three of the policies. Even though the burdens upon each household are likely to be less than one percent of household income, I believe that politicians attempting to pass any of these would need to be careful in the way they framed the policies, especially for the groups who are likely to feel targeted.
Before reading this article, I had not really considered the different options available for distribution of allowance value under cap-and-trade--either through allocating free allowances or distributing the revenue from allowance auction. A major issue we've brought up in the past with cap-and-trade policy as an economic incentive is that there is no price certainty, so the idea of auctioning with a price "collar" is encouraging, but the little Econ 100 teacher in my head says, "what about market failure due to price controls???" In this case, however, we know the market has already failed to account for the true cost of emissions.
A major problem identified by the authors was the disproportionate burden placed on middle-income families due to their exclusion from both capital flows and social safety nets (or low-income specific allowances in the Waxman-Markey case) that might offset the burden of a given energy policy. They suggest that when lifetime income is considered rather than annual income, the regressiveness of even carbon taxes becomes less apparent. Optimally, we can implement policy that helps everyone in the long run--something that is inherently true of policy aimed at drastically reducing emissions--but political feasibility really gets in the way here, given the fleeting nature of political positions relative to climate considerations. Because the cap-and-dividend approach is generally more progressive, it seems like it could be a short-term options easy to get behind, but without specified considerations fro particular industries, I imagine corporate lobbyists may find offense. I hope we can discuss what exactly per-capita dividends entail when they are applied to more than just households.
I would love to be able to see effects of this bill since 2011, but it was not taken up by the senate. Do we have any sort of emissions legislation in place outside of EPA standards??
This article relayed the findings of an investigation into how the costs of climate policy affect households. I found it interesting that they looked at two scenarios, optimistic and pessimistic outcomes, under the Waxman-Markey bill. They noted that the allocation scheme has multiple possible outcomes, which speaks to the fact that uncertain provisions of the bill could or could not lead to more efficient results. The estimates for average household burden range from $138 in the optimistic version of Waxman-Markey to $436 in the pessimistic scenario. While they address that “we are describing two versions that we feel bound the likely range of outcomes and illustrate the range of possibilities,” it seems to me like the estimates are such a wide range that it is difficult to make a strong conclusion about the true burden to households. This exemplifies the challenge that economists consistently face when attempting to draw conclusions while dealing with uncertainty.
Posted by: Izzy Koziol | 03/21/2022 at 07:44 PM
It was particularly interesting reading the lack of negative effects of climate change policy on older individuals. I had previously considered, and we've mentioned in class, the benefit of lower-income households. It was emphasized throughout the paper and refreshing to hear, especially with poorer individuals often receiving the bad end of the stick with policies. However, older individuals don't come up often, so it was interesting reading the results. The reasoning the article gave for this was the automatic indexing of the Social Security program to inflation. If this provided a benefit, how would wages play a role? Would accurately adjusting real wages as done with SS, reduce the burden of the middle-class? By how much would it reduce it, if at all? Would it lead to more negative effects in the long or short run? I'd also be interested in seeing if this would change anything among age groups, as the younger ones were more negatively affected.
Posted by: Jessica Pachuca | 03/22/2022 at 03:33 PM
While reading this paper, I found it very interesting and positive that the proposed bill would allocate the allowances to offset the extra expenditures from low-income households. In fact, it states that there would actually be a net gain for those in these situations. I believe that this is very important as we've discussed how lower-income households, communities, and countries have the hardest time adapting to climate positive technologies and policies. I also found it very interesting that those over the age of 75 are the ones who would be most benefitted from the cap-and-dividend scheme, as normally those who are in the older age groups are more opposed to climate change reform policies. The reason that we have not yet widely implemented any such policies is demonstrated rather nicely in the paper, as they state that the benefits of reducing greenhouse gases will not be reaped until the future, but the cost of it we have to pay now. This "cost but no benefit" situation is not easy to pass in Congress or through the public. Creating policies like the cap-and-dividend scheme can help to fight this by incentivizing people to reduce emissions and at the same time reducing the cost of doing so.
