The economic impacts of carbon pricing in the United States
Resolved: Carbon pricing would have a very minimal economic impact in the United States
Carbon Pricing: The generic term for placing a price on carbon through either subsidies, a carbon tax, or an emissions trading system
Round one will be for acceptance only.
I accept, and Look Forward to this debate
Carbon dioxide is clearly a pollutant since it contributes greatly to anthropogenic climate change. (1) In economic theory, pollution is considered a negative externality, and therefore results in a market failure. As one economic review concluded, climate change represents "the greatest example of market failure we have ever seen." (2)
Despite the economic benefits of addressing this market failure, some argue that putting a price on carbon emissions will cripple the US economy. Such arguments usually focus solely on the costs associated with pricing carbon while entirely ignoring the benefits. However, when we examine both the costs and benefits of various carbon pricing proposals, we realize that the resolution in this debate is clearly valid.
For example, let’s consider a cost-benefit analysis of H.R. 2454: the American Clean Energy and Security Act of 2009. This act would have reduced greenhouse gas emissions 17% below 2005 levels by 2020 and 83% by 2050.
Before the House voted on H.R. 2454, two members of Congress sent letters asking the EPA for technical assistance to estimate the economic affects of the legislation. Unfortunately, the EPA interpreted these requests for economic analysis to apply only to the costs of such legislation. As the agency’s report clearly stated, “None of the models used in this analysis currently represent the benefits of climate change abatement.” Similarly, in a table presenting the economic affects of legislation, under the entry “Benefits from Reduced Climate Change,” the EPA simply wrote, “not estimated”. (3)
The Institute for Policy Integrity at New York University felt that legislators needed to consider both the costs and benefits of carbon pricing. As such, they performed a thorough cost-benefit analysis of H.R. 2454.
The Institute for Policy Integrity calculated the potential benefits by multiplying the "social cost of carbon" by the amount of greenhouse gas emissions that would have been avoided under the bill. The social cost of carbon (SCC) is essentially a measure of the direct effects of carbon emissions on the economy. It takes into consideration such factors as net agricultural productivity loss, negative human health effects, property damages from sea level rise, and changes in ecosystem services.
SCC is very difficult to calculate. As a result, current estimates vary widely. The EPA found that the current SCC value is approximately $68 per ton of carbon dioxide emissions. Meanwhile, the Department of Energy has estimated this value at a much lower $19. (3)
The Institute for Policy Integrity found that the benefits of H.R. 2454 would exceed its costs if SCC is currently greater than $9. (3) Therefore, at the SCC values preferred by the EPA, the direct benefits of the bill are nearly eight times greater than the costs. Meanwhile, at the more conservative SCC values used by the Department of Energy, the benefits of H.R. 2454 are still more than double the costs.
These findings led the Institute for Policy Integrity to conclude that, “H.R. 2454 is cost‐benefit justified under most reasonable assumptions about the likely social cost of carbon.”
The Institute for Policy Analysis is, of course, not the only group to have conducted a cost-benefit analysis of carbon pricing. There have been numerous other analyses conducted both in the USA and internationally. (4-5) For example, a report conducted by the German Institute of Economic Research concluded that, "If climate policy measures are not introduced, global climate change damages amounting to up to 20 trillion US dollars can be expected in the year 2100....The costs of an active climate protection policy implemented today would reach globally around 430 billion US dollars in 2050 and around 3 trillion US dollars in 2100." (4)
Clearly, the global economy would be more prosperous if we enacted a carbon pricing system.
The Overwhelming Majority of Economists Support Carbon Pricing:
The New York University’s Institute for Policy Integrity also conducted a survey of the world’s leading economists with expertise on climate change. In one of the survey questions, experts were asked their opinion on the true SCC value. Although their answers varied greatly, more than 88% of the economic experts believed that SCC is greater than $9 per ton of carbon dioxide emitted. (6) As I established above, this is the approximate SCC value which would justify enacting climate legislation. Meanwhile, 94% of the survey respondents agreed that the United States should reduce it’s carbon dioxide emissions.
Adapting a carbon pricing system would clearly benefit the US economy even if the social cost of carbon is much lower than current estimates.
I thank my opponent for posting his argument.
Why Carbon Pricing Hurts the Economy
Carbon Pricing (in the form of a Carbon Tax or Cap and Trade) does significant harm to the economy. On top of this, it does little to stop pollutants and climate change.
The first problem with Carbon Pricing is that it significantly raises energy prices. This would significantly lower households consumption and kill jobs in the energy sector. The Obama Administration, which advocates cap and trade, estimated that Cap and Trade could cost as much as $1761 a year per household. After taking the slower, the Heritage Foundation estimated that the bill would cost $3,900 a year.
The reason that Carbon Pricing costs households so much is that it forces companies to switch to expensive non fossil fuel type energies. This forces up the price of energy.
The other major problem with Cap and Trade is that it incentivizes companies to move to countries where Carbon Pricing is not a policy, bringing millions of jobs with them. These countries, like China and India, already have lower labor costs than the US.
As you will note, companies moving to other countries does not reduce Carbon Emissions. Carbon from China is no better than Carbon from America.
