The climate crisis is often thought of as an environmental problem, but a group of professors from Indiana are proposing an economic solution. More than 50 professors in economics and related fields from Indiana University, Purdue University and the University of Notre Dame have written a letter calling on something to be done about the world’s changing climate, and suggesting a few economic levers that can be pulled to make that happen. They hope their letter will be well received — it’s addressed to Indiana's congressional delegation, but they hope its reach will be even broader. Much of the opposition to government efforts to combat climate change has revolved around concerns about costs and the potential damage to jobs and the economy. But economists from Indiana say even more is at stake. "If we don’t do something, that will be costly, too," said Jackson Dorsey, an assistant professor at IU's Kelley School of Business who focuses on environmental and energy economics. "And most analysis says it will be more costly if we do nothing.” Letter began with a conversation The origins of the letter can be traced to discussions between retired IU scientist Jeff White and U.S. Rep. Trey Hollingsworth, a Republican who represents Indiana’s 9th congressional district spanning from Indianapolis’ south suburbs to the state’s southern border. White said he realized during their conversations that the No. 1 issue Hollingsworth was worried about was the business case and the economics. That motivated White to contact economists from Indiana’s highly-respected institutions to address those concerns. Hollingsworth did not respond to IndyStar's requests for comment. Dozens of economists from the nation's heartland are ideal messengers for wary conservatives in Congress, said White, who is also a member of the Climate Citizens Lobby, an international environmental group that helps volunteers work with their elected officials on climate policy. “Here’s Indiana, a coal state and a conservative red state where this statement has come out and other states have not yet done this,” White added. “I think it could create a groundswell around the country.” Letter: Indiana economists call for more to be done on climate change Economic levers Not only does the letter say something needs to be done, but it lays out three main economic strategies for how to do it: a carbon tax or fee, a complementary dividend and a border tax adjustment. More specifically, the carbon fee puts a price on carbon dioxide that is released into the air. Companies and consumers would pay based on how much of the greenhouse gas is emitted during the production and consumption of goods and services. That price would increase overtime, so the idea is that it would motivate companies to change their processes to produce less carbon and for consumers to gravitate toward products that are less carbon-intensive. “Without a fee on carbon emissions, there’s too much generation of carbon emissions,” said Tim Cason, an economics professor from Purdue University who helped write the letter. “That’s why we need prices to limit how much we consume or emit.” This strategy should be done in a revenue neutral way, Cason said, meaning the money raised from the fee does not go to the government, but rather right back into citizens’ pockets — that’s the dividend. The fees collected will be divided up and given back to households as a rebate. Research shows that many people will actually receive more money back than they paid in fees, which Cason said is important for low-income families. The last component is a border tax adjustment, meaning the carbon fee would be adjusted for imports and exports to make sure that U.S. companies aren’t at a disadvantage to those abroad. 50 Indiana economic experts:In one voice, we ask Hoosiers in Congress to act on climate Looking for 'middle ground' “The letter and the policies we’re advocating should not be controversial or partisan,” Cason said. “You and I may disagree on what number or how much we need to reduce emissions by, but no matter the number, I think we all agree to get there the cheapest way possible. That’s what these strategies do.” These measures aren’t new, according to Dorsey, the IU economist who collaborated on the letter. The United States used to emit a lot of sulfur, which created problems with acid rain and other types of pollution. So in the 1990s, under the George H. W. Bush administration, the government placed a fee on sulfur emissions. It didn’t mandate how companies had to clean up their emissions, but they had to pay if they didn’t. “Turned out lots of companies found clever ways to reduce sulfur dioxide and we were able to clean up really fast and keep costs low,” said Dorsey. “So we have had some success from these types of policies and I think that’s one indication this would work well in this situation, too.” Even though these policies would need Congressional approval, it is a market-oriented approach rather than a regulatory one, Dorsey argued. The government-driven approach would be to decide what technology should be installed and mandate it. “This isn’t requiring any company to do anything in a particular way. But if you are producing or consuming a product that creates carbon emissions, you should have to pay for that because you’re imposing damages on other people,” he said. “That’s happening right now, but we’re not paying for the damages.” This is a topic that the federal government has been watching, according to Nelson Mark, a Notre Dame economics professor who was involved with the letter. About a year ago, he attended a conference by the Federal Reserve, the U.S. central banking system, devoted entirely to the economics of climate change. “They’re interested in climate change because they’re worried about financial stability,” said Mark, who said the conference was the catalyst for his interest in the topic. Sending a message Mark thinks the timing of the letter is right because the new Biden administration has made climate change a priority and has released broad-sweeping plans on how to tackle the problem. He hopes that means lawmakers will be more open and receptive to the suggestions outlined in their letter. Dorsey said he doesn’t see this as a left or right issue, but thinks the letter lays out policy that’s a “middle ground” between what the two political parties are suggesting to do for climate change. The consensus on this letter — more than 50 signatories — should speak volumes, Dorsey said. He hopes it’s loud enough that Indiana’s legislators will want to take a leadership role on climate change. “One thing we wanted to send is the message that it’s amazing how much consensus you have from a group of people who usually disagree and argue,” Dorsey said. “But we’re together on this, and that says this policy makes a lot of sense.” Call IndyStar reporter Sarah Bowman at 317-444-6129 or email at firstname.lastname@example.org. Follow her on Twitter and Facebook: @IndyStarSarah. Connect with IndyStar’s environmental reporters: Join The Scrub on Facebook. IndyStar's environmental reporting project is made possible through the generous support of the nonprofit Nina Mason Pulliam Charitable Trust.
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