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Climate Hustle

Global warming will depress economic growth in Trump country

Posted on 7 May 2018 by dana1981

A working paper recently published by the Federal Reserve Bank of Richmond concludes that global warming could significantly slow economic growth in the US.

Specifically, rising summertime temperatures in the hottest states will curb economic growth. And the states with the hottest summertime temperatures are all located in the South: Florida, Louisiana, Texas, Mississippi, Oklahoma, Alabama, Georgia, South Carolina, Arkansas, and Arizona. All of these states voted for Donald Trump in 2016.

This paper is consistent with a 2015 Nature study that found an optimal temperature range for economic activity. Economies thrive in regions with an average temperature of around 14°C (57°F). Developed countries like the US, Japan, and much of Europe happen to be near that ideal temperature, but continued global warming will shift their climates away from the sweet spot and slow economic growth. The question is, by how much?

The new working paper concludes that if we meet the Paris target of staying below 2°C global warming, US economic growth will only slow by about 5 to 10%. On our current path, including climate policies implemented to date (which would lead to 3–3.5°C global warming by 2100), US economic growth would slow by about 10 to 20%. In a higher carbon pollution scenario (4°C global warming by 2100), US economic growth would slow by about 12 to 25% due to hotter temperatures alone.

Republicans have this totally wrong

House Majority Whip Steve Scalise, who represents Louisiana (the second-hottest state), recently introduced a new anti-carbon tax House Resolution. Scalise introduced similar Resolutions in 2013 with 155 co-sponsors (154 Republicans and 1 Democrat) and in 2015 with 82 co-sponsors (all Republicans). The latest version currently only has one co-sponsor, but more will undoubtedly sign on. All three versions of the Resolution include text claiming, “a carbon tax will lead to less economic growth.”

As the economics research shows, failing to curb global warming will certainly lead to less economic growth. Climate policies could hamper economic growth, but legislation can be crafted to address that concern.

For example, as Citizens’ Climate Lobby notes in its point-by-point response to the Scalise Resolution, an economic analysis of the group’s proposed revenue-neutral carbon tax policy found that it would modestly spur economic growth(increasing national GDP by $80 to 90bn per year). With this particular policy, 100% of the carbon tax revenue is returned equally to households, and for a majority of Americans, this more than offsets their increased costs. As a result, real disposable income rises, and Americans spend that money, spurring economic growth.

REMI

Modeled change in real disposable personal income in the US resulting from the CCL rising revenue-neutral carbon tax. Illustration: Regional Economic Models, Inc.

In short, failing to implement climate policies will certainly slow economic growth, especially in hot, red, southern states. A carbon tax, if crafted smartly, could modestly spur economic growth. Blind opposition to carbon taxes is simply bad for the economy and especially bad for Trump voters.

It’s worse for poorer countries

While the Federal Reserve paper focused on the US economy, developing countries will be made much worse off by climate change. Many third world countries are located closer to the equator, where temperatures are already hotter than the temperature sweet spot identified in the 2015 Nature study. A new paperpublished last week in Science Advances also found that these poorer tropical countries will experience bigger temperature swings in a hotter world. Because of this combination of hot temperatures with bigger swings in countries with fewer resources available to adapt, these poorer nations are the most vulnerable to climate change impacts.

This is a key moral and ethical dilemma posed by global warming: as an important 2011 study concluded, the countries that have contributed the least to the problem are the most vulnerable to its consequences. Meanwhile, wealthy countries are already lagging behind their promised financial aid to help poor countries deal with climate change.

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Comments

Comments 1 to 3:

  1. Yes climate change will hurt red states and Trumps supporters more, however the blue collar workers won't be able to work it out, and are under his spell because Trump knows how to play them, and Trumps more astute business supporters dont care, because they are wealthy enough to escape the problems, or so they believe. But climate change will ultimately make everyone poorer than they would have been, because it degrades the wealth creating ability of the overall system.

    It's interesting that the highest income tax period in America was from from 1945 - 1975 and this coincided with the highest rates of economic growth and personal prosperity. While correlation doesn't necessarily mean causation of course, it does suggest that higher taxes don't necessarily impede growth.

    Imho it probably depends on the nature of the tax, and what its used for, and with a revenue neutral carbon tax, or carbon tax and dividend  the money is likely to flow back into job creating activities rather the black hole of government. So I struggle to see how it would reduce gdp growth, and its more likely to be neutral in effect, but of course when you factor in the growth destroying aspect of climate change, such a tax is effectively enhancing growth.

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  2. Out here in the real world the more money you have the larger your carbon footprint......period!

    Unless we tax the heck out of every carbon emitting activity (which is just about everything) and use ALL of that money to pay people to NOT do carbon emitting activities then there will be no net gain in a carbon tax, certainally not any that makes a difference.

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  3. Jef @2

    "Unless we tax the heck out of every carbon emitting activity (which is just about everything) and use ALL of that money to pay people to NOT do carbon emitting activities then there will be no net gain in a carbon tax, certainally not any that makes a difference."

    We don't have to tax "the heck out of nearly everything". Just fossil fuels and products like cement etc. Other products have a carbon content because of the energy used in manufacture and transport, so you wouldn't tax them twice. It really depends on how the tax is structured, and there are various approaches.

    I dont see that you have to pay people (the consumer) specifically not to do carbon emitting activities, and its hard to see how you would enforce this practically. For example Several countries have carbon taxes, and British Columbia for example has a small carbon tax which has provided a net gain as in this article.. They dont give all the tax back to the people or spend it on low carbon activities, as far as I'm aware. I stand to be corrected.

    From the article :"The tax, which rose from 10 Canadian dollars per ton of carbon dioxide in 2008 to 30 dollars by 2012, the equivalent of about $22.20 in current United States dollars, reduced emissions by 5 to 15 percent with “negligible effects on aggregate economic performance,” according to a study last year by economists at Duke University and the University of Ottawa."

    I agree obviously it will need to be set much higher to lead to 50% reductions, but if its tax and dividend this keeps power in consumers hands.  The economics suggest enough would be spent on low carbon goods to make a difference.

    However personally I think some of the tax should however go to manufacturers subsidising electric cars, so it would be a 'partial' tax and dividend scheme. I think the important thing is not to have such a dividend end up in general government spending on education, military etc.

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