The CSR Newsletters are a freely-available resource generated as a dynamic complement to the textbook, Strategic Corporate Social Responsibility: Sustainable Value Creation.

To sign-up to receive the CSR Newsletters regularly during the fall and spring academic semesters, e-mail author David Chandler at david.chandler@ucdenver.edu.

Thursday, February 25, 2021

Strategic CSR - Water futures

The story in the article in the url below seems like a big deal:

"Water joined gold, oil and other commodities traded on Wall Street, highlighting worries that the life-sustaining natural resource may become scarce across more of the world."

Specifically:

"Farmers, hedge funds and municipalities alike are now able to hedge against -- or bet on -- future water availability in California, the biggest U.S. agriculture market and world's fifth-largest economy. CME Group Inc.'s January 2021 contract, linked to California's $1.1 billion spot water market, last traded Monday at 496 index points, equal to $496 per acre-foot."

The key, of course, is whether trading water futures will potentially solve the problem of scarcity by allocating the resource more efficiently, or whether it will exacerbate the problem by pricing certain segments out of the market. This issue has become particularly salient in California in recent years due to the increase in frequency of natural disasters:

"The contracts, a first of their kind in the U.S., were announced in September as heat and wildfires ravaged the U.S. West Coast and as California was emerging from an eight-year drought. They are meant to serve both as a hedge for big water consumers, such as almond farmers and electric utilities, against water prices fluctuations as well a scarcity gauge for investors worldwide."

This approach to addressing water scarcity is being trialed in California, but is something that is increasingly relevant to many parts of the world. It is estimated, for example, that "two billion people now live in nations plagued by water problems, and almost two-thirds of the world could face water shortages in just four years":

"The United Nations has long warned that human-driven climate change is leading to severe droughts and more flooding, making water availability increasingly less predictable. In California, the most recent acute dry spell stretched from December 2011 until March of last year, according to the U.S. Drought Monitor. The most dire effects took hold in July 2014, with 58% of the state's land suffering 'exceptional drought,' leading to crop and pasture losses and other water emergencies."

The introduction of these financial instruments into the market for water has been made possible by a "Water Index" that was developed specifically for the California market:

"The futures are tied to the Nasdaq Veles California Water Index, which was started two years ago and measures the volume-weighted average price of water. … The index sets a weekly benchmark spot price of water rights in California, underpinned by the volume-weighted average of the transaction prices in the state's five largest and most actively traded markets. The futures are financially settled, as opposed to requiring the actual physical delivery. Contracts include quarterly ones through 2022, with each representing 10 acre-feet of water, equal to roughly 3.26 million gallons."

The futures, which are intended to "help water users manage risk and better align supply and demand," are particularly valuable for heavy users of water, such as farmers, who would benefit from a more predictable market price. While this sounds pragmatic, the application of market forces to allocate something that many consider to be a fundamental right (access to clean water) raises the stakes. You only have to look at what happened recently to the market for electricity in Texas (when unforeseen events caused widespread outages and exorbitant price increases) to see the potential danger. Given the anticipated ongoing shortage of fresh water, it does not take too much imagination to see something similar happening in California.

Or, as Stephen Colbert put it: https://youtu.be/gnEDF0tTReI

Take care
David

David Chandler
© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/


California Water Futures Begin Trading Amid Fear of Scarcity
By Kim Chapman
December 6, 2020
Bloomberg Businessweek

Posted by David Chandler at 10:24 PM

Tuesday, February 23, 2021

Strategic CSR - Bill Gates

You may have seen some of the media interviews Bill Gates has been doing recently to promote his new book, How to Avoid a Climate Disaster:

"How to Avoid a Climate Disaster details the transformation necessary to reverse the effects of decades of catastrophic practices. We need, Gates calculates, to remove 51bn tonnes of greenhouse gases from the atmosphere every year. Failing to do so would cost more than the 1.5 million lives already lost to Covid-19 and could cause, he calculates, five times more deaths than the Spanish flu a century ago."

