The New Year and Climate Change

We should start the new year with a reminder – a reminder that climate change is not going away as a concern. Here are some data points for you to consider.

As appeared in the Wall Street Journal on January 17, 2019: ECONOMISTS’ STATEMENT ON CARBON DIVIDENDS.

Who signed this statement: 4 Former chairs of the Federal Reserve; 27 Nobel Laureate Economists, 15 former Chairs of the Council of Economic Advisors, 2 former Secretaries of the U.S. Department of Treasury.

Global climate change is a serious problem calling for immediate national action. Guided by sound economic principles, we are united in the following policy recommendations.

I. A carbon tax offers the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary. By correcting a well-known market failure, a carbon tax will send a powerful price signal that harnesses the invisible hand of the marketplace to steer economic actors towards a low-carbon future.

II. A carbon tax should increase every year until emissions reductions goals are met and be revenue neutral to avoid debates over the size of government. A consistently rising carbon price will encourage technological innovation and large-scale infrastructure development. It will also accelerate the diffusion of carbon-efficient goods and services.

III. A sufficiently robust and gradually rising carbon tax will replace the need for various carbon regulations that are less efficient. Substituting a price signal for cumbersome regulations will promote economic growth and provide the regulatory certainty companies need for long- term investment in clean-energy alternatives.

IV. To prevent carbon leakage and to protect U.S. competitiveness, a border carbon adjustment system should be established. This system would enhance the competitiveness of American firms that are more energy-efficient than their global competitors. It would also create an incentive for other nations to adopt similar carbon pricing.

V. To maximize the fairness and political viability of a rising carbon tax, all the revenue should be returned directly to U.S. citizens through equal lump-sum rebates. The majority of American families, including the most vulnerable, will benefit financially by receiving more in “carbon dividends” than they pay in increased energy prices.

Additionally, here is some interesting data… Every year the World Economic Forum asks 1000 business, policy, and thought leaders to rank order about 30 risks on both impact and likelihood. Climate-related risks top the list. This year’s report covers more risks than ever, but focuses in particular on four key areas: environmental degradation, cybersecurity breaches, economic strains and geopolitical tensions.

Those risks that are most likely and most impactful were failures of climate policies, extreme weather, and natural disasters. Not far behind were cyber-attacks, interstate conflict, and data fraud or theft. 

Couple this with a recent example of PG&E’s collapse that shows the warming planet is every-more capable of delivering sudden shocks to the balance sheet. The general public, policy makers, and corporations seems to think that climate change is going to happen slowly. On the contrary – climate change is unpredictable series of events so companies need to create a certain resiliency to respond to these unpredictability.

In a recent op-ed piece Sally Uren OBE, chief executive of Forum for the Future, outlines seven shifts that must happen in 2019 if companies are to rise to the sustainability challenges we now face.

Places like California show that national or global action is not a prerequisite for local activism, but local actors will move faster if they are supported by national leaders. This is not an either-or situation; we need everyone to take action. 


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