My opponent bases his argument on the idea that Carbon Pricing will do alot to lower pollution. In practice, this is not how it has happened. In Europe, where Carbon Pricing is practiced, there has been no noticeable impact on the environment. An Open Europe Study found that installations covered by the ETS actually saw Emissions rise by 0.8%.
The fact is that Carbon Pricing does no good unless China and India adopt similar measures, which does not seem realistic.
On another note, Pro claims that economist unanimously support Carbon Pricing. In fact, all my opponent showed was that Climate Economist support carbon pricing. This is different from all economists. I looked for a poll of all economists and found numerous ones showing that economists prefer market based Carbon Solutions (Carbon taxes and Cap and Trade) over Command and Control ones, but I didn't find anything that asked economists whether they supported carbon pricing period.
I look forward to Pro's response
(Go to Page 198) http://books.google.com...
Would carbon pricing have a large affect on household costs?
I thank my opponent for responding.
Would Carbon Pricing have a Large Impact on Household Prices?
Yes. In fact, the very goal of Carbon Pricing is to increase household prices. You see, the reason that people do not already use "green" energy sources is that they are too expensive. Carbon, on the other hand, is relatively inexpensive. The goal of proposals like the Carbon Tax is to make Carbon more expensive than green energy sources so consumers will choose green energy.
Cap and Trade does the same thing as the Carbon Tax, except in a different way. It basically sets a cap on the total amount of carbon allowed to be emitted in an entire economy. It then gives out, or auctions off, permits to pollute, that can be traded among companies. This basically gives companies a reason to switch to more expensive, but greener, energy. Or, they can pay a lot more for Carbon. This will lead to more companies using green energy, but these higher costs will be passed onto consumers.
My opponent claims that a large amount of these costs will be offset by increases in "energy efficiency" from Carbon Pricing. I don't understand exactly how this happens. If I understand my opponents argument correctly, he is saying that the government should force companies to pay for their pollution, and then the government will spend this money on "efficiency" enhancing programs that will then lower costs. This entire line of thought ignores the fact that the private market place already moves towards increased efficiency. Our entire economy's history is based on the private sector finding new and better ways of doing things. Companies already compete for consumers by trying to offer them cheaper and better projects (i.e. more efficient). New government spending will not magically make energy more efficient.
In my last post, I cited a study that found, after taking the entire costs into account, the Cap and Trade Bill would cost each Household $3,900 per year . This is after taking into account the output losses that accompany carbon pricing (companies moving away and lost output from manufacturing).
My opponent countered by offering a couple studies that found much smaller impacts from Carbon Pricing. I'm having trouble reading these studies, but I have a couple of problems with them. First, do they take into account, fully, the lost long term output from Cap and Trade?
Even one of the studies my opponents offers finds significant output losses from Cap and Trade .
Second, do these studies rely on the unexplained premise that Government Spending will magically increase energy efficiency?
Would Carbon Pricing Force Companies to Move Overseas?
Again, the answer is yes. Consider the following example. Country A switches to a Carbon Pricing System and Country B does not. A company in Country A uses a large amount of Carbon.
This company can either choose to pay a lot more for Carbon, pay a lot more greener energy, or move to Country B. Some companies will pay the higher costs. This is not such a great thing as this will result in higher prices for consumers, lower wages, and less jobs. This is because this company will have less to reinvest in other things.
However, a lot of companies would simply move overseas, ending millions of jobs. Now, this also applies in the real world. Except, countries like China already have much lower labor costs than America .
My opponent response seems to, once again, rely on this odd idea that new government spending will magically do much more for energy efficiency than private competition. This is an idea that my opponent will likely defend next round, and I will then respond to that.
Of course, the blow to businesses could be softened if the money from Cap and Trade were to be funneled into new business incentives or a lower Corporate Tax rate. However, this has not been the case in any of the bills put forward. Most of the revenue goes towards welfare like "low income energy tax rebates" and so-called "green investments" .
Does Cap and Trade Significantly Reduce Emissions?
I think my opponent missed the point of my argument here. I was arguing that, since Carbon Pricing has the effect of shipping polluting companies to non Carbon Pricing Countries like China, Carbon Pricing would only reduce emissions if virtually all countries in the world implemented a Carbon Pricing system and enforced it well (enforced is a key), a highly unlikely prospect.
Carbon Emissions only matter on a global scale. As I mentioned in my last argument, emissions from China are no better than emissions from America.
Do Economists Overwhelmingly Support Carbon Pricing?
This argument is about the economic impacts of Carbon Pricing. Therefore, I hold that a survey of all economists would be much more meaningful. I have not been able to find such a survey.
Even if economists do support Carbon Pricing, this does not prove it is right. This is an example of an appeal to authority argument, which can be fallacious . And, of course, experts have been wrong before, many times .
I contend that a Carbon Pricing System will lead to lost jobs, lost output, and higher energy prices without doing much to lower global emissions.
Would Carbon Pricing have a Large Impact on Household Prices?