The article in the url below sums up the book and the coverage he has been getting pretty well, as well as highlighting the limits to Gates' argument. In short, the article makes clear that the constraints we face are not technical or scientific, but human:

"… we have to ask why, when what needs to be done seems obvious, we have been so slow to act. And why … has the world simply failed to come together?"

The solutions Gates provides in the book are, for the most part, technical. But, because the problem we face is essentially a human one, then it is a human solution that we must look for:

"Seemingly unanswerable scientific evidence can be torpedoed by powerful vested interests, or sidelined by bureaucratic indifference, or undermined by weak and incompetent political leaderships that make commitments they do not honour. Or they can be sabotaged by geopolitical rivalries or simply by nations clinging to old-fashioned and absolutist views of national sovereignty. As a result, the multilateral cooperation necessary to deal with a global problem does not emerge, and the very real tensions between economic and environmental priorities, and between the developed and developing world, go unresolved."

Gates has weighed-in publicly on the world's problems before (in addition to the wonderful behind-the-scenes work done by the Bill & Melinda Gates Foundation), most notably in his 2008 Davos speech on "creative capitalism" (see Strategic CSR – Bill Gates). But, what I think Gates misses is that the world is not dominated by automaton technocrats, like himself, but is instead made up of very human individuals who make decisions for all kinds of reasons that, often, have little to do with the most rational or scientific or technical option. The article gets at that by pointing out that there are all kinds of reasons why the 'correct' decision will not be made in many/most scenarios (even when self-destruction is a viable option). This quote in the article struck me as being the core of the problem (and what Gates doesn't seem to see):

"Taken together these [technical] measures could meet the world's objective of net carbon zero. But if politics was simply the application of reason and science to contemporary challenges, we might have not only solved the climate crisis by now but easily cured Covid-19 and other infectious diseases too."

In other words, the article highlights the limits of technology in a world dominated by human decision making. But, unfortunately, having identified this very real barrier to progress, the author of the article (who was Prime Minister of the UK from 2007 to 2010) then falls into exactly the same trap he accuses Gates of falling into. Rather than proposing a set of technological and scientific solutions, he proposes a purely political set of solutions, but fails to address the much stronger forces that are set against radical change:

"But to operationalise the Paris agreement – to limit warming to 1.5 degrees – requires countries to halve their CO2 emissions by 2030. So vested interests like big oil will have to be enlisted for change. The populist nationalist and protectionist rhetoric of irresponsible demagogues will have to be taken head on. And supporters of a stronger set of commitments will have to show why sharing sovereignty is in every nation's self-interest, and that coordinated global action is indeed the only way to end the mismatch between the scale of the environmental problems we face and our current capacity to solve them. Success will come by demonstrating that the real power countries can wield to create a better world is not the power they can exercise over others but the power they can exercise with others."

Yes, identifying the end result is easy, and asking for the world to cooperate is logical. What is much harder is explaining exactly how each of these valid goals will be achieved in a human world. One reason why firms do not develop more meaningful sustainability policies is that key stakeholders are unwilling to support the implementation of such policies, especially in terms of paying the accompanying costs. Similarly, of course, a major reason why politicians do not advocate for more radical sustainability laws is that many voters will not vote for them. The most ridiculous argument I have seen made against a carbon tax is that it will push up prices for fuel and electricity. Yes, that is exactly the point. It is supposed to push up prices because that is how we reduce consumption. But, that does not mean that voters are willing to pay those higher prices. And, if they are not willing to pay them, then they are unlikely to vote for the politicians who proposed them. Hence, no carbon tax.

Until we, collectively, agree we are willing to pay the costs associated with switching to a more sustainable lifestyle, I do not see how we can move fast enough to make the changes that need to be made.

