Summary of “The Economic, Climate, Fiscal, Power

,
and Demographic Impact of a National
FeeandDi!idend Car"on Ta#$ %y &E'I and Synapse
Summary by Danny Richter, Ph.D.
("out the study)
Citizens' Climate Education Corporation (CCEC) and Citizens' Climate Lobby (CCL)
contracted a third party, Reional Economic !odelin, "nc. (RE!") to do a nation#$ide study on the
impact o% its &ee and Di'idend (&(D) policy. )he policy modeled is not a per%ect representation o%
&(D (most ob'iously, &(D beins at *+, per ton $hereas the study bean at *+- per ton), but it is
.uite close, and accounts %or the impact &(D's border tari%% ad/ustment $ould ha'e on the 0S
economy. RE!" used three models to do the study1 (+) )he Reional Enery Deployment System
(ReEDS) built by the 2ational Rene$able Enery Laboratory and run by Synapse Enery Economics3
(4) the Carbon (nalysis )ool (C())3 an enhancement o% the open#source C)(! model and populated
by data %rom the 0S Enery "n%ormation (dministration (E"()3 and (5) RE!" P"6, a proprietary
dynamic model o% subnational units o% the 0nited States7 economy $hose methodoloy and e.uations
are peer#re'ie$ed and a'ailable to the public. 8utput included impacts on +9- industries, nationally
and reionally %or the : ;0.S. Census< reions commonly rouped toether in a number o% %ederal data
sources and in the enery mar=et %orecasts %rom the E"(.
!odel results $ere able to estimate the e%%ects o% the policy on >DP, personal income,
employment, prices, carbon dio?ide emissions, mortality due to 28? and S8? emissions, re'enues,
monthly di'idend amount, enery eneration capacity by technoloy, enery eneration by type,
in'estment in po$er, population, and economic miration on both a reional and national le'el. "ncome
and employment %iures %or each o% +9- industry cateories considered are included. )hese +9-
industries encompass the entire economy.
)he results are all relati'e to a baseline case $here there is no carbon ta? (modeled by usin the
e?act same set#up, $ith a *-@ton 'alue %or the carbon ta?). "n other $ords, all three models $ere run
t$o times. Aoth times, the set#up $as identical e?cept %or one thin1 the price o% carbon $as either *-
%rom 4-+9#4-5,, or $as *+- per ton in 4-+9 and increased by *+- e'ery year a%ter that.
*hy should we trust &E'I+
CCL hired RE!" because $e are committed to .uality data %ree o% ideoloical taint that you
miht et %rom some thin= tan=s. (s its name suests, RE!" models reional economics. "t does this
$ell. Dr. >eore )reyz %ounded RE!" in +:B-, a%ter $or=in as an academic $ith 2obel Prize#$inner
La$rence Clein and other pioneers in the %ield o% econometric modelin. RE!"'s modelin products
re$ %rom Dr. )reyz's $or= on one o% the %irst reional macroeconomic models e'er created1 the
!assachusetts Economic Policy (nalysis (!EP() model. Close lin=s to the upper echelons o%
academia ha'e persisted throuhout RE!"'s 56 decades o% e?perience, resultin in se'eral academic
publications in /ournals such as the American Economic Review, the Review of Economics and
Statistics, and the Journal of Regional Science.
)his e?perience and e?pertise is $hy pri'ate and public entities %rom all across the political
spectrum ha'e entrusted RE!" to do their analyses, and paid them $ell %or that e?pertise. )hese %ormer
clients include, but are not limited to1 the (merican >as (ssociation ((>(), the 2uclear Enery
"nstitute (2E"), the 2ational &ederation o% "ndependent Ausiness (2&"A), the 2ational Education
(ssociation (2E(), the "nternational Arotherhood o% )eamsters, Aooz (llen Damilton, EE (%ormerly
Ernst and Eoun), PFC (%ormerly Price Faterhouse Coopers), and "C& "nternational. Li=e CCL and
CCEC, RE!" is truly nonpartisan.
"n that same spirit, CCL and CCEC did not attempt to in%luence the outcome o% the report in any
$ay. "n %act, $e $ere e?cited $hen $e sa$ that not all the results $ere positi'e %or e'ery reion,
because that spea=s to the interity o% the analysis. 8ur %irst priority is a li'able $orld, and $e can't et
there $ithout an honest and clear#eyed 'ie$ o% the %acts.
Study ,ighlights)
• C84 emissions decline 55G
a%ter only +- years, and ,4G
a%ter 4- relati'e to baseline.
(&iure +)
• 2ational employment increases
by 4.+ million /obs a%ter +-
years, and 4.B million a%ter 4-
years. )his is more than a +G
increase in total 0S employment
$e don't et $ithout a carbon
ta?H (&iure 4)
• +5,--- li'es are sa'ed annually
a%ter +- years, $ith a
cumulati'e 44I,--- (merican
li'es sa'ed o'er 4- years.
