A bit dated, from Feb 28th of this year, but given the big push for Paris and the Pope’s encyclical, it is germane at the moment. -Anthony
Stanford research reveals that it is ultimately people – not corporations – who would bear the costs of climate change regulation. Under a hypothetical carbon tax, households in the lowest income group would pay as a percent of income more than twice what households in the highest 10 percent of income distribution pay. The findings suggest a fairer way to regulate greenhouse gases in the United States.
New research finds the heaviest burden for climate change regulation falls on the poor, for whom basic necessities take up a bigger chunk of the budget.
The heaviest burden for climate change regulation costs falls on people – especially lower income groups – and not corporations, according to new Stanford research.
The reason is that companies ultimately pass on those costs to people. For the poor, basic necessities take up a bigger chunk of the budget than for the rich.
“Households in the lowest income group pay, as a percent of income, more than twice what households in the highest 10 percent of the income distribution pay,” wrote economist Charles Kolstad, a senior fellow at the Stanford Institute for Economic Policy Research and the Precourt Institute for Energy.
The research gives impetus to adopting a fairer approach to carbon regulation costs, Kolstad said.
“This regressivity can be addressed through transfer payments, if and when the U.S. decides to regulate greenhouse gases leading to climate change,” said Kolstad, who researches environmental economics, regulation and climate change. As an example, he suggests reducing the payroll tax for lower income groups as a way to make a carbon tax more fair.
The study examined Bureau of Economic Analysis data and used a $15 per metric ton carbon “tax” as a scenario. In other words, every person or organization (such as a company) that emits carbon into the atmosphere would pay a tax on the total amount emitted multiplied by $15 per metric ton of carbon. The researchers looked at how such a hypothetical tax would hit individual income groups, industries and different regions.
Kolstad said that price and substitution effects may somewhat dampen the regressive nature of such costs. For example, when prices change, people change what they do. If the price of heating oil goes up, people may use more electricity or natural gas to warm their homes.
The paper was published as a SIEPR policy brief and is based on detailed analysis by Kolstad and Corbett Grainger of the University of Wisconsin-Madison.
Fairness issue
Their research points out that carbon regulation involves the question of who pays the most and the least – an issue with political and social consequences. Analyzing greenhouse cost burdens is important due to the urgency of coping with global warming, which may lead to sea-level rise, local temperature and precipitation changes, and increased frequency of extreme weather.
Kolstad said, “One of the most significant problems associated with passing any sort of legislation is perceived fairness. Although there are other issues, fairness in paying for the legislation and fairness in the benefits that the legislation generates can be key to passage. This work helps understand the extent to which paying for carbon legislation can be perceived as fair or unfair, with obvious remedies for correcting any unfairness.”
The poorest households spend a higher percentage of their income on fuels for heating and transportation, while higher income individuals spend proportionately a greater amount on services, which usually have lower than average carbon emissions per unit of output.
“Emissions increase more slowly as income increases. Thus, one would expect some regressivity in a carbon tax,” the study stated.
Kolstad expected the regressive nature of carbon regulations to be even more dramatic.
“I thought that a carbon regulation would be far more regressive, falling on the shoulders of the poor more than it does,” he said.
This expectation, he said, was based on the fact that lower income Americans often drive older, less fuel-efficient cars and frequently commute long distances to work to access lower cost housing. “Although that mental model may be correct, transportation fuel is only part of the picture,” he said.
Impacts on industry
While the costs of greenhouse gas regulations are broadly spread over the entire economy, some industries are hit harder, according to the study’s hypothetical carbon tax. These would include electric power, fertilizer, cement and coal-related industries like mining and transportation. Lime, a key ingredient in the manufacture of cement, would see the highest cost increase at 15 percent.
“The extent to which these industries are ultimately disadvantaged depends on the extent to which they are able to pass costs on to customers,” the research noted.
Still, these most highly affected industries contributed only 1 percent to the total gross output of the U.S. economy in 2011, according to the study.
“This suggests that the adverse incidence of such a tax can be ameliorated through highly targeted financial assistance, without reducing the incentive benefits of a carbon tax,” the paper stated.
Another question is which regions bear the most or least cost of carbon regulations. This is a bit more complicated to examine, as the coal mining companies operating in Wyoming may have owners in San Francisco or New York, Kolstad said.