Take care
David

David Chandler
© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/


How to Avoid a Climate Disaster by Bill Gates review – why science isn't enough
By Gordon Brown
February 17, 2021
The Guardian 

Posted by David Chandler at 5:59 PM

Thursday, February 18, 2021

Strategic CSR - Pink tax

The article in the url below caught my eye because of the enlightened approach to women's healthcare (and associated issues around poverty) that the Scottish government is demonstrating:

"On Nov. 24, Scotland became the first country in the world to establish through legislation that access to period products is a right, a move that First Minister Nicola Sturgeon described as groundbreaking. It caps a four-year campaign backed by a wide coalition of trade unions, women's groups, and charities and led by Monica Lennon, a member of the Scottish Parliament."

As the title of the article suggests, the issue of healthcare access in this case is secondary to the issue of poverty, which acts as a barrier to that access:

"The aim, Lennon says, is to eradicate 'period poverty'—the cost of the products can be prohibitive—and end the stigma around menstruation."

Some more detail about the legislation:

"Under The Period Products (Free Provision) (Scotland) Act, approved unanimously in the Scottish Parliament, local governments will be required to make free supplies available in public buildings such as libraries and recreation centers to anyone who wants them. (Schools, colleges, and universities in Scotland have offered free products since 2018, and the legislation compels them to keep doing so.) The Scottish government estimates that about 13% of people who have periods will take part in the program in its first year. That would put costs, which it will cover, at about £8.7 million ($11.6 million) for 2022-23. Full implementation of the program will take two years."

As the budget to implement the legislation indicates, without assistance the cost of these products can quickly rise:

"In the United Kingdom, the average woman spends about £4,800 on the products over her lifetime, according to a 2018 study … and that amount can be higher for people with medical conditions such as endometriosis, which can cause heavier periods. For households living on low incomes, the expense is a burden."

As a result, "period poverty" is a real issue for many women, even in developed countries:

"A survey of more than 1,000 women in Scotland, which helped galvanize support for the bill, found that a fifth had experienced period poverty at some point in their lives. Unable to afford tampons or pads, some resorted to using toilet paper or even rags. One in 10 said they prioritized buying food over the products."

In many countries, women's healthcare products are not given preferential taxing, and are sometimes taxed higher because of the stigma that is often attached to them:

"In some countries, they're even treated as luxury goods and taxed like cigarettes, alcohol, and jewelry. The 2020 tax rate on menstrual products was 27% in Hungary, 25% in Sweden, and 16% in Mexico. In the U.S., 30 states levy a sales tax on tampons and pads, according to the advocacy group Period Equity, and they can't be purchased with food stamps."

Such taxes are considered discriminatory by activists due to the fact that they are not applied equally throughout the population:

"A handful of countries have scrapped the tax. The first was Kenya in 2004, and others that followed include Australia, Canada, Ireland, and from January, the U.K., where 'the tampon tax' became so controversial that major supermarkets started covering the cost of it themselves in 2017."

Many of these points are related to the larger issue of a pink tax, which is defined by Wikipedia as follows:

"The pink tax is a phenomenon often attributed as a form of gender-based price discrimination, with the name stemming from the observation that many of the affected products are pink. This is sometimes but not always a literal tax. Regardless of whether tax policies of state or federal governments are involved, there is a broad tendency for products marketed specifically toward women to be more expensive than those marketed for men, despite either gender's choice to purchase either product. The NYC Department of Consumer Affairs conducted a study that concludes that women's products are typically more expensive than men's (in New York city) without reasonable cause. There are many causes of this discrepancy, including the tampon tax, product differentiation, and the belief that women are less price elastic than men."

Take care
David

David Chandler
© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/


Scotland Takes Aim at 'Period Poverty' by Making Products Free
By Caroline Alexander
November 30, 2020
Bloomberg CityLab
 
Posted by David Chandler at 2:06 PM

Tuesday, February 16, 2021

Strategic CSR - Climate transparency

The article in the url below reports on efforts by the UK government to increase its oversight of companies' sustainability efforts:

"The U.K. said that companies need to report the financial impacts of climate change on their businesses within the next five years, becoming the first country to make the disclosures mandatory as investors and governments demand corporations curb their greenhouse gas emissions."