Posted by: Camryn Bostick | 03/22/2022 at 08:44 PM
I thought that this paper was intriguing as it is a deep dive on the effects of climate policy on different age groups, socioeconomic status, and regional location. It was interesting to read that the allocation of emission allowances has a bigger effect on distributional outcomes than initial cost. Households with those 65 and older incur relatively less cost than other age groups due to automatic inflation indexing of social security. I learned that low income households spend a larger fraction of earnings on energy than wealthier households, which I could have guessed. I also saw that lower income households will be ok in this regard as distribution of allowance value and indexing of government programs offset this spending. After speaking in class today and reading about it in this article it was interesting to me that the cap-and-dividend approach benefits low-income households relatively more than high-income households, and that middle income households get the short end of the stick as they do not receive low income rebates nor value through ownership of capital stock. It made sense that it doesn’t necessarily affect high income households that much because it is a small percentage of their total income or assets. It also surprised me that older households (75+) are generally better off under climate policy than other households under both Waxman-Markey or the cap-and-dividend process. I think it is really interesting that this paper addresses the consequences of climate policy by not only socio economic status and income, but also by age group and regional location. I also appreciated how they looked at these outcomes on both ends of the spectrum, on the optimistic side and the pessimistic side. It allows the public to know the “worst” and “best” possibilities regarding the burden of climate policy; however, the range of burden per socio-demographic group is still relatively wide which leaves people still uncertain of the specific costs that they might have to bear under certain climate policies.
Posted by: Blake Cote | 03/22/2022 at 09:16 PM
I thought it was interesting that the largest burden as a percentage of income falls on the middle class, but it makes sense. Lower-income households benefit from programs like the Low Income Energy Rebate Program in the Waxman-Markey bill and the per-capita rebate in the cap dividend option. Middle-class households do not qualify for these and, in turn, absorb more of the cost. The upper class has a higher concentration of "shareholders" or owners of firms that receive accrued benefits from the relief of allocations. The middle class gets the short end of the stick. As Jessica said, it was refreshing to hear poor households are protected under all scenarios presented. It is nice to read about some policies that are directed directly or indirectly at benefiting lower-income households. This, coupled with the older demographic being harmed less by climate policy, is very fortunate to hear. The regional aspect of the study did not show conclusive evidence for me, but it would be interesting to see this on a global level. This would be hard because of different national policies but seeing climate policies compared from different regions of the world opposed to regions of America would be interesting.
Posted by: TevinPanchal | 03/22/2022 at 10:01 PM
One of the things that stuck out to me in reading this article was how many different but similar plans there are to create cap-and-trade restrictions on greenhouse gas restrictions, some of which had bipartisan support. I try to be a pretty politically engaged person and yet, despite these many proposed policies, I don’t often see updates on these policies in the news. Similarly, on social media, I often see my friends sharing updates on issues they care about, I have never once seen people posting about cap-and-trade policies. It seems like there is no strong, sustained political will power behind this bill, the kind that could help these bills become laws. This is despite the fact that climate change is among the most important issues to young people today. Why is this? One possibility is that cap-and-trade policies are not flashy enough to draw attention during a time where success in mainstream media is indicated by the amount of attention you draw. Another possible reason for this lack of attention is that the huge problem that climate change presents can feel overwhelming, and a cap-and-trade program, though useful, will only address a small part of this issue. Because a cap-and-trade program represents one step in addressing climate change, people might feel like it’s not worth even trying to enact the proposed changes.
Posted by: Kate Hannon | 03/23/2022 at 01:21 AM
One thing I really enjoyed about this paper was the pure focus on fiscal implications. I think sometimes the narrative that gets pushed by environmental-focused policies tends to reflect more of the social cost mitigation and how expenditures now will be beneficial in the future. As rational as it may seem to want to save the world from climate change and global warming, people just aren’t willing to give up money now for something they might not even notice in the future. I appreciated that this paper addressed those concerns from a different angle by bluntly estimating how much different cap-and-trade programs will cost the individual consumer. The authors’ conclusions affirmed what we discussed in class Tuesday, and the reporting on statistics helped make it even more approachable. The decision to report the percentage of income that a proposal may impact is a key one, as it helps put the hard value in perspective for those unfamiliar with a certain tax bracket. Overall, strictly speaking about the impacts on individual’s income negates arguments against a cap-and-trade system that say we can’t understand how this will affect people. I also felt like some of their estimates may have been slightly inflated. Because the implementation is likely to occur over time, it’s reasonable to predict that companies will become more efficient and innovate, further driving down costs.