Research shows that while the total out-of-the-pocket carbon tax costs may be similar across U.S. regions, the price of electricity may vary considerably. Thus, one could expect higher electrical costs in coal-dependent states like Kentucky, Tennessee, Mississippi and Alabama.
As for whether the United States adopts greenhouse gas regulations, he is pessimistic in the short run – but optimistic in the long run.
“Policy windows happen in which the conditions are right for congressional action. We are not in one now, but I am confidant these will arise at some point in the future,” Kolstad said.
“Under a hypothetical carbon tax, households in the lowest income group would pay as a percent of income more than twice what households in the highest 10 percent of income distribution pay.”
Under another hypothetical carbon tax, households in the lowest income group would be much better of regarding income (net positive) than households in the highest 10 percent of income distribution pay (net negative).
A MUST-READ:
20 June: UK Telegraph: Christopher Booker: The Pope joins the EU in a sad world of make-believe
There are two great acts of political make-believe in our time, so all-pervasive that it is hard for us to grasp just how much effect they are having on our lives
http://www.telegraph.co.uk/comment/11688994/The-Pope-joins-the-EU-in-a-sad-world-of-make-believe.html
20 June: UK Independent: Tom Bawden: Test-case wind turbine will ruin cathedral view, say Lincoln locals
Lincoln Cathedral, an imposing building set on a hill in a county renowned for its lack of gradients, has defined the local landscape for hundreds of years. But plans for a wind farm on the nearby estate of vacuum-cleaner tycoon Sir James Dyson, with turbines twice as high as the cathedral, have raised fears that the area’s unique character could be destroyed.
The proposed wind farm near the village of Nocton, eight miles south-east of Lincoln, would be one of the biggest in the country, made up of 20 turbines, each 149.5 metres high…
Local people fear it would be noisy, damage property prices and threaten wildlife such as endangered lapwings and Marsh harriers. But their biggest concern, it seems, is the damage it could do to the view.
“Lincoln Cathedral defines the landscape for miles in each direction,” said Melvin Grosvenor, who lives in the village of Baumber, 10 miles west of the proposed site. “This [wind farm] would spoil the long-distance view that has existed for a thousand years and change the character of the whole area.
***The development would also set back the cathedral’s campaign to become a UNESCO World Heritage site, he said…
Lord Cormac, a life peer who lives next door to Lincoln Cathedral, is, if anything, even more strongly opposed to the development than Mr Grosvenor.
“I believe onshore wind farms in general are unreliable, uneconomic and very unsightly. But this one, of 20 turbines roughly twice the height of Lincoln Cathedral, placed in an area of quiet natural beauty, is a ghastly and monstrous proposal,” he told The Independent on Sunday. “It would completely ruin centuries- old views of one of the most majestic buildings in Europe.”…
http://www.independent.co.uk/news/uk/home-news/testcase-wind-turbine-will-ruin-cathedral-view-say-lincoln-locals-10334229.html
My next cleaner will not be a Dyson . What does it tell you about the financial status of his company if he needs the subsidy so much that he is willing to destroy the visual and natural environment of Lincolnshire.
‘As an example, he suggests reducing the payroll tax for lower income groups as a way to make a carbon tax more fair.’
Ok. Now what’s he gonna’ do for people living on Social Security which I’m certain he doesn’t live on. Social Security benefits are not taxable unless there’s additional supplemental income. How’s he going to reduce an already nonexistent tax. And, don’t forget, in the Obama economy of the last six miserable years there’s a whole heap of people for whom their only option was to go for SS in whatever form they could get it. Yeah, it’s a real snazzy idea to banter on about increasing Carbon (the lazy man’s description for a molecule) costs in an economy that, in the last six years, has struggled to see one lousy quarter reach 4% growth and in the first quarter of this year was back to negative. These people live in La La Land.
“Under a hypothetical tax, households in the lowest income group would pay as a percent of income more than twice what households in the highest 10 percent of income distribution pay.”
Business as usual?
“…climate change regulation burden (is) heaviest on poor…”
Gee, somehow just by common sense and my self made BS detector, I have known this all along. You really need a study to demonstrate this??? Like I said, it is just common sense. Higher electricity prices, higher gasoline prices, higher energy prices overall affect the poor and low income the most…I know as I am in that category…
“Emissions increase more slowly as income increases. Thus, one would expect some regressivity in a carbon tax,” the study stated.
