Guest essay by Eric Worrall
Huffington Post has a plan to address the as yet unanswered question of who will foot the bill, for the renewable transformation green advocates want, in the wake of the Paris COP21 agreement. HuffPost’s suggestion is a $2.9 trillion rise in annual taxes on fossil fuels.
How Can We Pay for the New Energy Economy?
Many a great idea has been deflated by a simple question: “That’s nice, but who’s going to pay for it?” That question hovered like a cloud over the international climate conference in Paris a week ago. Simply put, the goal of the agreement at that conference is to build a world in which we achieve and sustain universal prosperity without plummeting into a future of irreversible climate catastrophe. It’s a great goal, but who is going to pay for it?
Fossil Energy Subsidies: Some government subsidies go to energy consumers and some to energy producers. Some are direct – tax breaks, for example – and some are indirect “post tax” subsidies, including the social and environmental costs of using fossil fuels. According to the International Monetary Fund (IMF), direct and indirect subsidies around the world are expected to total $5.3 trillion this year.
The IMF notes that the benefits of reforming fossil energy subsidies are “potentially enormous”. “Eliminating post-tax subsidies in 2015 could raise government revenue by $2.9 trillion (3.6% of global GDP), cut global CO2 emissions by more than 20% and cut premature air pollution deaths by more than half,” it says.
In addition, Huffpost thinks we should place an unspecified price on CO2.
Putting a Price on Carbon: The principal reason that climate change has become the world’s biggest market failure is that the energy market’s price signals are broken. Government subsidies keep energy prices artificially low. Moreover, the prices we pay at the pump and electric meter do not include the cost of damages that carbon fuels do to public health, the environment and so on.
The most common argument against carbon pricing is that it would kill jobs and cripple the economy, but actual experience shows this is not necessarily the case. One example is found in the nine U.S. states whose carbon trading I cited above. Between 2009 and 2013, their economies reportedly grew more than 9% compared to 8.8% in the other 41 states, while their combined carbon emissions dropped 14%. The net economic benefit to the region’s economy was $1.3 billion.
Taxing our way to prosperity – the green solution to the global climate “crisis”.