Posted by: Valerie Sokolow | 03/23/2022 at 08:04 AM
I think that this paper did a great job of taking the readers through the effects of climate policy on households. I found it very informative how the authors examined the effect by age, income, and region. In addition, I thought that it was both very interesting and beneficial for the authors to evaluate the legislation through two lenses, pessimistic and optimistic. First, like some of my classmates have said, it is very encouraging to read that these policies protect low-income households in all cases. As we have discussed in class, low-income households often are more vulnerable to climate change, but are the least responsible for it in most cases. The paper pointed out that low-income households spend a higher percentage of their income on energy compared to wealthier households. This makes sense, and it would generally be of concern that climate change would then, as a result, be more burdensome for these households. However, the policies talked about in this paper ensure that “the allocation of allowances offsets the increase in energy expenditures for an average household in the lowest income quintile, leading to a net gain for low-income households.” It left me very optimistic to learn that average low-income households are actually better off under climate policy. This made me think back to our discussion in class yesterday about the fact that in British Columbia, low-income households were less likely to support the carbon tax. Given, the policies discussed in this paper and the one that was implemented in BC are different. However, both papers discuss how policies can look out for low-income households. This makes me wonder if we make more efforts to educate low-income households about climate change and the consequences of climate policy for their families, then maybe this group would increase their support. Similarly, I found it interesting to learn that older households, who are also a more vulnerable group to climate change, incur less costs than other age groups from both the Waxman-Markey and cap-and-dividend policy. This is due to the automatic inflation indexing of Social Security, meaning that Social Security payments increase to this group when the pricing of carbon leads to inflation. Overall, I think that this paper did a great job of taking a deep dive into how burdens of climate policy are distributed amongst different age groups, income quintiles, and regions.
Posted by: Claire Jenkins | 03/23/2022 at 10:38 AM
For me, the most interesting part of this paper was the conclusion and discussion on who would ultimately be most affected by these policies. In studying Environmental Studies, the inflated effects burdening the poor are often discussed. I am not familiar with much policy regulating this type of thing, but with taxes and other regulations I have always been concerned with regressive effects. I was pleased to read about both the carbon tax system in BC and now these bills which take this into account, also supporting the elderly. In fact, I was surprised to read that in some predictions households may actually be better off after this policy than before, particularly elderly people with low incomes. I was interested by the conclusion that high income will not generally be affected due to their more frequent ownership of firms, which will benefit from the allowances distributed. The fact that the middle class will have to bare most of the effects surprised me, as I would've thought it would be manipulated in a way to prevent that. I understand that the rebate programs often cut them out early in the timeline, but I wonder if there is any solution to this, or if it just makes more sense to allow this phenomenon to happen. It seemed at the end of the paper that they had concluded that these effects do not "pose an insurmountable challenge" to their design of policy, but in the case of the pessimistic outcome, how much support will they be able to maintain from the middle class? I could certainly imagine pushback from this. Overall, however, I thought this was an exciting conclusion and I appreciate the current concern with creating policy that protects the most vulnerable households.
Posted by: Clara Ortwein | 03/23/2022 at 10:58 AM
I think its especially important that all three cap-and-trade policies examined ensure that low-income households are protected through means such as the Low-Income Energy Rebate Program and per-capita rebate. As mentioned many times in class, policymakers and those opposed to raising the price of emissions often argue that it’ll disproportionately impact lower-income households who cannot afford this price raise with their already tight budget. I’m unsure if the last reading mentioned this explicitly, but I wonder if the main reason that low-income households were more likely to support this type of policy than higher-income households was because of the slight financial gain the most extremely poor would experience. However, I find it interesting that middle-income households bear the highest burden and find that this might inhibit these types of policy from being supported or passed because I feel like policymakers tend to try and appease the middle-class the most in their campaigns. Additionally, because it is necessary to give firms and households sufficient time to make changes in implementing more efficient technologies, I also found it beneficial that the cap gradually becomes more stringent over time. I think this certainty of knowing that the cap will become more stringent will help encourage people to make good decisions in a world with so much uncertainty of the future in terms of climate change and its impacts.
