By: Maddie Barkate
According to the latest climate forecasts, a global warming-induced hike in temperature of 2 degrees Celsius above pre-industrial levels will cause irreversible damage, fundamentally changing our world and our way of living. More than 97 percent of scientists agree that global warming is anthropogenic—that is, caused by deliberate human action. Although various plans have been proposed to fight climate change, with such a short timeline available, a combination of market-based incentives, strong regulations, and research is needed to curb our emissions. The 2015 Paris Accords and other agreements like it attempt to establish concrete change by encouraging countries to reduce emissions, invest in clean technology, and transparently report progress. However, despite the responsibility of countries such as China and India to curb their growing emissions, I will focus mainly on the solutions proposed by US scientists, economists, and politicians, as the US has been responsible for 20 percent of global emissions since 2014. First, I will look at market-based approaches, then will contrast these with command-and-control policies to examine the similarities and differences between the two.
The Intergovernmental Panel on Climate Change says emissions need to “fall 45 percent by 2030, reaching net zero by 2050, to avoid catastrophic change.” These changes will take the form of increasingly unpredictable and violent weather, rising sea levels, increasingly common epidemics, food shortages, and other disasters like it. In order to reach our temperature benchmark, global emissions need to decline by 60 percent by 2050, meaning industrialized nations such as the United States would need to decrease emissions by at least 80 percent by 2050. Although the IPCC estimated that this emissions reduction scenario would result in an estimated reduction in cumulative global GDP by about 3 percent by 2030, it should be noted that this reduction is nothing compared to the economic and social consequences wrought by climate change if left unchecked. If present trends continue, the cost of climate change just in the United States will be as high as 3.6 percent of U.S. GDP.
One proposed market-based solution is a carbon tax. A carbon tax would set a taxable amount on how much companies can emit, which would be paid to a country’s central government. However, under the plan proposed by the Climate Leadership Council (a conglomerate of economists, world leaders, and Nobel Prize winners), each government would not keep the money and would instead pay it back to citizens as a “carbon dividend.” On average, a family of four would receive a $2,000 lump-sum rebate per year. Numerous companies, including BP, Shell, and Exxon, agree that a carbon tax is the best option to get to our emissions reduction benchmark. However, lobbying groups such as the American Fuel and Petrochemicals Manufacturers (AFPM) do not support this plan, as they claim that other actions, such as raising the octane levels in petrol, will do far more to help the crisis. The AFPM claims that infrastructure has been strengthened to deal with worsening storms and rising sea levels, counting this as a reason that Texas was able to bounce back from Hurricane Harvey. However, this approach could be seen as reactive, and it will likely cost the U.S. and its citizens more in the long run. In addition to the economic loss caused by these disasters, there are many uncalculated losses included in these changes, such as lost wages due to weather-induced business closures, or the cost of moving inland as sea levels rise.
Another proposed market-based solution is a cap-and-trade system. Governments issue a fixed number of emission permits to companies, who can either use them, or reduce their own emissions then sell their permits to other companies. All European Union countries, plus Iceland, Liechtenstein, and Norway have implemented cap-and-trade since 2005. Emissions permits are issued yearly, and the volume decreases every year to ensure that all companies must reduce emissions levels to reach desired targets. Eleven U.S. states participate in a cap-and-trade program as well. The Regional Greenhouse Gas Initiative is an agreement to limit carbon emissions, whose cap has been decreasing steadily from its inception in 2009 and aims to decrease limits by 30 percent from 2020 to 2030. California also established a cap-and-trade program in 2013. Revenues from California’s program are put in its Greenhouse Gas Reduction Fund, which has created over 5 billion dollars of total revenue since its inception. These funds are then appropriated to state agencies to create more programs to further lower emissions. Compared to other policy alternatives, cap-and-trade programs are traditionally favored by companies as a way to incentivize decreased emissions, as any permits not used and sold instead in the free market can represent an extra source of revenue.
However, there are a number of policy solutions as well. The biggest lightning rod in recent years has been the Green New Deal proposed by Congresswoman Alexandria Ocasio-Cortez of New York’s 14th District and other members of the House of Representatives. It is a comprehensive progressive deal that purports to deal with climate change through investment, regulation, and cooperation with historically marginalized communities. It, however, rejects market-based solutions. Detractors, such as The Heritage Foundation, a right-leaning think tank, state that the plan is vague and will be too expensive: costing 1.4 million jobs, $3.9 trillion, and an increase in average consumer energy expenditures. Left-wing proponents claim to understand that although the legislation’s price tag is high, so is that of climate change. Moreover, many believe that the plan will pay for itself by boosting economic growth, job growth, and savings.
Lastly, it is important to note that the infrastructure plan proposed by President Biden outlines climate solutions such as investment into research, tax credits, and carbon sequestration and capture. Although Biden plans to spend 2 trillion dollars over 4 years to get the economy to net zero emissions, many criticize the plan for not doing enough and relying too heavily on market-based solutions.
In short, the best plan appears to be a mix of market-based and command-and-control policies. Although market-based policies accrue the broadest nonpartisan support, many note that they will be too little, too late. Since we are already off track to stay under our 2 degrees Celsius benchmark, the best solution is to use all the tools at our disposal. Political proposals offer the widest range of options, forcing collaboration across many sectors, but they often lack the incentives to get large companies on board. Although many solutions have been proposed, ultimately the decisions will be made by our leaders. We can only hope that nonpartisan cooperation leads to quick action—our lives, quite literally, are in their hands.