Can the US Afford Cap-and-Trade?

Many Americans are fearful that if we reduce our carbon footprint, we will compromise our quality of life. This fear, however, is unfounded as evidence from around the United States demonstrates. U.S. states vary only modestly in average incomes, but have widely differing per capita emissions.

States like New York, California, Rhode Island, Oregon, Vermont and Washington have per capita emissions roughly one-half of the U.S. average and comparable to per capita emissions in Japan, German, Belgium, and Denmark. They prove that it is possible to have a US lifestyle, with a European sized carbon footprint! If all fifty U.S. states could emulate the per capita emissions of these states, we would go a long way toward our national emissions goals.

In our latest report, Greenhouse Gases and the American Lifestyle: Understanding Interstate Differences in Emissions, we analyze interstate variation in per capita emissions from residential fuel use, electricity use and transportation. Our report finds that the variation in states emissions is the result of many factors, some more controllable than others.

Some parts of the country are colder than others and face greater heating requirements; some are hotter and need more energy for cooling. People who live in rural, low-density states drive more than those who live in urban, high-density areas, resulting in more transportation emissions.

But there are other factors well within states’ control that affect household emissions. The extent of public transportation in urban areas varies widely from state to state; the level of gasoline taxes differs as well. Both of these policies have a direct, measurable effect on automobile usage and thus on transportation emissions. The reliance on coal power for electricity generation has a large impact on residential. Energy efficiency is important too.

The differences between states, though they look large at first glance, seem less so as the reasons why these differences exist become clearer. We can address the differences in impacts between states through smart climate and energy policies. A cap-and-trade program that auctions permits (or a carbon tax) will generate the revenue stream we need to invest in renewable energies, energy efficiency and assist the households that will be most impacted by climate policy.

Above all, information about policies that have succeeded in reducing emissions in some states should be circulated to the rest of the country to demonstrate that it is possible to produce a comfortable American lifestyle with carbon emissions well below average. Following their example more widely is an important first step on the road to reducing our greenhouse gas emissions to a sustainable level.

Economists across the country are organizing themselves to demonstrate that the U.S. economy can afford to deal with climate change. This report is just one part of this larger national effort, initiated by Economics for Equity and the Environment Network and our partners at Stockholm Environment Institute – US and Ecotrust.

We’ve launched a new website, RealClimateEconomics.org, that surveys the published literature in climate economics. It demonstrates that the weight of economic evidence supports immediate policy measures to address climate change. These studies show that the cost of preventing climate change can be addressed efficiently and fairly, and that the costs pale in comparison to the costs of inaction. Economics should not be used as the rationale for delaying action on climate change.

Kristen Sheeran is the director of Economics for Equity and the Environment Network (E3), a nationwide network of economists developing new arguments for environmental protection with a social justice focus. Prior to her role with E3 Network, she was an Associate Professor of Economics at St. Mary’s College of Maryland, Maryland’s public honors college.

Her research is primarily focused on the tension between equity and efficiency in climate change mitigation. She has published articles in Environmental and Resource Economics, Ecological Economics, Climatic Change, Journal of Economic Issues, Eastern Economic Journal, Seattle Journal for Social Justice, and Berkeley La Raza Law Journal. Her book, Saving Kyoto with Graciela Chichilnisky, will be published later this year by New Holland Press.

To watch a video interview with Dr. Kristen Sheenan in which she discusses this report,  click here.

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