Posted by: alliengfer | 03/23/2022 at 12:43 PM
I find the discussion in these paper about the potential conversion to WWS energy very interesting. From what I have experienced, it seems as if the majority of our current population either thinks that WWS is not a viable option for our future because they either believe that such a form of energy collection is economically unpractical with regard to transformation to such facilities , or that it simply would be too expensive once the conversion has happened. However, I these articles Delucchi and Jacobson point to the contrary. They state that conversion to WWS is actually more of a political and social issue rather than a technological or economic issue. They also discuss how if we transitioned to WWS, the cost of energy would be roughly the same. This points to the idea that if such a transition were to actually be put into place, it would benefit the environment greatly while simultaneously posing far less troubles than many think.
Posted by: A Facebook User | 03/23/2022 at 02:51 PM
I thought the literature this week on the implementation of carbon taxes was very informative. The problem with implementing such a policy really comes down to short term incentives and politics. However, it is difficult for a politician to get the funding and votes by campaigning for a tax. It is a political death sentence. I remember facing this diffiulty when trying to propose a cap-and-trade system in a Model UN conference. The idea of taking that tax and giving it directly back to the people is an excellent way to get around this! Sure, a politician isn't going to get fossil fuel funding. On the other hand, they will be getting more votes and money by suggesting a net financial benefit to consumers and businesses in other sectors of the economy.
I was happy to see that the article tried out several models based on varying forms of legislation. Too often in economic studies can the parameters be set to create a favorable conclusion through the data. The conlcusions drawn from both optimistic and pessimistic scenarios proves the strength of this study.
Something that I found interesting with this debate was not just the impact on individuals, but the entire economy in general. The studies are expecting a negative impact on the economy based on historical notions. However, if one thinks about a lack of a carbon tax as a subsidy on the carbon-emmiting industries over the true cost of their emissions, then it becomes clear that a carbon tax would actually make the economy more efficient. A further effect of putting this money into the hands of the government is that it gives them more money to work with and a better hand to guide the economy in a politically favorable direction.
Compared to some of the bleak reading we saw last week, these papers give me a lot of hope that change is possible.
Posted by: William Dantini | 03/23/2022 at 03:30 PM
In reading the paper assigned for today, I was particularly struck by the length to which the largest burden falls upon the middle-income households. Of course, this makes sense, as they receive neither low-income rebates nor value through ownership of capital stock. Before reading this paper, I most likely would have assumed that the lower-income households bear the brunt of the costs of climate policy, so it was definitely a relief learning that lower-income households benefit – either directly or indirectly – from the different programs and policies that the paper mentioned, such as the Lower Income Energy Rebate Program. Thus, while it is still unfortunate that the middle class endures the burden of higher costs of climate policy, I’m glad that lower-income households are somewhat protected and that, according to the paper, “the most vulnerable groups of the population are not harmed.” Further, I liked how the study integrated the element of optimistic and pessimistic scenarios. In doing so, this would make the results more realistic, as some element of uncertainty would be understood and determined. Despite this aspect, however, the differences between such optimistic and pessimistic scenarios are quite large; in the optimistic scenario, the average household pays $138, but in the pessimistic scenario, the cost is $436 – a difference of just under $300. As Izzy points out, this incredibly wide range merely confirms the convoluted challenges that uncertainty brings.
Posted by: Merritt McCaleb | 03/23/2022 at 03:38 PM
This article brought up a few ideas that I had never considered when looking at some of the ways benefits of Climate policy would be distributed. Specifically when looking into the effects of houses and their income/age. I was not surprised to hear that those in the upper crust were not strongly affected if any at all. However, it never crossed my mind that one reason for this is because those individuals might be the ones that are stakeholders in the actual policy that would affect them. With this said, I was surprised to see that those at the bottom of the income bracket especially those over the age of 65 were those that benefited the most. Such benefits came from those individuals receiving such a high rebate value and other government support. However, these benefits went away at a rapid pace as income increased. Therefore making those in the middle class have more negative effects than the lower/upper class. It was also interesting how regardless of income over the age of 75 social security posed benefits.
Lastly, I thought it was very interesting how under the Waxman Markey policy there was a price floor to regulate how cheap firms could sell their permits on Carbon. While on the other hand, the Kerry Boxer had both a floor and a ceiling to regulate carbon. I understand there is a need for a price floor but don't see any reason for a ceiling in this specific scenario.
