Newswise — Any policy that limits the use of fossil fuels will raise their price, which will affect the real incomes of families. The Carbon Limits and Energy for America’s Renewal (CLEAR) Act, sponsored by Senators Maria Cantwell (D-Wash.) and Susan Collins (R-Maine) ensures that families’ incomes are protected from these price hikes, and that the money spent on carbon permits goes where it is most needed—into the hands of families and into productive investments to stimulate a clean, strong economy. “Clear Economics: State-Level Impacts of the Carbon Limits and Energy for America’s Renewal Act on Family Incomes and Jobs,” a new study by James K. Boyce and Matthew E. Riddle of the Political Economy Research Institute at the University of Massachusetts Amherst, assesses the impacts of the CLEAR Act on families. Boyce and Riddle not only consider the specific parameters of the bill, but also assess the state-by-state job creation from the bill. The CLEAR Act recycles 75 percent of carbon permit revenue directly to households as an annual dividend. The authors find that this dividend—which they calculate at roughly $297 per person—cancels out most of the differential impacts between states due to increases in fuel prices. The remaining inter-state differences could be eliminated by varying the dividend between states, so that states with higher fossil fuel costs would receive higher annual household dividends in the first years of the policy. Strikingly, the CLEAR Act is far more egalitarian across states than other major federal policies; for example, defense spending per person varies across states by a ratio of 50 to one.
Assessing the impact of the CLEAR Act on families across the range of the economic spectrum, Boyce and Riddle find that lower-income households benefit the most, and that middle class households are “made whole” in that their dividends more than offset their costs from higher fossil fuel prices. Only households in the very highest income brackets – who consume more and therefore pay more in fuel costs – fail to come out ahead after factoring in their dividends.
Increased fossil fuel costs from any carbon capping policy, such as the CLEAR Act, will encourage households to increase their energy efficiency and conservation, regardless of their state or income level, lowering household costs as well as lowering the levels of carbon in the atmosphere.
Boyce and Riddle also examine the economic impact of the Clean Energy Reinvestment Trust (CERT) Fund, which will receive the other 25 percent of carbon permit revenue under the CLEAR Act. CERT funds could be distributed in such a way as to offset any differential impacts of the increase in fossil fuel prices between states, by directing more investment to states with higher unemployment and/or greater potential economic dislocations from the shift away from fossil fuels. They find that the CERT Fund will create roughly 360,000 jobs nationwide.
The “Clear Economics” report is available at www.peri.umass.edu/fileadmin/pdf/other_publication_types/green_economics/CLEAR_Economics.pdf. More information is posted at www.peri.umass.edu/green_economics_guide/.
RSS