Yes, driving my old car to work produces so much more emissions than a rich person flying to his winter home in Florida while leaving the heat on in his New England home to make sure the pipes don’t freeze.
Anyone, and that includes the dope in the White House, who uses the term “carbon pollution” simply proves that they’re a scientific imbecile. As far as the cost burden falling most heavily on the poor, that’s a bit like saying “water is wet” and “the Sun rises in the east each morning.” Duh!
Joel D. Jackson
June 20, 2015 at 5:46 pm said
There are well over 20 acres of woods behind my house.
.
I’ve lived here for over 20 years.
We have a hundred acre wood lot and have heated with wood for four generations and you are right it is sustainable.
This would be a good point, if every household had access to a twenty acre wood lot. Using wood to fuel baseload power reminds me of what happened to the forests in my area a hundred years ago when they were stripped to supply the big city. There is not a single tree on our lot older than eighty years and it is still more bush than forest.
Yes peter, but the forests in your area have recovered. Oil wells and coal seams don’t regenerate as fast (if at all) . The problem in the past was the “stripping”….They used the forests back then the way we use fossil fuels today…..not thinking about depletion. With proper management, the forests can be very productive.
Your argument doesn’t hold up. First, with a population of about 300 million, at 20 acres per person, you’d need about 6 billion acres, almost 3 times the land area of the US. Even if you figure an average household is 4 people, that’s still almost all the land in the US and well over the amount that is suitable for growing forests in the first place, with less than nothing left over for things like food.
But you’ve changed your argument as the thread progresses. Now you want to argue that forests can regenerate while fossil fuels can’t. Well, do the math from the first paragraph and you’ll discover that the only way for them to regenerate in the first place is to use fossil fuels instead/ Otherwise the forests get exterminated and then it is a race between starving to death and freezing to death, a race whose “winner” gets determined mostly by geography.
But as to your second argument, the fact that fossil fuels don’t regenerate is a self regulating mechanism. As they become more scarce, the price rises, and the very reduction in use you are suggesting is a good thing becomes a natural outcome of the market, no intervention of any sort required.
….and before I forget, all I’ve debunked from your evolving claims is the use of wood for heating. Add electricity, transportation, and industrial energy requirements to the picture, and your 20 acre lot becomes a recipe for joblessness, starvation, and freezing to death. Not even enough energy left over to flee to another country.
“Stanford research reveals that it is ultimately people – not corporations – who would bear the costs of climate change regulation.” No $hit Sherlock. A corporation is a fictitious entity.
“The research gives impetus to adopting a fairer approach to carbon regulation costs, Kolstad said.”
==================
You say this like it is a given.
Lost me at the first line. “Stanford research reveals that it is ultimately people – not corporations – who would bear the costs of climate change regulation.”
Where the heck do you think corporations get their income from? Fairies at the bottom of the garden? Ultimately, all expenditure is traced back to the efforts of the individual. When you hear of corporations making record profits, that is good because they typically then use the money to employ more people for (hopefully) further productive enterprise.
There is an abundance of communistic feeling about society just now, that hates the thought of corporations being wealthy. What do they think that corporations do with this wealth? Do they have swimming pools filled with coins for their Scrooge McDuck to swim in? Of course not. It is reinvested into society.
What these little communistas hate is that corporations who control their reinvestment can do so freely, without the dreaded leaded hand of governments who try to dictate the course of all major spending. That’s how we got national economies like Pot Pol, China under Mao making steel instead of food, etc etc.
Adopt the spirit of free enterprise, work hard and be proud. Work to maintain maximum control over the destination of every last penny you earn. Eschew regressive and excessive taxes and petition against your government spending your money on climate change junkets for people who assume they can spend even more of your money with pledges, imposts, taxes, levies, foreign aid …. IT IS YOUR MONEY, not theirs.
As a business owner in BC Canada where there is a carbon tax, I can verify these taxes are added to the cost of goods and services all the way up the line until they’re purchased by the end consumer who carries the full burden. On top of higher prices, there is both a provincial sales tax of 7% and a federal goods and service tax of 5% charged on the final selling price. Tax on tax, an extra little dollop of revenue given to government.