Posted by: Jackson Hotchkiss | 03/23/2022 at 03:53 PM
I found this paper to be extremely informative on the legislative implications of the four major climate bills. Additionally, by looking at how the effects of climate policy would affect households in a pessimistic sense versus an optimistic sense was useful to think about. Seeing the range of costs almost reminded me of a confidence interval that is used in econometrics. The range of the Waxman-Markey bill was relatively small, at between 0.23% of household income to 0.73% of household income. My first thought was that lower income households would be disproportionally affected by these potential costs, but was surprised to learn that low-income households are protected by these effects because increased expenditures from higher energy prices could be
more than offset by the distribution of allowance value and indexing of government programs. Also it was interesting to see that households with the age range 50-64 bear a much larger portion of the burden. It was nice to see that groups that could potentially struggle more with costs such as the age group above 50-64 and lower-income households don't suffer as much because of social security benefits and the Low Income Energy Rebate Program.
Posted by: Jack Lewis | 03/23/2022 at 04:24 PM
This article answered one of the questions asked most frequently when it comes to provisions to limit emissions: what is it going to cost? After reading through the estimates provided, $138 per household in the optimistic version of Waxman-Markey, $436 in the pessimistic version of Waxman-Markey, and $235 in the cap-and-dividend policy, I was surprised that the number was so low. Now, of course this cost can be a signifigant burden for low income households, but the authors were quick to point out that the redistributive measures placed in the bills would make it such that there was no burden on these low income households. Instead, the burden would fall mostly on middle class households. The question remains: what are you willing to pay for clean air and lower emissions? Let me draw a comparison here. An Amazon Prime membership is $139, almost exactly the same household price as the optimistic scenario of Waxman-Markey. It is estimated that over 60% of households pay for an Amazon Prime membership. Surely then, middle class households should be willing to pay a similar amount for concrete action that will limit immense future costs of climate change. Free two day delivery is appealing but I think I will take the existence of our coastlines instead.
After doing some aditional research into the Waxman-Markey bill, I was sad to see that, despite passing the house, it was never brought to the senate. Unfortunately, lobbying from oil and gas companies that will bear the largest costs have stopped legislation such as Waxman-Markey time and time again.
Posted by: Josh Fingerhut | 03/23/2022 at 04:33 PM
I found the reading to be very fascinating, especially how the different proposals would affect different households. The part that stood out to me the most was how upper income households can actually economically benefit a significant amount from these proposals. My previous thinking was that wealthier people tend to live more exuberant lifestyles, thus they consume more carbon. This would mean a higher economic cost for their activities. I had not accounted for the fact that wealthy households spend a proportionally much smaller amount of their income on carbon products. This does however make sense. I had also not accounted for the rise in value of greener solutions and that the collective ownership of these clean substitutes is predominantly wealthy individuals. The striking part about the paper was how the middle class seemed to suffer with all of the proposals. Being too wealthy to receive any offsetting tax benefit, these households would incur a large sum of the tax. These households would still be receiving the positive environmental effects of a carbon pricing system yet such policies would be economically harmful. The politics of the issue is also very fascinating. As we know, no carbon pricing method has been implemented on a federal level. I wonder if there would be more success at doing this if such policies were framed as being a tax rebate for poor and middle class americans. I think that politicians on both sides of the aisle would jump at the opportunity to sponsor and support such a rebate. This makes me wonder if the messaging surrounding climate action is too “climate” focused and not painted in an economically positive light.
Posted by: Cal Christianson | 03/23/2022 at 05:28 PM
I believe the paper was very interesting to read. I highly appreciated how it gave us both the optimistic side and the opposite one. I have never thought about how climate change or policies related to it directly could affect households. The Waxman-Markey policy might be very expensive, but from my own experiences in the US I could say that it can be affordable if it sticks to around $139 cost. I was wondering what would this policy or legislation look like in other countries, and if it is even possible to be implemented there. Now, the question would be: What is next, and is there a way to make it cheaper so low-income households could afford it?
I believe politics will play a big role and the future of the policy.