Although this may seem obvious, it is actually an important step forward:

"Chancellor of the Exchequer Rishi Sunak, the country's equivalent to a U.S. Treasury secretary, said Monday that the rule would apply to most of the nation's economy, including listed companies, banks, large private businesses, insurers, asset managers and regulated pension funds."

This policy came directly from the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD, https://www.fsb-tcfd.org/, Chair Michael Bloomberg), an organization that was established in 2015 "to promote more informed decisions by companies":

"The TCFD says companies should disclose in their financial reports how climate change could increase or reduce sales, among other issues. As of this year, more than 1,500 organizations have expressed their support for the TCFD's recommendations, a more than 85% increase from last year, according to the TCFD's status report published late last month. The report said 42% of companies with a market capitalization above $10 billion disclosed at least some information in line with the TCFD."

The work of the TCFD is global, with implications for regulatory systems far beyond the UK:

"Investment houses that offer environmental funds welcomed the U.K.'s adoption of the TCFD. … The U.K.'s move comes as regulators in the U.S. have voiced support for the TCFD. Last month, Linda Lacewell, superintendent of the New York State Department of Financial Services, recommended that banks and insurers report through the TCFD. The DFS regulates around 1,500 banks, 1,800 insurers and other financial groups, with assets exceeding $7 trillion."

Together with the UK, other countries in the EU are moving further and faster than most:

"Like the European Union it recently exited, the U.K. has a net-zero emissions goal by 2050. To help meet that goal, Mr. Sunak also said the country would issue its first green bond next year under its new climate change agenda, following its European peers. Money raised by issuing a green bond is earmarked for climate and environmental projects. In early September, Germany raised 6.5 billion euros ($7.12 billion) via its debut green bond. The eurozone's green sovereign bond market, which the U.K. isn't part of, is still relatively small at less than around 1% of the region's overall bond market, but it is expanding since France's first green bond in January 2017."

There is additional reporting on this issue in the article in the second url below:

"The TFCD standards, to which the U.K. decision will lend weight, cover four main areas: governance, risk management, strategy and key metrics. While the disclosures are largely qualitative, their publication would likely push companies to incorporate climate risks into the financial numbers too. Big entities will need to comply first, followed by smaller ones over five years. By 2022, the U.K. government expects climate-risk reporting from all companies listed on the main market of the London Stock Exchange (excluding a high-growth submarket), half of its large private companies, 75% of U.K.-authorized asset managers and nearly all of its banks, insurers and large pension funds."

Most notably, the UK government felt compelled to intervene formally because previous efforts at voluntary compliance were not working:

"Progress on voluntary disclosure has been slow, even though over 1,500 companies and organizations 'support' [greater transparency on this issue]."

Take care
David

David Chandler
© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/


U.K. Requires Companies to Report on Climate Change by 2025
By Dieter Holger and Emese Bartha
November 9, 2020
The Wall Street Journal

U.K. Tries Climate Reports
By Rochelle Toplensky
November 18, 2020
The Wall Street Journal
Late Edition – Final
B14
 
Posted by David Chandler at 4:52 PM

Thursday, February 11, 2021

Strategic CSR - $15 minimum wage

There is an interesting debate going on in the U.S. at the moment about whether the federal government should raise the national minimum wage to $15 per hour. My understanding of the large body of economics research on the effects of raising the minimum wage is that, overall, it is a wash – small, incremental increases essentially have little to no effect on jobs. The implication, however, is that a significant increase will have a more consequential impact. This position seems to be supported by the article in the url below, which frames the debate in terms of the effects of a raise on the national deficit:

"Raising the federal minimum wage to $15 an hour — a proposal included in the package of relief measures being pushed by President Biden — would add $54 billion to the budget deficit over the next decade, the Congressional Budget Office concluded on Monday."

