Energy Innovation and Carbon Dividend Act of 2019

Recently, I joined the Citizen’s Climate Lobby (CCL) which backs the Energy Innovation and Carbon Dividend Act of 2019. This bipartisan piece of legislation introduces a carbon fee that rises each year. The proceeds are distributed to American households on a lump sum basis, similar to the process used for the Alaska oil dividend program.

Below you will find an updated version of a letter that I wrote to Congressman Glenn Grothman, the Congressional representative for the district in which I reside (6th district in Wisconsin. Similar letters were written to both Wisconsin Senators (Baldwin and Johnson) and to the editor of the Appleton Post Crescent.

There exist several other pieces of similar legislation that are described in a blog posting from the Economics Policy Network section of CCL. All four bills reviewed feature carbon fees; however, only two are revenue neutral in that they distribute all of the revenue as equal rebates to American households. Only the Energy Innovation Act seeks to replace existent regulation if emissions targets are met and retains tort liability for emitters. Many features are similar to those proposed by the Climate Leadership Council. The differences should be resolvable which increases the potential for a real sustainable public policy.

January 31, 2019

To Representative Glenn Grothman:

I encourage your support for the bipartisan Energy Innovation – Carbon Dividend Act (H.R. 763.)  As a professional economist, I strongly support using market forces to address spillovers that are not captured by direct interactions between buyers and sellers.  I support (and have signed) the statement in support of a Carbon Dividend program from professional economists that was published in the Wall Street Journal on January 16, 2019.

Carbon emissions are a serious concern that deserve a serious and efficient response.  Typical regulatory methods tend to be heavy handed in that they don’t respond to the individual circumstances faced by businesses and households; so they are costly to implement.  The carbon fees envisioned in the proposed legislation will over time efficiently bend the release of greenhouse gases to a sustainable level.  Furthermore, the funds generated by these fees will be distributed directly to American families in lump sum fashion.  This distribution will more than compensate low income families for the increased prices they will face on consumption of fossil fuels while providing a well-targeted price signal for all to discourage the consumption of fuels that generate greenhouse gasses.

Doing nothing in response to the potentially calamitous conditions created by climate change will generate huge costs to businesses and households.  As Bob Litterman, chair of the risk committee of Kepos Capital, opined in a January 29th piece in the New York Times, utility and transportation companies face increased risks to their infrastructure.  He cites Pacific Gas and Electric’s bankruptcy filing in light of potential liability claims as one of many companies confronted with increased risk.  For utilities the cost of addressing the increased risk to their infrastructure will be passed on to their rate payers.  Furthermore, some might choose to shutdown temporarily the power grid to reduce the risk.  As a result, homeowners and businesses must devote time and resources to determining how to cope with such a lack of power.

I conclude this letter with Litterman’s last sentence “And while sadly these actions are all costs that will grow over time, the unfortunate reality is that the longer we wait to act, the greater the bill will be.”

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