Posted by: Mohammed R Mourtaja | 03/23/2022 at 05:53 PM
This paper outlines a few of the legislative attempts to limit carbon emissions and gives estimations of the costs of such legislation on households. This plan proposed setting a cap on emissions that would become more stringent over time. In outlining the costs to households, it is revealed that middle income households bear the highest cost to the emissions cap. In an optimistic case, this cost is as low as $138, but in a pessimistic case, this cost could be up to $436. Lower and higher income households bear less of this burden, so the questions of the cost should focus on middle class households. How much of the burden are middle class households willing to take on to reduce carbon emissions? Is it justified to throw the burden on the middle class? The answers to these questions may help partly explain why none of these plans have never passed through the Senate.
Posted by: Hayden Roberts | 03/23/2022 at 06:08 PM
The biggest thing about this paper that I was surprised about was the idea that it would be designed so that middle income families are handed the largest burden of payment with the Markey plan. I feel like the answer to this issue could be very easily resolved by having those who make more pay slightly more proportionally. On top of this I knew that Markey had a climate change policy being from MA but had never looked this in depth to the policy and its affects. Another thing that I was shocking to me would be the fact that region with the Markey plan didn't matter enough or fluctuate enough between the optimistic and pessimistic outcomes. Id think that something like that would definitely matter. I keep saying "one more thing" I'm surprised about but the last thing would be the feeling to state the obvious. The costs to stop climate change are current and the effect from lowering emissions is accrued. To think that people use that as a reason not to address it is dumb, it should be a reason to address it since we have already waited this long.
Posted by: Carter Dummett | 03/23/2022 at 06:11 PM
As a few people in class have mentioned in other comments, I too found it refreshing to see that low income households are protected in all scenarios and actually experience a net gain. Older households also fare better and higher income households face a relatively small burden since they consume less carbon as a percentage of income. What is interesting to me was how middle income households have the highest burden. From what I have been hearing for the past few years was that the middle class is shrinking and it has been more difficult for this described group to maintain its standard of living. I also assumed that most new policies coming out, especially relating to climate change, would not only focus on helping the more vulnerable people, but also have wealthier households chipping in more. I'm wondering if it is fair for the cots of climate policy to be placed more heavily on these households when we usually talk about how the wealthy should shoulder more of the costs. It definitely doesn't seem like it.
Posted by: Alice Chen | 03/23/2022 at 06:20 PM
I think it is interesting that this paper talks about the effects of certain policies that would help halt climate change. We have talked all the time in class about what can be done to fix climate change, but I don't think we have talked a ton about some of the tradeoffs that come with these policies. Part of the reason I feel uneducated about it is because there is so much political messaging simply lying for one side or the other's benefit. It does not really surprised me that the middle class would feel a lot of the effects of a cap and trade type policy, but it was interesting to me that the fixed income older individuals would be largely unaffected. For me, I know at the moment that the people bearing the costs of climate change are overwhelmingly the people that are not feeling the benefits, so I personally think some of these effects are going to have to be necessary for long run benefits. The issue is helping support these middle class people in the meantime.
Posted by: Andrew Arnold | 03/23/2022 at 06:26 PM
The assigned paper was very enlightening regarding how feasible the implementation of a "pricing of carbon" mechanism is in the United States. I'll admit that I had failed to consider the internal changes that firms would make to accommodate a new "input cost" resulting from a national cap-and-trade program and the impact it would have on households: the topic of the article. However, once I began reading, I could not help but think of the three separate labor markets developed in ECON 180 last semester with you, Dr. Casey, and their relation to the different levels of costs per three income classes: moral being, the middle class is affected the most. The biggest takeaway I had from the paper was that, or so I appeared, the Waxman-Markey bill had so much promise! I was not aware that a national cap-and-trade program had been drafted, let alone passed by the House. I want to take a moment and compare this economic situation with that of advancing artificial intelligence and machine learning. The similarities are straightforward: both the low class and upper class are unaffected/less affected, while the middle class suffers. With the middle class and future of labor, it has been discovered that many of the jobs in this category are "routine," requiring formal and informal education. If one's job is routine, then it follows a pattern, if it follows a pattern, it can be written into code and performed by a machine. The result yields a loss of jobs in the middle class, delivering a financial and emotional burden. With the cap-and-trade bill, the results are not as extreme.
