Would Serious Climate Change Mitigation Policy Increase World Hunger?

That’s the finding of a recent study published in Nature Climate Change, “Risk of Increased Food Insecurity under Stringent Global Climate Change Mitigation Policy” by an international team of 22 researchers.  (Coauthorship like this is why god created et al.)  The abstract has made the rounds of the blogosphere, including Marginal Revolution, which is where I found it.

The article reports an integrated assessment model (IAM) exercise in which various scenarios are run, each consisting of a climate piece (how agriculture will be affected by climate change) and a climate policy piece (how steep a carbon tax is imposed and how it impacts production and consumption).  More tax, less climate change and vice versa.  The unsurprising result is that, if the tax is universal and large it will raise food prices, putting millions more people at risk of hunger.

But where does all this extra money collected in carbon taxes go?  That was not addressed: “In most models, carbon tax revenue stays outside of agricultural sectors both on the producer and consumer sides, and is not properly redistributed to affected people.”  That’s all they say about carbon revenues, but it’s enough to explain why climate policy is portrayed as a threat to the world’s poor.  In any sensible approach, carbon taxes or moneys collected from carbon permit auctions are returned to the people who pay them in a progressive manner, so those with the lowest incomes come out ahead.  (They get back more in rebates than they pay in higher prices.)  The simplest way to do this is with an equal per capita dividend.

I did a simple back-of-the-envelope calculation of the effect of a global carbon price rebated via an equal lump sum payment everywhere.  For every dollar of this price, $12.5 billion is effectively transferred from upper to lower income countries.  (Details will appear in my climate change book when it appears next year.)  Of course, there are large political and administrative problems to overcome in setting up such a system, but they are not insurmountable, especially since higher income countries can decide (or negotiate) how to divvy up carbon revenues between those destined for national versus international rebates.

So, yes, a global carbon tax as modeled by the Nature Climate Change team would make the poor poorer, but the one additional tweak of recycling the money on an equal per capita basis would lead to the opposite effect.