"...most low and middle income Americans..."
Jeff Lehr
10 Posts

In promoting H.R. 5744 to climate activists concerned about environmental justice and equitable policies, it would help to understand why CCL's dividend benefit communications refer to “most” rather than all low and middle income Americans; which groups won't come out financially ahead or break even; and what percentage they comprise of all LMI Americans. Thoughts on how CCL can advocate for legislation covering these groups would also be helpful…

Puts Money in Your Pocket. The money collected from the corporate polluter fee goes directly into the pockets of millions of hard-working families via a monthly carbon cashback payment. The money can be spent without restrictions, and most low and middle income Americans will come out financially ahead or break even."

10 Replies

@Jeff Lehr
I don't have an answer for Jeff.  I'd like to hear the answer too.  

Jeff Green
61 Posts

@Jeff Lehr
I've asked a similar question for years without getting a precise answer: Why don't the percentages in each quintile of the Household Impact Study add up to 100%, and what's going on with the households unaccounted for?

@Jeff Lehr An example of LMI Americans who won't come out ahead under a basic carbon fee and dividend are rural or exurban households whose members drive long distances every day. (Not all do, of course.) It's basically impossible to devise a revenue-neutral policy where everyone comes out ahead. The cash-back policy does a better job of ensuring economically fair outcomes than nearly any other climate policy I've seen. Moreover, there are problems with addressing every inequity. If you give additional subsidies to rural folks, you may encourage more people to move from cities to rural areas, increasing emissions. There's no perfect solution.

If you want more analysis of the implications of household “heterogeneity” and “horizontal inequities” (inequities within an income group), see Emilien Ravigné, et al., “Is a fair energy transition possible? Evidence from the French low-carbon strategy,” Ecological Economics, 196 (June 2022) and Tomas Green and Christopher R. Knittel, “Distributed Effects of Climate Policy: A Machine Learning Approach,” (MIT 2020).
 

Jeff Lehr
10 Posts

@Jeff Green thanks…let us know what you think of Jonathan Marshall's response and references…I look forward to checking those out.

Jeff Lehr
10 Posts

@Jonathan Marshall thank you…will check these out!

Jonathan, thank you for the explanation and links.  You raise a valid point regarding rural residents who drive a lot.  The electrification incentives in the IRA merit close scrutiny by anyone who drives a lot.  

Hi @Jeff Lehr, @Robert Tereba, @Jeff Green. The Household Impact Study is the best resource here. 96% of households in the poorest 20% income bracket come out ahead and 3% more would see a minor loss of less than 0.2% of their income. For the next-lowest income bracket (20–40%), 85% come out ahead and 11% experience a minor loss, and in the next bracket (40–60%), 68% come out ahead and 24% experience a minor loss.

These numbers don't add up to 100% because the rest (1% of the lowest income bracket, 4% of the second-lowest, and 8% of the middle income bracket) will experience a net income loss of more than 0.2%.

As @Jonathan Marshall alluded to, that's because some lower- and middle-income households have relatively high carbon footprints that are ‘inelastic,’ meaning that they're difficult to reduce. As Jonathan said, an example of this is a household that has to regularly drive long distances for work or some other critical activity.

But while there are always exceptions, as you can see, the vast majority of low- and middle-income households would come out ahead with a net income from the Energy Innovation Act, and the vast majority of the rest would see an insignificant net cost. Only a small sliver of households would experience a significant cost from the policy. And we could help those outliers with other policies, for example providing financial assistance to help them transition to EVs, as with the IRA tax credits.

D C
405 Posts

@Jeff Lehr When I took the training on the Household Impact Study that Dana recommended above, one of the examples of “low income” folks who wouldn't come out ahead are folks who are only “technically” low income, for example, college students who are from families who will support plane tickets, etc. That's someone in the lowest quintile's 1% of people in Dana's example, who wouldn't either see a benefit or only minor 0.2% increase. 

But for sure check out the Household Impact Study-- where that question was definitely asked at least in one of the trainings.
 

Jeff Lehr
10 Posts

@Dana Nuccitelli thank you for the prompt response…this is very helpful--and thanks for all the incredible work you're doing!

Jeff Lehr
10 Posts

@Debbie Chang thanks so much!
 

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