Putting aside the $54 billion price tag (which is relatively small in an overall package priced at $1.9 trillion), what is more interesting, I think, is the tradeoff between standard of living (for those who receive the wage increase) and job opportunities (for those who are not hired due to the higher costs for employers). The CBO also addresses this tradeoff in its report and, in the process, raises the moral stakes of the political vote:

"Progressives see the wage increase as a central weapon for fighting poverty and inequality, while conservatives often warn it will reduce jobs. The report in essence said both sides were right. It found a $15 minimum wage would offer raises to 27 million people and lift 900,000 people above the poverty line, but it would also cost 1.4 million jobs."

So, if we accept these predictions as largely accurate (and the Congressional Budget Office is apolitical), then is that a reasonable tradeoff to make? Is it worth costing 1.4 million people the opportunity to work in order to give a meaningful increase in the standard of living of 27,000,000 people, 900,000 of whom would be rescued from poverty? For many, that is any easy choice; for many others, it is more challenging. Hence, the political stalemate.

Take care
David

David Chandler
© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/


$15 Minimum Wage Would Cut Poverty and 1.4 Million Jobs
By Jason DeParle
February 9, 2021
The New York Times
Late Edition – Final
B5

Posted by David Chandler at 12:36 PM

Tuesday, February 9, 2021

Strategic CSR - CDs

In Strategic CSR, a large part of Chapter 11 is dedicated to a discussion around waste, looking at the consequences of our convenient, high-tech lifestyle from the perspective of the amount of plastic and e-waste that we generate and throw away. The article in the url below adds to that growing pile of detritus, and the sense that we don't know how to deal with it, by highlighting the challenges of recycling old CDs:

"The CD recycling process [involves the discs being] … granulated into raw polycarbonate plastic, resulting in a white and clear powdery material that glints and resembles large snowflake crystals stuck together."

Why is the recycling of CDs important?

"The material, which takes one million years to decompose in a landfill, can eventually be used to mold durable items for cars, home building materials and eyeglasses. But that's assuming anybody buys the raw material."

But, as we know with the markets for several recycled materials, those buyers have disappeared in recent years, and especially since China stopped being willing to act as the recycler of last resort for the rest of the world:

"The polycarbonate granules used to be sold mostly to China, where the United States sent the bulk of its recycling until 2018 before China restricted imports of mixed paper and most plastic. The price that China was willing to pay per pound of granulated polycarbonate began to dip in 2008, … and by 2011 it had plummeted."

In addition to highlighting the importance of recycling CDs, and also spelling out how difficult it is, the article looks at how the CD became such an important part of our lives:

"CDs may seem like a relic, but when they entered consumer homes in the 1980s, they were a revelation in information sharing. 'In the early '80s, information storage was mainly in magnetic tape and magnetic devices,' said Kees Immink, who was one of eight engineers to create the CD in 1979. 'The CD was groundbreaking.'"

Of course, it was the shift from vinyl to CDs that led to this growth:

"CDs became ubiquitous: In the 1990s, AOL sent them to potential internet subscribers. In the mid-'90s, makers of video games began to shift away from cartridges and toward discs. By 2000, more than 900 million music CDs were sold, a record number that was never surpassed again, according to the Recording Industry Association of America. (Eminem, Destiny's Child and Britney Spears were all top sellers.) And then, just a year later, Apple released the first iPod, which allowed users to carry 1,000 CD-quality songs in a six-ounce device in their pocket."

