U.S. must lead on path toward livable world with revenue-neutral fee on carbon

To say that the stakes are high at the U.N. Conference on Sustainable Development  in Brazil (June 20-22) is a bit of an understatement. The stakes were high when Facebook did a faceplant on Wall Street. What’s at stake at the Rio+ 20 summit is the preservation of a world capable of meeting the basic needs of a population expected to reach 9 billion people by mid-century.

Ahead of the meeting, expected to draw 50,000 participants, the U.N. Environment Program issued a report that warned of irreversible damage to the planet if current trends continue and urged that leaders agree to new environmental targets at the summit.

"If current trends continue, if current patterns of production and consumption of natural resources prevail and cannot be reversed and 'decoupled', then governments will preside over unprecedented levels of damage and degradation," UNEP Executive Director Achim Steiner said. "The moment has come to put away the paralysis of indecision, acknowledge the facts and face up to the common humanity that unites all peoples." 

While there are many issues remaining to be resolved, the biggest elephant in the room – a room President Obama appears unlikely to enter – is climate change. As the nations of the world continue to pump ever-increasing amounts of heat-trapping gases into the atmosphere, global warming’s impact is being felt and will only worsen until those emissions are substantially reduced.

That impact is felt in…

·      Food production: As global warming produces more numerous and intense droughts, crop yields shrink.

·      Water supplies: About a billion people rely on water from glaciers that are melting at an alarming rate.

·      Displaced people: Rising sea levels, severe weather events and the inability to grow food is turning millions of people into climate refugees.

·      Our oceans: Too much carbon-dioxide being absorbed by seas is making them more acidic and could destroy the shell-forming creatures that are at the base of the aquatic food chain.

What we’re seeing now is the tip of the melting iceberg. Climate scientists like Dr. James Hansen tell us that levels of CO2 beyond 350 parts per million in the atmosphere are unsustainable, at least if we want to live in a climate that human civilization has grown accustomed to. Therefore, it came as disturbing news last month that CO₂ in the Arctic now exceeds 400 ppm.

To avert greater catastrophe and preserve a livable world for our children and grandchildren, we need to stop burning things that make the world hotter. It’s as simple as that.

What’s not so simple is coming up with a policy that will wean our nation and others off of fossil fuels.

Such a policy must…

·       Protect our fragile economy, which is just now emerging from a debilitating recession;

·       Be market-based to motivate the private sector, rather than the government, to be the driving force;

·       Be simple and transparent so that the general public can understand and support it;

·       Protect U.S. businesses from unfair foreign competition;

·       Motivate other nations to follow suit with similar policies of their own.

What policy could possibly meet all these criteria?

It’s called carbon fee and dividend and it would place a fee on the amount of CO₂ a fuel will emit when burned, starting at $10 a ton. The fee increases by $10 a ton each year, eventually making the price of fossil fuels reflect the true costs their use imposes on society[1]. Gradually, conservation and clean energy from sources such as wind and solar will become less expensive than coal, oil, and natural gas. Investors, assured of being able to predict returns on investment, will fund conservation and new product development, stimulating the economy and igniting the clean energy revolution for real. Consumers will be motivated to be more energy efficient and to purchase vehicles that rely less on gas.

But wouldn’t this fee increase the cost of energy? How could the public be persuaded to accept such a thing?

With carbon fee and dividend, the revenue collected is given directly back to consumers as direct, per-capita payments.  In this way, households are protected from rising fuel and energy costs associated with the fee.

To protect American businesses from unfair foreign competition, border adjustments would be imposed on goods from nations that don’t have an equivalent carbon pricing mechanism. Rather than pay the U.S. Treasury, nations will be strongly motivated to impose a similar fee and keep the proceeds within their own borders. Worried about China getting with the program? They’d either play or pay.

Because it is revenue-neutral and doesn’t increase the size of government, this approach should find support from Republicans who seek a solution on climate change but are averse to more subsidies and regulations. In fact, a Republican from South Carolina, Bob Inglis, sponsored a revenue-neutral carbon tax bill in the previous Congress, the Raise Wages, Cut Carbon Act.

Wouldn’t it be great if a bill like this were introduced in this Congress?

Actually, such legislation currently sits in the Ways and Means Committee – the Save Our Climate Act (H.R. 3242), sponsored by Rep. Pete Stark. His bill would also devote a portion of revenue to deficit reduction, the topic of the hour. 

Even if Stark’s bill is not passed in this Congress, Democrats and Republicans in the House and Senate must begin to discuss in earnest legislation like H.R. 3242 and be prepared to bring up a bipartisan bill early in the next Congress.

The nations of the Earth may not reach a binding agreement on sustainable development in Rio, but the U.S. can help put the world on a path that averts catastrophe by putting a revenue-neutral price on carbon pollution.