Essentially, the middle class faces the largest burden as a percentage of income (around 0.42%) compared to low (0.29%) and high (0.10%) using the Waxman-Markey optimistic case. The rationale was surprising to read...at least for high income. Households older than 75 would be better off due to the social safety net of social security (ironic?) because the cap-and-trade program would most likely increase the pricing of carbon in the U.S., which would lead to a normative rise in the price of goods and services, inflation. However social security payments do those in this age-bracket increase to adjust for such inflation. On the other side of the income equation, the Waxman-Markey bill included a provision for an energy rebate entitlement program, yielding a net gain for low-income households. Alternatively, the cap-and-dividend program proposed higher return for individuals with low income, which I found more promising given that this group would be "most affected" by additional costs of livelihood. I think Josh makes a key point by pointing out how the annual estimate cost really is in the context of other common expenditures. I find it amazing that Americans will easily pay $7 for a burrito at Chipotle, yet contemplate on spending $1.99 for an iPhone app that really appeals to them. It's all relative and a result of context.
To sum up, I want to highlight a "caution" that the paper made in relation to national legislation. Congress tends to default to the reasoning for lack of support because the benefits of a reduction in greenhouse gases will occur "x" years from now, while the social and corporate costs of the solution to mitigate climate change begin immediately. Yes, elected officials...the short run will "hurt," but temporarily as the massive, invisible (but not for long) social costs of climate change are massive (talking billions) compared to a few hundred dollars per household annually, which could go unnoticed distributed over 365 days. Short-term hurt, for long-term gain, we will have to incur for a better future.
Posted by: Trip Wright | 03/23/2022 at 06:29 PM
I found it to be relatively comforting that this analysis found that the average household burden for each the pessimistic and optimistic Waxman-Markey plan and the cap-and-dividend policy fell between $138 and $436 dollars for the year in 2016. This represents less than one percent of household income (between .23 percent and .73 percent depending on the chosen strategy). Although these plans would still present significant financial burden, especially for specific groups disproportionately affected by the various strategies, they do not appear to be attempting to spend an impossible-to-receive amount of money. Of course, some household would likely fair better than others; in all three cases the households in the bottom income quintile and the households with a household head older than age 75 are harmed the least, those in the bottom income quintile could even have some monetary gains. These results are slightly concerning on a policy level since they could alienate middle class voters who may feel unfairly targeted by the climate policies. The examination of the three policies also found that households in the Plains region consistently faced higher average burdens for all age groups than households in other regions which means that middle class families from the Plains are most likely to be apprehensive about all three of the policies. Even though the burdens upon each household are likely to be less than one percent of household income, I believe that politicians attempting to pass any of these would need to be careful in the way they framed the policies, especially for the groups who are likely to feel targeted.
Posted by: Grace A Stricklin | 03/23/2022 at 06:54 PM
Before reading this article, I had not really considered the different options available for distribution of allowance value under cap-and-trade--either through allocating free allowances or distributing the revenue from allowance auction. A major issue we've brought up in the past with cap-and-trade policy as an economic incentive is that there is no price certainty, so the idea of auctioning with a price "collar" is encouraging, but the little Econ 100 teacher in my head says, "what about market failure due to price controls???" In this case, however, we know the market has already failed to account for the true cost of emissions.
A major problem identified by the authors was the disproportionate burden placed on middle-income families due to their exclusion from both capital flows and social safety nets (or low-income specific allowances in the Waxman-Markey case) that might offset the burden of a given energy policy. They suggest that when lifetime income is considered rather than annual income, the regressiveness of even carbon taxes becomes less apparent. Optimally, we can implement policy that helps everyone in the long run--something that is inherently true of policy aimed at drastically reducing emissions--but political feasibility really gets in the way here, given the fleeting nature of political positions relative to climate considerations. Because the cap-and-dividend approach is generally more progressive, it seems like it could be a short-term options easy to get behind, but without specified considerations fro particular industries, I imagine corporate lobbyists may find offense. I hope we can discuss what exactly per-capita dividends entail when they are applied to more than just households.
I would love to be able to see effects of this bill since 2011, but it was not taken up by the senate. Do we have any sort of emissions legislation in place outside of EPA standards??
Posted by: Isabel Lourie | 03/23/2022 at 06:56 PM