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# - About the study: Summary of"The Economic, Climate, Fiscal, Power, and Demographic Impact ofa National Fee-and-Dividend Carbon Tax" By REMI and Synapse

Summaryby Danny Richter, Ph.D.

Citizens' Climate Education Corporation (CCEC) and Citizens' Clilnate Lobby (CCL) contracted a third party, Regional Economic Modeling, Inc. (REMI) to do a nation-wide study on the impact ofits Fee and Dividend (FAD) policy. The policymodeled is not a perfect representation of FAD (mostobviously, FAD begins at $15 per ton whereas the studybegan at $10 perton), but it is quite close, and accounts for the impactFAD's border tariffadjustment wouldhave on the US cconmny. REMI used three models to do the**study~** 

### 1. The Regional Energy Deployment System (ReEDS) builtby the National Renewable Energy Laboratory and run by Synapse Energy Economics; (2) the CarbonAnalysis Tool (CAT); an enhancement ofthe open-source ClAM model and populated by data from the US Energy InformationAdministration**(EIA)~** and (3) REMI PI+, a proprietary dynamic model ofsubnational units ofthe United States' economy whose methodology andequations

are peer-reviewed and available to the public. Output included impacts on 160 industries, nationally and regionally for the 9 "U.S. Census" regions commonly grouped together in a number offederal data

sources and in the energy n1arkct forecasts from the EIA. Model results were able to esrin1ate the effects ofthe policy on GDP, personal income, employment, prices, carbon dioxide emissions, mortality due to NOx and SOx**etnissions~** revenues, monthly dividend amount, energy generation capacity bytechnology. energy generation by type, investment in power, population, and economic migration on both a regional andnational level. Income and employment figures for each of 160 industry categories considered are included. These 160 industries encompass the entire economy. The results are all relative to a baseline case where there is no carbon tax (modeledbyusing the
exact same**set-up~** with a $0/ton value for the carbon tax). In other words, all three models were run two times. Both times, the set-up was identical exceptfor one thing: the price ofcarbon was either $0 from 2016-2035, orwas $10perton in 2016 and increased by $10 every year after that.

\\'hy 

### should we trust REl\fi? CCLhired REMI because we are committedto quality data free ofideological taint that you might get from some think tanks. As its name suggests, REMI models regional economics. Itdoes this well. Founded in 1980, REMI's modeling products grew from one ofthe first regional macroeconomic models evercreated; the Massachusetts Economic Policy Analysis (MEPA) model. This model was the product ofcollaborations between REMI's founder, a Nobel prize winner, and two otherrespected economists. Close links to the upper echelons ofacademia have persisted throughout REMI's 3+ decades ofexperience, resulting in several academic publications injournal such as the American Economic Review, the Review ofEconomics and Statistics, and the Journal ofRegional Science. This experience and expertize is whyprivate and public entities from all across the political

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# e spectrum have entrustedREMI to do their analyses, and paidthemwell for that expertizc. These fanner clients include, but are not limited to: the Ametican GasAssociation (AGA), the NuclearEnergy Institute (NEJ), the National Federation ofIndependent Business (NF1B), the National Education Association (NEA), the International Brotherhood ofTemnsters, BoozAllen Hamilton. EY (formerly Ernst and Young), PWC (formerly Price \Vaterhouse Coopers), and ICF International. Like CCLand CCEC, REMI is truly nonpartisan. In that same spirit. CCL and CCEC didnot attempt to influence the outcome ofthe report in any way. In fact, we were excitedwhen we saw thatthe study had some dark spots, because that speaks to the integrity ofrhe analysis. Our first priority is a livable worltL and we can't get there without an honest and clear-eyed view ofthe facts.



### Study Highlights:
6,000

• C02 emissions decline 33%, after only 10 years, and 5**2~o** after 20 relative to baseline. (Figure 1) "'5,000 c 

## .s**·~** 4,000 Ql E3ooo 

### o' 

### •

• National employment increases by 2.1 millionjobs after I0 years, and 2.8 million after 20 years. This is more than a 1 

### o/o increase in total US employment

we don't get without a carbon tax! {Figure 2) 13,000 lives arc saved annually after 1 0 years, with a cumulative 227.000American lives saved over 20 years. (Figure 

### 3) 

# ! 2,000**~** 1000

0**~** w**~** oo m o**~** N**~ ~** **~ ~** **~** oo m a rl N m**~ ~**  rl rl rl rl rl N N N N N N N N N N M M M M M M c c 0 0 0 0 0 0 0 c c 0 0 0 0 0 0 0 0 0 0 NNNNNNNNNNNNNNNNNNNNN

· NEMS/ReEDS Baseline CAT/ReEDS Alternative

Figure 1: U.S. C02 emissions under FAD (yellow) and without a carbon tax (blue). FAD reduces US emissions to 69% of 1990 levels by 2025, and to 50% by 2035.