But, in the U.S. at least, it wasn't playing music that caused the rapid expansion of the number of CDs produced, but the emergence of the internet:

"In a recent interview, Janice Brandt, a former senior consultant at AOL and the marketing guru behind the company's 1990s campaign that produced millions of CDs for potential customers, reflected on how much has changed, technologically, in just a few decades. The AOL campaign, which at one point in the late 1990s had a budget of $750 million, was a huge moneymaker for AOL that brought millions of new users to the internet. Ms. Brandt said she thought that probably every other CD in existence is an AOL CD."

For now, however, CDs continue to be replaced by other, more efficient storage technologies:

"This month brings another small blow to CDs as Sony and Microsoft are releasing the latest editions of their game consoles, the PlayStation 5 and the Xbox Series X, without disc drives."

Even though CDs are not as omnipresent as they once were, there are still hundreds of millions of them out there and, at some point, something has to be done with them:

"In a global sense, recycling CDs is not a big environmental priority right now, according to Judith Enck, a former E.P.A. regional administrator, who founded Beyond Plastics, an anti-plastic project based at Bennington College in Vermont. … 'You look at other materials, like cardboard and glass and aluminum, and that's all included in curbside recycling programs because there are businesses that will buy all of that for a reliable market,' Ms. Enck said. 'There just aren't markets for this type of plastic.' So, for now, old CDs languish in basement or attics, or just end up with other plastics -- in the trash."

Take care
David

David Chandler
© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/


The Uneasy Afterlife of Our Dazzling Trash
By Sandra E. Garcia
November 7, 2020
The New York Times

Posted by David Chandler at 12:07 PM

Thursday, February 4, 2021

Strategic CSR - Bubbles

The article in the url below draws a fascinating distinction between investment bubbles that are "hugely destructive" and those that are "socially useful." While the housing bubble that led to the financial crisis a decade ago falls into the former category, the current inflated stock price of Tesla and associated bubble around green energy are (according to the author) examples of the latter category:

"Whether investors one day regret paying so much for Tesla Inc. stock, they have done the planet a favor. Their enthusiasm enabled the company to raise enough money to stay afloat until it could profitably mass produce electric cars while accelerating other manufacturers' rollouts."

The bubble these investments have created is partly due to fascination with individual personalities, such as Elon Musk (Tesla is currently "trading at more than 1,000 times trailing earnings"), but is also partly due to the increased interest with ESG funds (and the younger retail investors driving their growth). And this fascination seems to be growing, irrespective of whether the firms themselves are profitable:

"From the end of 2019 through Tuesday, a fund that tracks a Nasdaq clean energy index had risen 191% compared with the broad market's 15%. It trades at 52 times trailing earnings, nearly double the overall market's already-historically high multiple. More than a third of its 44 constituents are losing money. On Wednesday afternoon it was up 7% on expectations Democratic control of the Senate would lead to more support for renewable energy."

The rapid growth in investments flowing into these funds is apparent from the chart accompanying the article:
 

 
Although elements of these investments may be irrational, as the article notes, that does not mean the resulting bubble does not have any redeeming features:

"Stupid, however, isn't the same as useless. Some bubbles can be hugely destructive, as we saw with housing 13 years ago. Others are socially useful. Private markets generally provide too little incentive for risky innovation because shareholders only capture a small part of an innovation's benefit; most goes to consumers (think of a life-saving drug). A bubble can overcome that market failure as investors shower capital on countless new ventures they hope will be the next Microsoft Corp. or Amgen Inc. Even as most of those ventures fail, they extend the technological frontier."

This is true of elements of the dotcom bubble around the turn of the century. Similarly, it is true of a number of unicorns in recent years, and the green energy bubble today. The competition that leads to the failure of (most) companies will also produce the (much fewer) success stories that define the future:

"In the late 1990s and early 2000s, investors snapped up the stocks and bonds of money-losing technology, media and telecom companies. The mania financed a glut of fiber optic that drove the price of bandwidth down enough to bankrupt many telecom companies while allowing countless new businesses to emerge. It also enabled Amazon.com Inc. to raise enough money to keep growing until it had proven its business model could work. Green energy faces obstacles the dot-com boom didn't. It mostly does what fossil fuels already do—just with less carbon dioxide emissions, a benefit that accrues to the entire world rather than producers or consumers."