BC promised the carbon taxes would be tax neutral through lower income taxes. Back in 2008 when they first introduced the carbon tax, they lowered individual and corporate tax rates by a small amount. Since then income tax rates have remained flat while the carbon taxes have gone up year after year. While people below a certain income threshold receive an annual check for $100, it does not begin to touch the higher cost of living introduced by the carbon tax.
Hi Marlene,
Where is the carbon tax revenue spent/allocated? Where was it promised to be utilized?
I have not dug into the government’s financial statements to see where the carbon tax revenue flows. My sense is there’s a great deal of attention paid to the optics of sticking to the script since it’s a matter of interest to a lot of people.
I found this report by the Canadian Taxpayers Federation on BC’s supposed reduction of emissions due to the carbon tax. http://www.taxpayer.com/blog/bc–carbon-tax-no-success-story
Seems to me this is an area ripe for investigation and a presentation of facts contradicting the Globe and Mail’s glowing article extolling the success of BC’s carbon tax as a program to be emulated to fix man-made global warming.
“The research gives impetus to adopting a fairer approach to carbon regulation costs, Kolstad said.””
Well, presuming there is a need for carbon regulation. There isn’t.
U.S. Government’s rules, regulation and mandate compliance costs amount to almost $2 trillion/yr, or roughly $20,000/yr per household…. To put that into perspective, that’s almost the entire GDP of India, which has a population of over 1 billion people….
$20,000/yr doesn’t affect the super rich (although compliance costs devastate their companies), but it’s crippling to the nation’s poor..
Additional CO2 taxes and compliance costs will further erode the poor’s living standards and limit employment opportunities for them.
So, professor von stanford says:
1) It is proposed that carbon use/consumption will be taxed so as to reduce c02.
2)The resulting negative impact on the poor obvious.
3)We will therfore need to give breaks and credits of some sort to the poor.
4)Given the tax credit/reimbursement, the poor people can now afford more c02 producing stuff.
5)Professor von stanford projects that it will only cost the average family somewhere between $1,000 and $2000 per year … no big deal.
What professorvonstanford doesn’t say:
6)Poor people will then be dependent on the c02 credits, and it will be that much harder for them to make the change of state to being non-poor.
7)The standard of living for the non-poor is reduced but it O.K. because they are non-poor. $2000 per year should not beconsidered a big hairy deal.
8)And finally, the tax only goes away when hell freezes over and it is becomes apparent that it was not necessary to begin with.
9)A portion of the tax revenue should be used to permenantly fund studies such his; the tax revenue should also be used to prove that it really is not cold, and the tax is still necessary.
It comes down to; more wage control, and more dependency.
It also encourages graft and corruption by companies and individuals to circumvent the Tax. The more Tax you can avoid, the more money in your pocket. Oh, but then the government need more laws, enforcers of the laws, and of course ways to monitor corporations and individuals who might be thinking of circumventing the Tax. These will of course need to be funded out of your Taxes, and boy do they cost a lot.
As you can see the law of unintended consequences goes far beyond the added cost of product.
I forgot …
7a) The credit to the poor is paid for by the non-poor, causing the overall cost to the non-poor to be between $3000 and $4000
A few more programs/schemes like this and I will be able to qualify for the “poor” status.
The Left would probably “fix” this inequity by raising the minimum wage to $30/hr. This of course would throw millions of low and moderately skilled people out of work, which would be “fixed” by doubling the number on food stamps, and other welfare, which would be paid for by raising the income taxes on job creators (small business) which would cause more layoffs, which of course would be “addressed” by tripling the budget of the SBA, which would be paid for with money borrowed from China, with the interest paid for with newly printed money which would create inflation which would necessitate another increase in the minimum wage and so on and on and on.
Ultimately, anti-carbon energy policies in whatever form they take are a huge drag on an economy. Switching from cheaper, more efficient forms of energy to “green” energy is like having a “jobs” program hiring some people to dig holes and others to fill them in, or like taking 700,000 perfectly-good vehicles and sending them to the crusher (like anyone in their right mind would do that!). The point is that people suffer from bad economic policies. Ultimately, it tends to destroy the middle class, putting more and more of them in the “poor” category.
