I found the above video to be incredibly fascinating. Bill Gates discusses the complexity of the climate change issue. Individuals can make it seem if we increase the cost of carbon (i.e. add the proper pricing to the negative externality carbon creates), the markets will correct the negative externality and the efficient allocation of resources will occur. Bill bashes this in the video.
Once one recognizes the role of energy in countries developing beyond poverty and subsistence (which much of the global population is still experiencing), one understands the flaws and unjustness of this concept.
Here are a few quotes from the video:
“I’m not just a believer in taking the 9% of your income Americans spend on energy and saying let’s just pay a premium to feel like we are clean people but rather you’ve got to solve this problem for China, India, and Africa without making Energy super expensive. That constraint makes what’s almost an impossible problem, slightly more difficult.”
When asked about the focus on progress on renewable energy / clean energy, he responded:
“No…that is so disappointing…let’s not joke around…that’s nothing…that doesn’t solve the reliability problem.”
Ultimately, Bill believes the solution will involve a significant amount of spending on Research and Development and Innovation.
What are some areas you agree with Bill and some you do not?
Climate change has been a divisive issue, especially with the US decision to withdraw from the Paris Agreement. As I was reading into different solutions for improving our future environmental prospects, I came across an organization called the Climate Leadership Council (https://www.clcouncil.org). In my view, their proposal is a very strong idea that could be bi-partisan.
I believe as global citizens, and as stewards of God’s creation, we are called to protect the environment. I also believe capitalism and growth are not zero-sum with the environment. In fact, I believe capitalism has great potential to solve our environmental challenges. I think back to Joe Rehmann’s Impact Interview and what he is accomplishing with Victory Farms.
The Climate Leadership Council’s proposal has four pillars:
A Gradually Increasing Carbon Tax – Allows for a cost to be associated with carbon and consumption preferences to shift accordingly toward less carbon based consumption. Most economists on both sides agree this is the most effective solution that corrects the market failure of not placing proper long-term costs on carbon.
Carbon Dividends for all Americans – Equal distribution of the dividends to all Americans. Incentivizes socially beneficial behavior, as those individuals will net positive. Studies show the bottom 3 quintiles of Americans would come out ahead.
Border Carbon Adjustments – Exports to countries without the carbon tax would receive rebates and imports from such countries would face fees on carbon. This would improve US competitiveness.
Regulatory Rollback – With the bulk of the solution coming from the carbon tax, other regulation could be scaled back.
Benefits of Plan:
Short-term neutral – The proposal understands a plan with short-term pain would be hard to implement as voters would be opposed to it due to human nature. This neutralizes that with the dividend rebate.
Pro-growth – A carbon tax sends a powerful market signal that encourages technological innovation and large-scale substitution of existing energy and transportation infrastructure. In addition, the dividend will disproportionately benefit those that have a higher marginal consumption rate, causing increased consumption and growth.
Proper Market Pricing – The plan would fix the market failure of not placing the proper price on carbon consumption.
Most Effective Solution
“There is widespread agreement among economists that a carbon tax is the most efficient mechanism to reduce greenhouse gas emissions and correct the fundamental market failure driving climate change, namely, the failure of prices to reflect social and environmental costs. No other policy lever can match its economy-wide effects in changing investment decisions and individual behavior. For a carbon tax to be most effective, the tax rate must increase gradually until emissions reduction targets are met. To avoid the loss of competitiveness or the shift of industry to economies without carbon taxes, border adjustments will also be necessary. Together, a carbon tax with border adjustments can help ensure that other countries follow suit, bringing us closer to a global solution.”
Most Popular Solution
“The key to making carbon taxes popular is a countervailing incentive that outweighs the tax’s burden. The best candidate is carbon dividends, which would put money directly into people’s hands and reward socially beneficial behavior. Simply put: all proceeds from a nation’s carbon tax would be divided equally among its citizens, and returned to all adults through a quarterly dividend check automatically deposited in their bank accounts. Polls reveal that 64% of Americans favor this plan, including 54% of conservative Republicans. The popularity of dividends is crucial not only to the initial passage of carbon taxes, but also to ensure ongoing support for gradually increasing the carbon tax rate.”