Economists

Economists’ Statement on Climate Change in Washington:

Climate change is ultimately a national and international issue, but the lack of progress at those levels has increased the importance of state and regional action. An especially promising approach is the revenue-neutral carbon tax that British Columbia adopted in 2008: it provides real-world evidence that significant greenhouse gas emission reductions can be achieved without harming economic growth. As economists, we encourage the governor and legislature in Washington State to consider a similar policy to improve our state’s economy and environment and help propel this worthy idea onto the national agenda.

Right now the prices of the goods we buy don’t capture the true costs of making and using those goods, including the costs associated with polluting our air and water. A carbon tax would help to change this by increasing the price of carbon-based fossil fuels (such as coal, oil, or natural gas) when they are sold in Washington State. This will make the prices of goods and services more accurately reflect all the costs of using and producing them.

A carbon tax is appealing because it sends a price signal which stimulates our market-based economy to innovate and develop new clean-energy technologies. It also provides flexibility by allowing households and businesses to adjust in the way that is best for them: for example, companies might choose to improve the efficiency of their heating and cooling systems, workers might consider alternatives for their daily commute, and families might add insulation in their homes. Both economic theory and historical evidence strongly support the use of market-based approaches such as carbon taxes as the most efficient and effective way to achieve environmental goals.

To encourage sustainable economic growth we believe that a carbon tax should be made mostly if not entirely “revenue neutral” by using most if not all of the revenue to cut existing taxes on households and businesses. With a thoughtfully designed policy—one that addresses distributional impacts, including those on low-income households and energy-intensive trade-exposed businesses—the average family in Washington State would see little to no change in its standard of living, and the average business would see little to no change in its level of competitiveness with other businesses inside or outside the state. Given the economic distortions created by existing taxes, it is even possible that a shift to carbon taxes could reduce the overall economic burden of the tax system, thus improving our state’s economy as well as our environment.

There is a growing consensus that we need to take action on climate change by reducing carbon emissions. The most effective way to do this is by putting a price on carbon, and the revenue-neutral carbon tax in British Columbia makes Washington State an ideal location to implement a similar policy. With a carbon tax we can have a cleaner environment and a stronger economy, and Washington State can lead the way to a brighter future for us and our children.

Professional Economist Endorsements (as of 11/3/2014)

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