This research paper falls in the “well, duh” category.
It has long been my opinion that this whole CAGW illusion will fall apart once Millennials can no longer afford to recharge their smart phones.
“Lime, a key ingredient in the manufacture of cement, would see the highest cost increase at 15 percent.”
Lime is a key ingredient in Key Lime Pie but not in cement! Lime is used in mortars, plasters, stucco and in chemical processes. For cement, they use cheap limestone, bulk quarried. This is the trouble when non technical people (economists here) make assumptions from what they read. The term lime is essentially a chemical term and it gets used by chemical engineers, geologists, etc. even in referring to limestone if the chemistry of the situation is what is important. Yeah, burning high calcium limestone to make a high quality lime product used in a host of industrial applications is both an energy user (energy gives off CO2) and a source of “fossil” CO2 of its own being a carbonate.
Good thing this only accounts for 1% of GDP, or they would have to do the study over again!
Then you might know of the town of Lime, near Baker City along Interstate 84. There’s more lime there than you can shake a stick at. You just can’t get to it economically anymore. It was once the “other” industry that helped build Union and Baker County, logging being the other one. A trip there is a dangerous yet fascinating visit. Wear tall boots in case you encounter a rattle snake under your foot upset that you have stepped on its dust colored tail.
http://archive.lyza.com/2009/09/29/weekend-abandoned-cement-plant-in-lime-oregon/
Hi Pamela. I haven’t been to that town of lime but, for some reason, places that historically made lime tended to get the name. Here is an old kiln near “Limehouse” Ontario, Canada.
https://ca.search.yahoo.com/search?fr=mcafee&type=C111CA662D20141029&p=Lime+kiln+Ontario
There is also Lime Ridge, Lime Lake, etc and this is just Ontario.
Here’s one from Texas: http://texasescapes.com/CentralTexasTownsNorth/Lime-City-Texas.htm
It must be something pleasant in the sound of the word. I’ve never heard of a place called “Cement”.
Gary Pearse,
I offer you Concrete, WA instead (70 miles NNE of Seattle).
There’s a town called Cement in Oklahoma. It got its name in 1902 from workers at the nearby Acme Cement and Plaster Company. Ironically, the indigenously-mined gypsum rock was used to produce plaster, though, not cement.
So, if the Stanford study suggested a better way of going about the solution that would not affect the poor, then what is the basis of opposition to that?
It is a huge unnecessary cost to society that is not a solution to anything. At least nothing has been demonstrated to be problematical and certainly all the forecasts of temperature over the past 30 years have proven to be totally wrong. There are lots of things we should do for the environment, for poverty at home and abroad. We have had no warming for 18yrs while CO2 has risen 10% or more and all the fuss about global warming was essentially balmy weather during a shorter period than the pause! There is nothing in the weather and its extremes that hasn’t happened before.
Otter17, you seem like a smart, compassionate type. Do you see what is happening here? They are looking for ways to help the poor with the cost of a problem that doesn’t exist. I’m not against the poor getting some more money, just not for this. And the larger problem is the regulations prevent poor countries from getting aid to build cheap energy infrastructure without which they are doomed to poverty and early death – there is no wealth to distribute in the poor half of the world. Stop watching the cable news and buying newspapers for your education and dig a little into the topic with an open mind before even that is taken away.
Yet another miracle of the modern world. Research required in order to state the obvious. Next new research shows lack of food will result in weight loss. Of course the poor suffer more from vice taxes and other forms of regressive taxes. You think a someone driving around a 2015 Lexus is concerned if state tax on gas goes up? Or someone who lives in a pent house apartment is concerned when alcoholic beverages tax goes up?
Vice taxes are the most regressive taxes, and in the end the carbon tax is is vice tax; carbon has been deemed “bad” for you so take it up the bun and be happy to be taxed on it.
Even if you believe AGW is true and a great problem, a carbon tax having anywhere near a significant effect has been proven to be fantasy. So why go for it? Well because carbon is a vice, and those who are sinful must be punished. When ecological concerns can be twisted to support totalitarian moralistic fanaticism I feel most comfortable in stating it’s a crazy world.
Why does the cult of CAGW push policies that are madness such as taxing ‘carbon dioxide’ emission or the forced conversion of food to biofuel?