Take care
David

David Chandler
© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/


Market Euphoria Helps Fuel Green Energy
By Greg Ip
January 7, 2021
The Wall Street Journal
Late Edition – Final
A8

Posted by David Chandler at 3:52 PM

Tuesday, February 2, 2021

Strategic CSR - Carbon tax

The article in the url below is a useful and clear explanation of the benefits of a carbon tax as the most effective, immediate remedy to the challenge of climate change:

"The economics of climate change is straightforward. Earth is warming both because greenhouse gases are costly to eliminate and because governments have permitted people to emit them into the atmosphere without penalty. The classical remedy is a carbon tax, a fee on the carbon content of fossil fuels. Generally levied where fuels are extracted or imported, it discourages carbon emissions by making goods with larger carbon footprints more expensive. The World Bank reports that as of 2019, 57 local, regional and national governments have either enacted some form of carbon tax or plan to do so. When people must pay for their emissions, they quickly discover creative ways to reduce them."

One of the main barriers to the implementation of a carbon tax, of course, is the lack of political will. That is, politicians fear sponsoring anything that looks like a tax, based on the reasonable assumption that their voters will vote them out of office if they do so:

"Even with such gains in prospect, many legislators remain unenthusiastic because they perceive a carbon tax as being unpopular with voters. Many families have been struggling to make ends meet, they might say, and the last thing they need is a stiff new tax on energy use."

The most commonly-prescribed solution to this problem is to make the tax revenue-neutral. That is, each person would receive a monthly rebate that is (in theory) equal to their estimated carbon usage. The problem, of course, is how to accurately measure individual usage to ensure poorer families do not end up paying more in carbon taxes than they receive in rebates. As a potential remedy, the author of this article suggests a more progressive rebate system based on the uneven carbon usage by different income groups:

"Because the wealthy consume much more energy than others, they would contribute a disproportionate share of the revenue from a carbon tax. The top 10 percent of all income recipients account for almost half of carbon emissions worldwide, an Oxfam International study has found. Use patterns are less skewed in the United States, but here, too, the wealthy live in bigger houses, drive bigger cars and, at least when the pandemic isn't raging, take many more trips to distant destinations."

So, rather than try and calculate each taxpayer's carbon usage, this article suggests that simply giving everyone the same payment would amount to a net gain for those at lower income levels:

"Even with equal rebates per capita, most people would get a monthly check for more than they'd paid that month in carbon taxes. Rebates could, of course, be distributed in a more progressive fashion."

There is even an argument that higher income earners would still be better off, even though they would be net contributors to the carbon tax system:

"Although low- and middle-income families would be net cash beneficiaries under this plan, the wealthy would pay more in tax each month than they would receive in rebates. Even so, prosperous voters would also come out ahead, on balance. That's both because they would benefit disproportionately from the resulting reductions in climate losses and because they would otherwise have to shoulder much of the tax burden of climate adaptation measures. In short, compelling evidence suggests that a carbon tax would improve life outcomes for rich and poor alike."

This twist of a progressive rebate distribution is intriguing, and something I do not remember seeing before. The result could be persuasive to politicians with the creativity to frame it appropriately to their constituents:

"Had carbon taxes been widely adopted decades ago, the planet would not be facing a climate crisis today. Critics are correct that it is too late for this measure alone to defuse the climate threat. … But adopting a carbon tax even at this late date would greatly reduce both the cost of achieving climate stability and the time needed to achieve that goal."

Take care
David

David Chandler
© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/


Behavioral Contagion Could Spread Carbon Tax Benefits
By Robert H. Frank
August 23, 2020
The New York Times
Late Edition – Final
BU5

Posted by David Chandler at 9:25 AM
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