• $70-$85 billion increase 

### in GOP from 2020 on, with a cumulative increase 

### in national GOP due
to 

### f'AD of

### $1.37 5 trillion.

• SIZe ofmonthly dividend for a family of4 with two adults in 2025 

### = $288, and in 2035 = 

### $396. Annually, this is $3,456per family of4 ($1152 per capita--children get 

### Y2 dividend) in 2025. Electricity prices peak in 2026, then strut to decrease.

• Maximum cost-of-living increase by 2035 is 1.7-2.5%, depending on region. Real incomes up over $500per person in 2025; this is after accounting for cost ofliving increases.

• By 2025, up to $400billion in carbon tax revenues, all ofwhich is returned to American households.

• Electricity generation from coal is phased-out by 2025. Biggestemployment gains in hcalthcare, retail, and other services {excludingpublic administration). This is because people have more money in theirpockets to spend, and these industries arc mostboosted by consumer spending. Regional Gross Product is steady or rising in 8 of9 regions.

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# e e e e Ill c :l,OOO**~** 2/>00 _g**~** 2,000**~** {1.500 0 {; 1,000 

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Figure 2: Thousands ofjobs created by FAD relative to the

case without a carbon tax. Over a millionjobs created within 4 years, over 2 million within 9 years. ·2SO
j' -200**~ ~**  -150 E {;**~** 100 0 -{:. ·50

0**~~~oomo-Nm•~~~OO~OrlN~¢~ ~~~~MNNNNN~NNNMmMmm~m**  aooooooooooooooooooco**~NN~-~NN~M~N-NNNN~N~~** ·PAC

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Figure 3: Cumulative lives saved fmm avoided emissions by region under FAD. Region ENC, including Ohio, Indiana, Michigan. Illinois, and Wisconsin, has the most lives saved. 227.000American lives would be saved in 20 years under FAD. 

### Why Haven'tPrevious Studies Found Such Positive Impacts? The n1ajority ofpreviou..<; reports considering a carbon tax have not n10deled a completely revenue-neutral carbon tax. do not envision a policy with such an aggressive rate of**increase~** do not have the same detail as REMI can provide, do not consider a 1**00~/o dividend~**  and do notreport health benefits. \\'here revenue-neutrality was Inodcled, a "double-dividend" was often discoveredinwhich carbon emissions were reduced andthe output grew. As these previous studies have highlighted, including a May 2013 studyby the Congressional Budget Office {CBO), a carbontax without revenuerecycling is a cotnpletely different animal from a carbon tax that does recycle revenue. The two policies. revenue-neutral carbon tax and a carbon tax without revenue returned, should not be confused in tenns oftheir effect on the economy. Failing to consider such a rapid rate ofincrease in the carbon tax prevents previous studies frmn realizing the magnitude ofemissions reductions and scale ofeconomic benefit reported in this study. Often, this is because rates ofincrease were not considered politically feasible. Most other**models~** nm by acade1nics orthink tanks, do not have the detail provided by REMI. Overthe past 3 decades, REMl's regional modeling techniques have been refined, detail has been added, and functionality improved. Three decades ofsuch work and refinement in the private sector are whathave given it an unmatched level ofdetail and reliability difficult to replicate. Despite these differences in conception, the results ofREMI's work are largely consistent with previous studies in terms offinding a benefit to the economy, industry effects, and emissions reductions. For exatnple, the May 2013 CBO also stated that a well-designed carbontax couldincrease economic output, and found a hypothetical $20 per ton carbon tax scenario would result in an 8o/o reduction in emission at the national level. Ifheld at that level, REMis model setup would have found comparable results.


### Interpreting the Results: Take-home points The biggest take-hon1e frotn this study is that there is no econmnic argument against FAD. It
createsjobs, grows the economy, saves lives, and makesAmericans richer. Itdoes this while also taking

a serious chunk out ofC02 emissions, reducing them to**69~/o** of 1990 levels by2025, and**SO~Io** of 1990 levels by 2035. To be against FAD is not only to be against a stable climate, but it is to be againstjobs, against a larger economy, and against savingAmerican lives. We know ofno politician who wants to be against these things, and so we hope that this study will clear the way to rapidpassage ofFAD.