The cult of CAGW includes a propaganda campaign that you are either with the cult of CAGW or your are an evil cult of CAGW denier.
The intentional consequences of the cult of CAGW’s ‘denier campaign’ is to stop policy analysis. The unintentional consequences of the cult of CAWG’s ‘denier campaign’, is the cult of CAGW’s policies are disconnected from logic and reason. That is bad thing, not a good thing.
Carbon dioxide (CO2) is a gas that is essential for life on this planet. It is a fact that CO2 is injected into commercial greenhouses to increase yield and reduce growing times. Plants ‘eat’ CO2. When atmospheric CO2 increases C3 plants – all plants, except for grasses, include all cereal crops – reduce the number of stomata on their leaves which reduces plant evaporation water loss (less stomata less water loss) which enables the plant enables to grow and thrive with less water. (Good thing not a bad thing.) Cereal crop yield increases by roughly 40% if CO2 is doubled. (Good thing not a bad thing.)
There has been no warming for 18 years. There is now unequivocal observational evidence of cooling. There is no CAGW problem to solve. The planet is about to abruptly cool which is a different issue/discussion.
It is surreal, that the cult of CAGW’s paradigm is to attack any questioning of the policies of CAGW as a hate crime. Why are there ‘environmental’ lobbying groups that are ‘fighting’ for policies that will increase the cost of energy (the cost of electricity in Germany is three times more than the cost of electricity in the US)?
What will happen to poor people in the world when the cost of ‘energy’ increases worldwide? Is it a hate crime to question the tripling of electrical costs? What will the benefits be to offset the negative consequences of tripling of the cost electricity worldwide?
The EU and the US have mandated the forced conversion of food to biofuel in direct response to the cult of CAGW’s lobbying. As there is a fixed amount of agricultural land in the world and a fixed amount of fresh water and fertilizer to grow food, the forced conversion of food to biofuel must increase the amount of virgin forest that is cut down and will cause an increase in the cost of food for people.
The immediate consequence of this forced conversion of food to biofuel madness is a dramatic increase in the cost of basic food such as a 140% increase in the price of corn. The problems associate with this practice will become more acute as it is fact that the majority of the developed countries have mandated an increasing percentage of biofuel.
Analysis of the total energy input to produce ethanol from corn shows that 29% more fossil fuel input energy is require to produce one energy unit of ethanol. Vacuum distillation improves the energy calculation to one to one, i.e. as much energy is required to produce ethanol as the energy in the ethanol however the vacuum distillation equipment is significantly more expensive and fossil energy is cheaper so that vacuum distillation is not used unless it is mandated.
Comment:
The energy input to harvest the corn, to produce the fertilizer, and to boil the water off to distill ethanol/water from 8% ethanol to 99.5% ethanol (three distillation processes) to produce 99.5% ethanol for use in an automobile, produces more green house gas (if ‘fossil’ fuel for all processes) than is produced than the production consumption of conventional gasoline. The cost of corn based ethanol is more than five times the production cost of gasoline, excluding taxes and subsides.
Rather than subsiding the production of corn based ethanol the same money could be used to preserve and increase rainforest. The loss of rainforest is the largest biological cause of the increase in CO2.
http://www.time.com/time/magazine/article/0,9171,1725975,00.html
http://www.abc.net.au/news/2008-04-14/biofuel-production-a-crime-against-humanity/2403402
http://news.yahoo.com/prime-indonesian-jungle-cleared-palm-oil-065556710.html
“Why does the cult of CAGW push policies that are madness such as taxing ‘carbon dioxide’ emission or the forced conversion of food to biofuel?”
Because it is all about policy. CAGW is just a fable to get us to accept the unacceptable. We won’t accept a new tax, but we might accept a carbon tax. Which, of course, is just a tax.
UK Government Study: If nothing done kiss civilization goodbeye 2040: http://www.zerohedge.com/news/2015-06-21/uk-government-study-finds-if-nothing-done-expect-civilizations-collapse-2040
From Anglia Ruskin University
Science proves that CO2 has no significant effect on climate. The proof and identification of the two factors that do cause reported climate change are at http://agwunveiled.blogspot.com (now with 5-year running-average smoothing of measured average global temperature (AGT), the near-perfect explanation of AGT, R^2 = 0.97+ since before 1900)