For this week’s EnergyTradeoffs.com podcast interview, we have David Spence interviewing Sheila Olmstead his colleague at the University of Texas, about Sheila’s research on “Carbon Taxes: The Evolving Conventional Wisdom.”
Sheila responds to the concern that a carbon tax would have a regressive impact on lower-income households by raising the price of energy. She explains that a carbon tax is actually less likely to have a net regressive impact on low-income households than other climate policies. Nearly all climate policies place disproportionate burdens on low-income households that spend a larger share of their income on energy. But a carbon tax produces revenue that can be used to offset or eliminate the costs it imposes on vulnerable populations. (And, of course, as I argue here on Greg Mankiw’s blog, it imposes more transparent burdens than other climate policies, which means that policymakers will be more likely to address those burdens on low-income households.)
Sheila also argues that a carbon tax would not have a major negative impact on the economy. And she argues that the negative impact of the tax on some fossil fuel sectors is a feature not a bug of a policy designed to cut greenhouse gas emissions. Sheila also argues that even if a carbon tax starts at $40 per ton, new research suggests that it should rise well beyond that. Finally, Sheila explains the controversy over whether governments that impose a carbon price should consider rolling back other climate regulations.
Sheila and David reference the Climate Leadership Council’s “Economist Statement on Carbon Dividends,” which was signed by all four former Chairs of the Federal Reserve, 27 Nobel Laureate economists, and 3,500 economists, including Sheila.
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