The Revenue From Carbon Pricing Will not Reduce Household Costs
The central point of my opponents argument is that the revenue resulting from Carbon Pricing will offset the increase in costs. First, let me explain my original argument like this:
1) The goal of Carbon Pricing is to reduce the use of Carbon, in favor of more expensive greener Energy
2) By Forcing People to switch to a more expensive energy source, Household Energy Prices will go up
My argument is that simple. My opponent responds by basically making this argument:
1) Carbon Pricing generates a revenue stream
2) That revenue stream can be used to make up the difference in costs between Carbon and Green Energy, thereby not increasing household prices
This is a major fallacy on my opponents part. You see, carbon pricing schemes rely on revenue that comes from carbon usage. For example, a carbon tax only generates a lot of revenue if people use a lot of carbon, as there would be nothing to tax in a green economy. Therefore, the revenue argument falls short because there will not be revenue from Carbon Pricing if it is successful. Here is the basics of this argument:
1) Carbon Pricing's goal is to reduce the usage of Carbon, but
2) The revenue that supposedly comes from Carbon Pricing relies on the continued heavy usage of Carbon
3) As stated in 1), the goal of Carbon Pricing is to reduce Carbon Usage
4) As stated in 2), the revenue that comes from Carbon Pricing relies on the continued heavy usage of Carbon
5) Therefore, Carbon Pricing cannot simultaneously reduce Carbon Usage and create an large Revenue Stream
Switching to a more expensive energy source will raise household prices no matter what.
My Opponents Attack on the Study I Cited
In my last argument, I cited a study from the Heritage Foundation showing that the Cap and Trade bill from 2009 would cost each household $3,900 annually. This study took into account the long term lost output and higher energy costs associated with the Cap and Trade bill.
I expected my opponent to respond to this by explaining what he sees as problems with this study. Instead, he resorts to an Ad Hominem attack on the Heritage Foundation:
" This study came from the Heritage Foundation, a conservative American think tank. As extensive research has shown, the conclusions of a study usually support the interests of the study's financial sponsor. [2-3] Therefore, the findings of my opponent’s study should not be weighted heavily."
My opponent did not even mention why the results of the study may be wrong. He seems to believe that attacking the Heritage Foundation is enough to discredit this study. Studies need to be judged on their methodology above all else, something that my opponent does not even mention.
My opponent does cite a few studies that show the 2009 Cap and Trade bill having much smaller costs than the study I cited found. I mentioned why this could be in my last post:
"My opponent countered by offering a couple studies that found much smaller impacts from Carbon Pricing. I'm having trouble reading these studies, but I have a couple of problems with them. First, do they take into account, fully, the lost long term output from Cap and Trade?
Even one of the studies my opponents offers finds significant output losses from Cap and Trade .
Second, do these studies rely on the unexplained premise that Government Spending will magically increase energy efficiency?"
I expected my opponent to respond to these questions, but he did not. I still hold that the Heritage Foundation study is superior because it fully takes these things into account.
The Private Sector is the Best Source of Energy Efficiency
My opponent disagrees with my assertion that the private sector is best at promoting energy efficiency. The core of his argument is this:
"Without governmental assistance, many individuals are unable to obtain energy efficient technologies."
Clearly, my opponent's argument is more complex than this, but I think that this is a pretty fair simplification of what he is arguing. However, I see this as another flawed argument.
The core of my argument is that energy will only become more efficient through the private sector. My opponent seems to forget that a key part of en energy being "more efficient" is that "more efficient" energy would also be cheaper. When things get more efficient, they increase in quality and decrease in price.
This is where I see a flaw in my opponents argument. He ignores that producers of energy will look for ways to offer energy at cheaper prices, in trying to make their products more attractive to consumers. In order to make their energy cheaper, producers will find more efficient ways to produce energy. This is how the private market has always worked. Over time, energy will get more efficient, and, therefore, more affordable.
Carbon Pricing Tends to Make Companies Move Abroad
My opponent claims that this is not true. He first says that other countries are switching to Cap and Trade systems, including China. He links to an article proving this. This article, however, has some Chinese officials making very vague claims for a Carbon Pricing system in 2015. My opponent does not give any reason to believe that China will actually switch to a well enforced Cap and Trade System. Given China's bad record on a number of other issues, there is little reason to believe that China will enforce a Cap and Trade system .
The rest of my opponent's argument relies on the ideas that 1) Carbon Pricing will bring in a lot of Revenue, which will be spent on Business Incentives and 2) Carbon Pricing will increase Energy Efficiency more than the Private Sector would have. Please read the earlier parts of this post where I prove these are both false assertions.
Carbon Pricing Will not Substantially Reduce Global Emissions
I recommend reading my post in the third round on this issue and the above issue. Carbon Pricing does, in fact, send many companies overseas where they can pollute more freely.
My opponent cites the fact that The Acid Rain Cap and Trade system seemed to reduce these emissions. This does nothing to refute my point. I have always allowed that Carbon Pricing will reduce US emissions. My claim is that they will not reduce Global Emissions by a lot. The Acid Rain case did not look at this.
Economists on this Issue
My opponent never showed a survey showing all Economists support Carbon Pricing. However, we seem to agree that this is not particularly important in the first place.
I think I have made a fairly strong case that Carbon Pricing does hurt the economy.