OPINION: Colorado economists: We need a federal carbon fee with cash back for all U.S. citizens

Photo by Andy Cross/The Denver Post. | Thick smoke from California and Oregon wildfires seen along E. Iliff Ave. looking west near Parker Rd. August 07, 2021.


Many of us have publicly supported this position before. Why are we doing so again now? Global climate change has reached crisis status, requiring immediate national action. President Joe Biden has called for major investments to facilitate the transition to a renewable energy economy. Those investments are needed but alone they are not enough to secure the rapid change necessary to meet the president’s goal of reducing U.S. emissions more than 50% below 2005 levels by 2030.

Guided by sound economic principles, more than 3,500 economists from every state in our country have recommended that the federal government put a price on carbon emissions and return those revenues to the public as carbon dividends.

Now, with the publication of this op-ed, I and these sixteen Colorado economists join the chorus: Edward B. Barbier, Colorado State University; Jo Burgess Barbier, Colorado State University; Elissa Braunstein, Colorado State University; Carol A. Dahl, Colorado School of Mines; Kevin Duncan, Colorado State University-Pueblo; Mark Eiswerth, University of Northern Colorado; Nicholas Flores, University of Colorado Boulder; Daphne T. Greenwood, University of Colorado, Colorado Springs; Terrence Iverson, Colorado State University; Daniel K. N. Johnson, Colorado College; Farida Khan, University of Colorado, Colorado Springs; Haider Khan, Denver University; Kyle Montanio, University of Colorado Denver & International College Beijing; Mark Griffin Smith, Colorado College; Jeffrey S. Zax, University of Colorado Boulder.

What we are experiencing today — increasing drought, water supply issues, and wildfire risks — will impact the economy and heritage of Colorado.

We are compelled to issue this call for action to reduce greenhouse gas emissions through a federal pricing mandate that will also induce the innovation necessary to address the climate crisis. We are asking Colorado’s congressional delegation to support the following policies.

Impose a carbon fee

A carbon fee will reduce carbon emissions at the needed speed. A carbon fee will use market forces to move both businesses and consumers to low-carbon solutions. Columbia University’s Center on Global Energy Policy has estimated that a steadily higher price on carbon, ($10/ton per year), would cut fossil fuel emissions by 30% in the first 5 years alone. This will put America on a path to meet the Paris Accord targets and to reach net-zero by 2050.

The carbon fee should increase every year until the net-zero goal is met. A revenue-neutral fee will reduce debates over higher taxes.

A carbon price will encourage technological innovation, large-scale infrastructure development and stimulate the development of low-carbon goods and services. Yes, some jobs in the fossil fuel industries will be lost, but more and better jobs in the emerging clean energy economy will be the real result.

A scheduled rising carbon fee provides a strong market signal that promotes economic growth and provides businesses the pricing certainty needed for committing investment.

Adopt a carbon border adjustment

The European Union has announced it will impose a carbon border tax, beginning in 2023, on imports from nations that do not have an equivalent carbon price. If the U.S. implements the policy we are recommending (a carbon price including a carbon border adjustment) American businesses will remain competitive in their European markets. America will join with our traditional European partners in action that matches our stated goals and together we will motivate additional nations to also price carbon. Additionally, the border adjustment should act to incentivize foreign firms who sell in the U.S. to reduce their products’ embedded carbon independent of other carbon pricing schemes, thus inducing a sizable carbon reduction benefit.

Return the carbon revenues to Americans as a carbon dividend

The carbon pricing program can maximize fairness and the political viability of a rising carbon fee via a “cash back” program. All revenue should be returned directly to U.S. citizens through per-capita carbon fee rebates or dividends. Most Americans, including the vast majority of low-income households, will benefit financially by receiving more in “carbon cash-back” than they pay in increased energy prices.

Call for Action by every Colorado Citizen

Every Coloradan reading this should call or write their congressperson and senators and let them know you want a carbon fee with cashback for all U.S. Citizens. Tell them you want bipartisan support for a Carbon Fee and Dividend policy as provided in H.R. 2307 — 117th Congress.

This effective, practical policy should be enacted as soon as possible.


About the Author: Anders Fremstad teaches courses in microeconomics, environmental economics, and political economy at Colorado State University. His current research focuses on the distributional impact of carbon mitigation policy.

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