Rethinking the Green New Deal: Using Climate Policy to Address Inequality

By Mathur, Aparna | AEI Paper & Studies, July-August 2019 | Go to article overview

Rethinking the Green New Deal: Using Climate Policy to Address Inequality


Mathur, Aparna, AEI Paper & Studies


I. INTRODUCTION

The Green New Deal is best understood as an ambitious mobilization of the economic and environmental resources of the country to achieve- within a period of ten years-the twin targets of a cleaner economy with net-zero greenhouse gas emissions and a more equal and fair society where workers can get decent paying jobs with benefits, healthcare, housing and economic security (H.Res.109, 116th Cong. 2019). In terms of specific climate policy, it calls for repairing and upgrading the infrastructure, as well as manufacturing facilities in the United States in order to eliminate pollution and greenhouse gas emissions, guaranteeing universal and affordable access to clean water and electricity, investing in renewable power sources and upgrading to "smart" power grids, restoring and protecting threatened and weakened ecosystems, and finally investing in cleaner transportation systems. On the public policy goals of strengthening labor standards and boosting worker wages, it calls for providing people with affordable and high quality healthcare, housing, benefits such as paid family leave and vacation and sick days, and addressing the challenges of wage stagnation as well as growing income and wealth inequality across race and gender. While the list of goals proposed by proponents of the Green New Deal is long, details on how to achieve these goals are lacking. What are the best means to address climate policy goals? Which policy changes will result in higher wages and better jobs for workers? How do we address inequality, especially across race and gender? In this paper, I provide a framework for thinking through these questions and a means of connecting climate policy targets with inequality reduction.

What the Green New Deal gets right is its attempt to make climate policy a centerpiece of its policy platform. At a global level, carbon emissions from fossil fuels have increased significantly over the last several decades. As per the Intergovernmental Panel on Climate Change, carbon dioxide emissions have increased 90 percent since 1970, with emissions from fossil fuel combustion and industrial processes contributing about 78 percent of the total greenhouse gas emissions increase from 1970 to 2011 (IPCC, 2014). These assessments suggest that these emissions increases, as well as the rising concentrations of greenhouse gases in the atmosphere, are driving increases in the global average surface temperature. However, the best means to achieve greenhouse gas emissions reductions is not outlined in the Green New Deal bill text.

The second broad goal of the Green New Deal is its stated aim of reducing inequality and improving the lives of poor households. Again, a focus on inequality, and particularly on the need to improve economic opportunity for low-income households, is warranted. While the extent to which income inequality has widened is debated (Auten and Splinter, 2018), there is no denying that there is a lack of economic opportunity for disadvantaged households, in terms of access to good, decent paying jobs, schooling for children, and access to good social networks (Chetty et al, 2016).

The challenge with the Green New Deal is to combine these two goals and address the question of financing both in a practical as well as an effective manner. As I explain in this paper, one such solution could be a carbon tax. A well-designed carbon tax could raise significant revenues on an annual basis, which could then be used to achieve other social and economic policy goals (Mathur and Morris, 2015).

This paper is organized as follows. In Section II, I begin by introducing the concept of a carbon tax as a means to achieving climate goals. I discuss the possible implications of a carbon tax on households, as well as the macroeconomy in terms of achieving emissions reductions and raising tax revenues. Section III considers additional revenue sources, such as a 70 percent tax on earned income above $10 million. …

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