The earth is warming at an alarming rate — the five warmest years in recorded history all occurred during the last decade.
There is little doubt that this warming is caused by human activity. Climate change poses a threat to both our natural environment and our economic prosperity. North Carolina is already bearing the costs of climate change.
For example, rising sea levels caused by climate change are eroding beaches, submerging low lands, exacerbating coastal flooding and increasing the salinity of estuaries and aquifers. Stronger storms also increase the risk of inland flooding. Elevated flood risks pose significant challenges for infrastructure investments across the state.
Unfortunately, climate-related damages will continue to worsen if we continue to emit carbon dioxide and other greenhouse gases at current rates. Addressing climate change will require effective policies guided by sound economic principles.
To that end, more than 40 professors of economics and related fields from Appalachian State University, Davidson College, Duke University, East Carolina University, Gardner-Webb University, High Point University, UNC-Asheville, UNC-Chapel Hill, UNC-Charlotte, UNC-Greensboro, Wake Forest University and Winston-Salem State University have asked North Carolina's congressional delegation to support the following policies:
A national price on carbon dioxide emissions offers the most cost-effective policy lever for reducing carbon emissions. Carbon dioxide is a pollutant created during the production of many goods and services across the economy. These pollution emissions impose indirect damages on other members of society through rising temperatures and changes in precipitation. When polluters do not pay for the damages they inflict, we experience a market failure — the unregulated economic system does not deliver an efficient outcome for our society.
A carbon price corrects the market failure by sending a clear price signal about the damages of carbon pollution to market participants and makes both consumers and producers pay for damages they cause. In particular, a carbon price creates incentives for producers to use cleaner inputs and encourages consumers to use or purchase less pollution-intensive goods. Notably, a carbon price achieves the necessary emissions reductions at the lowest possible cost to American households and businesses.
All revenue collected under the carbon price should be returned as lump-sum payments to Americans each year. Returning an equal share of the carbon price revenue to each American as a dividend is simple to implement and increases the policy's equity and fairness. Importantly, the carbon price and dividend policy would benefit most Tar Heels and households across the U.S., including the most vulnerable. The majority of families would receive a larger dividend payment each year than they pay in increased energy prices and prices of other goods.
Border Tax Adjustment
To ensure that U.S. carbon emissions and production are not diverted abroad, we recommend the carbon price and dividend be paired with a border tax adjustment. The border tax adjustment would tax imported goods, where the tax depends on the carbon emissions associated with producing those goods. In addition, the border adjustment would offer rebates to US producers who export to countries without carbon prices. Therefore, the border adjustment would provide a competitive advantage to U.S. companies that are more energy-efficient and use cleaner production processes. Moreover, the border tax adjustment would encourage other countries to adopt similar climate policies.
Meeting Emissions Reduction Targets
The policy should include emissions reduction targets and mechanisms for enforcement. The carbon price should start low, then increase each year until we achieve these targets. A carbon price that gradually increases over time will give firms and consumers time to adapt to the new policy while also providing a strong incentive to immediately innovate and invest in new low-carbon technologies.
Bill Blancato is a regional coordinator for Citizens’ Climate Lobby who lives in Winston-Salem.
This opinion was signed by the following economists: David M. McEvoy and John C. Whitehead, Appalachian State University; Shyam Gouri Suresh, David W. Martin and Fred H. Smith, Davidson College; Ravi Bansal, Charles M. Becker, Philip J. Cook, Henry Grabowski, Ron Leven, David McAdams, Marjorie B. McElroy, Manoj Mohanan, Thomas J. Nechyba, Jeremy Petranka and Curtis R. Taylor, Duke University; Andrew G. Keeler, Ausmita Ghosh, Qingxin He, Gregory Howard, Jonathon M. Lee, Philip Rothman, Nicholas G. Rupp and Vera A. Tabakova, East Carolina University; Anthony Negbenebor, Gardner-Webb University; Peter Summers, High Point University; Hongkil Kim and Robert Tatum, UNC-Asheville; Rita A. Balaban, Richard E. Bilsborrow, Patrick J. Conway, Lutz A. Hendricks and Peter Norman, UNC-Chapel Hill; John M. Gandar, Peter M. Schwarz and Carol O. Stivender, UNC-Charlotte; Stephen P. Holland, Dennis P. Leyden and John L. Neufeld, UNC-Greensboro; Allin Cottrell, Mark Curtis and Andrew C. Graczyk, Wake Forest University; Craig Richardson, Winston-Salem State University.