(&iure 5)
• *I-#*B, billion increase in >DP %rom 4-4- on, $ith a cumulati'e increase in national >DP due
to &(D o% *+.5I, trillion.
• Size o% monthly di'idend %or a %amily o% J $ith t$o adults in 4-4, K *4BB, and in 4-5, K *5:9.
(nnually, this is *5,J,9 per %amily o% J in 4-4, (*++,4 per capita##children et L di'idend).
• Electricity prices pea= in 4-49, then start to decrease.
• !a?imum cost#o%#li'in increase by 4-5, is +.I#4.,G, dependin on reion.
• Real incomes increase by more than *,-- per person in 4-4,. )his increase accounts %or cost
o% li'in increases.
• Electricity eneration %rom coal is phased#out by 4-4,.
• Aiest employment ains in healthcare, retail, and other ser'ices (e?cludin public
administration). )his is because people ha'e more money in their poc=ets to spend, and these
industries are most boosted by consumer spendin.
• Reional >ross Product is steady or risin in B o% : reions.
Figure -1 ./S/ C01 emissions under &(D (yello$) and $ithout a
carbon ta? (blue). &(D reduces 0S emissions to 9:G o% +::- le'els by
4-4,, and to ,-G by 4-5,.
*hy ,a!en2t Pre!ious Studies Found Such Positi!e Impacts+
)he ma/ority o% pre'ious reports considerin a carbon ta? ha'e not modeled a completely
re'enue#neutral carbon ta?, do not en'ision a policy $ith such an aressi'e rate o% increase, do not
ha'e the same detail as RE!" can pro'ide, do not consider a +--G di'idend, and do not report health
bene%its. Fhere re'enue#neutrality $as modeled, a ;double#di'idend< $as o%ten disco'ered in $hich
carbon emissions $ere reduced and economic output re$. (s these pre'ious studies ha'e hihlihted,
includin a !ay 4-+5 study by the Conressional Audet 8%%ice (CA8), a carbon ta? $ithout re'enue#
recyclin is a completely di%%erent policy %rom a carbon ta? that does recycle re'enue. )he t$o
policies, re'enue#neutral carbon ta? and a carbon ta? $ithout re'enue returned, should not be con%used
in terms o% their e%%ect on the economy.
&ailin to consider such a rapid rate o% increase in the carbon ta? has pre'ented pre'ious studies
%rom realizin the manitude o% emissions reductions and scale o% economic bene%it reported in this
study. 8%ten, this $as because rates o% increase $ere not considered politically %easible. !ost other
models, run by academics or thin= tan=s, do not ha'e the detail pro'ided by RE!". 8'er the past 5
decades, RE!"'s reional modelin techni.ues ha'e been re%ined, detail has been added, and
%unctionality impro'ed. )hree decades o% such $or= and re%inement in the pri'ate sector are $hat ha'e
i'en it an unmatched le'el o% detail and reliability di%%icult to replicate.
Despite these di%%erences in conception, the results o% RE!"'s $or= are larely consistent $ith
pre'ious studies in terms a bene%it to the economy, industry e%%ects, and emissions reductions. &or
e?ample, the !ay 4-+5 CA8 study also stated that a $ell#desined carbon ta? could increase economic
output and %ound a hypothetical *4- per ton carbon ta? scenario $ould result in an BG reduction in
emissions at the national le'el. "% held at that le'el, RE!"'s model setup $ould ha'e %ound comparable
results.
Interpreting the &esults) Ta3ehome points
)he biest ta=e#home %rom this study is that there is no economic arument aainst &ee and
Di'idend. "t creates /obs, ro$s the economy, sa'es li'es, and ma=es (mericans richer. "t does this
$hile also reducin C84 emissions to 9:G o% +::- le'els by 4-4,, and ,-G o% +::- le'els by 4-5,.
&(D there%ore sets the ne$ standard %or climate and economic policy. 8ther policies must no$
compare their climate and economic impact aainst &(D. )o be aainst doin anythin is to be aainst
/obs, aainst a larer economy, and aainst sa'in (merican li'es. Fe =no$ o% no politician $ho $ants
to be aainst these thins, and so $e hope that this study $ill clear the $ay to rapid passae o% &(D.
Revision 3: June 5, 2014
Figure 11 Thousands of 4o"s created by &(D relati'e to the
case $ithout a carbon ta?. 8'er a million /obs created $ithin
J years, o'er 4 million $ithin : years.
Figure 51 Cumulati!e li!es sa!ed %rom a'oided emissions
by reion under &(D. Reion E2C, includin 8hio, "ndiana,
!ichian, "llinois, and Fisconsin, has the most li'es sa'ed.
44I,--- (merican li'es $ould be sa'ed in 4- years under
&(D.

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