We’re back from a lovely vacation in France and are ready to resume our exploration of the Green New Deal from a practical point of view.
Those who have read earlier posts can be forgiven if they start shaking their heads at the amount of money each individual portion of the GND seems to cost. The Green New Deal will cost a lot of money, although much of it will be obvious investments with an expected and forecast-able return.
But housing half a million homeless and offering tax subsidies for solar panels and electric cars doesn’t come cheap. And that’s just two of the initiatives we’ve discussed.
We’ll add up the totals later, when we’ve gone through all of the separate initiatives of the GND. But let’s talk about financing some of it now, before we get too scared of the big numbers involved.
We, along with everyone else who has both studied the climate issue and is comfortable with numbers, strongly support a carbon tax to be levied on emitters (and perhaps producers of fossil fuels). We have long held that a carbon tax should be revenue neutral–that the money raised from the tax should be refunded in full to the citizens. This has seemed the only way to make such a tax palatable to Republicans.
But one way of rebating the money raised by a carbon tax is financing the economic initiatives of the Green New Deal, which can be expressed in shorthand as ‘feed the poor, house the homeless, treat the sick,’ at least in part.
One of the most interesting parts of discussions about a carbon tax is what the tax should be. Pure economists look at the lowest level needed to change the behavior we want to change–what’s the minimum level that will cause emitters and producers to look at alternatives to fossil fuels. And that’s a legitimate point of view.
But we could also look at the revenue required to finance the economic parts of the Green New Deal and decide what level of carbon tax would be required to raise that revenue, or at least part of it.
There’s a reason to do that and also a a reason to hypothecate the revenues to economic relief, as opposed to financing the parts of the GND dedicated to fighting climate change.
There’s very little doubt that a carbon tax would work–that emitters and producers will make intelligent decisions about moving to green energy as quickly as they can, so as to avoid paying the tax. And that will fight climate change by itself. But as it succeeds, the money raised by the carbon tax will decrease. And quite quickly, especially if the tax is set at a high level.
We argue that the early windfall produced by a carbon tax is needed most to alleviate the economic plight of 40 million Americans and that most of the poor, homeless and sick need the money now. Further, we think that intelligent use of the money will actually work–that giving the homeless a place to live will solve homelessness. That paying for the sick to get treatment will heal them. That educating and training the unemployed, incentivizing employers to hire them, will drop levels of poverty to a far lower level. And hence, that the need for revenues will diminish even as the revenues from a carbon tax fall.
It should also be more acceptable to the body politic–even its conservative members–to use a carbon tax to raise the standard of living of 12% of Americans to a decent level.
But then how will we pay for the equally expensive initiatives of the GND that deal with climate change?
We call for the creation of a sovereign wealth fund that increases the royalties currently charged on extraction of fossil fuels. That all of the royalties (including present royalties) be used for mitigation (and perhaps pre-adaptation) measures designed to bring America to (or close to) zero emissions by 2050. That we tax imported fossil fuels at the same rate as the royalties.
A sovereign wealth fund works best if it is allowed to grow and the income from the fund’s investments is used, rather than the capital itself. Were a sovereign wealth fund to be started in 2021 with a new administration, and if it were invested as wisely as, say, Norway’s fund is, by 2030 it would have grown enough to finance the heavy lifting required to push the Green part of the Green New Deal across the finish line in 2050.
What that would allow for (and actually require), is that the period between now and 2030 be more concentrated on the enabling infrastructure to support a green economy–the smart grid, the charging stations, the improvements to mass transit. We should continue to fund subsidies for take-up of renewable energy, electric vehicles, energy efficiency, and even increase those subsidies. But we should be laying the groundwork for the following 20 years as well, using existing funding mechanisms to do so.
We can set levels for a carbon tax and extraction royalties as we like. (We could even change them if it seems the right thing to do.) We can hypothecate the revenues as we see fit.
In reality, it is doubtful that these two revenue sources would be sufficient on their own to finance the Green New Deal. But it seems apparent that they could make a significant contribution.