Earlier this month, the Commodity Futures Trading Commission, a financial regulatory body of the U.S. federal government, warned that climate change could impair the productivity of the U.S. economy and undermine employment.
The stern CFTC warning was issued in a report entitled “Managing Climate Risk in the U.S. Financial System,” which was prepared by contributors who included representatives of industry, finance, agriculture, and government.
After evaluating the effects of climate change on components of the economy, the report made 53 recommendations. These included incorporating climate change-related risks into the financial assessments and risk management procedures of regulators and companies, including banks and insurance companies. The report also stated that its single most important recommendation is for the U.S. to implement a price on carbon to help markets efficiently price climate risks.
One readily available way to address the CFTC report’s primary recommendation would be to pass the Energy Innovation and Carbon Dividend Act (HR 763). This bill is currently before the U.S. House of Representatives, and would charge a fee on carbon and return the revenues to U.S. taxpayers. The starting fee is low (equivalent to about 12 cents a gallon of gasoline) and rises annually by about 8 to 12 cents a gallon. Economists predict the bill would reduce carbon dioxide emissions by about 37% in 10 years.
Edward Cullen, State College
This article originally appeared in the Centre Daily Times.