by Zora Ilunga-Reed, Daniel Jacobson, and Becca Nelson
This quarter we will be featuring a series of blog posts about the geopolitics of sustainability, recapping Roble's Hard Earth Talks. If you are interested in attending this series of sustainability talks at Roble or want to learn more about the Roble Living Laboratory for Sustainability at Stanford (ROLLSS), check out Roble's website. Here is a recap of the first talk, which focused on how carbon pricing policies affect low income households.
On Wednesday, September 26th, Chikara Onda, a doctoral student in Environment and Resources at Stanford discussed his research on how costs are distributed in carbon pricing policy. Climate policies can be either regressive or progressive. Regressive policies take proportionally more from low-income households, whereas progressive policies take proportionally more from high-income households. Climate change often disproportionality affects low-income communities due to geographic location (e.g., socioeconomic disparities between the global North and South), communities which often lack resources to enact climate adaptation measures. Thus, policymakers should take environmental justice frameworks into account by creating carbon policies that are progressive and by understanding how a climate policy may impact different income brackets. According to Onda, carbon pricing policies are often regressive because low-income homes tend to spend a greater percentage of their income on energy costs.
Onda's economic research uses computer-generated equilibrium (CGE) models to predict a policy’s outcomes regarding consumer behavior and the costs of goods and services, such as energy. Onda and other researchers at the Energy modeling forum compared different carbon policies’ economic consequences across different income levels. Ultimately, any form of a carbon tax would affect the cost of many products which would spread throughout the economy. Although a price hike would affect all consumers, it would disproportionately affect low-income households because they spend a larger share of net income on goods. However, in response to carbon-tax-related price increases, firms might change production processes, potentially stabilizing or minimizing the hike. It’s important to note that all actions in this scenario are hypothetical and actual price reactions to a carbon tax are challenging to predict.
The question then becomes “what should the government do with carbon tax revenue?” The most progressive option would be to redistribute revenue back to households on a per capita basis. Two other options include using the increased revenue to adjust capital and labor tax rates, both somewhat regressive options. Emission-heavy industries contribute higher paying jobs for less-educated workers. A new labor tax on these jobs might increase labor mobility away from environmentally damaging industries, thus compounding the positive effect of a carbon tax policy. However, this would negatively affect less-educated workers in need of high-wage jobs. Therefore it would be a more regressive policy.
Onda’s model also explored different sectors that people choose to work in and predicted how they might be affected by a carbon tax. Using individual data, Onda found that people have difficulty transferring their experience across sectors, meaning that a worker with 20 years of experience in one industry would earn lower wages if they had to switch to another industry, and would thus be regressively affected by a carbon tax if they worked in an emissions industry.
In our discussion of Onda’s talk, we weighed the regressive impacts of carbon pricing with our planet’s urgent need to reduce carbon emissions and had a hard time justifying regressive policies even if they cut emissions effectively. During his presentation, Onda made a point that many of the low-income countries in the tropics that contribute the least to climate change are feeling its worst effects. In times of such rampant wealth inequality in our own country, it doesn’t seem right that those with the least should bear the largest burden to solving the problems our planet faces. Policymakers should create carbon policies that reflect principles of environmental justice.
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This is a forum for students to share their writing on intersectional environmental topics, curated by Students for a Sustainable Stanford. Writers of all backgrounds, abilities, and perspectives are welcome.