Media Packet, December 14, 2014
Following Lima: How the U.S. can lead on climate with a price on carbon
Following an overtime session at the UN climate conference in Lima, Peru, an agreement has been reached among 196 nations that sets the table for a treaty in Paris next year aimed at averting future catastrophe from climate change.
From the New York Times:
The agreement requires every nation to put forward, over the next six months, a detailed domestic policy plan to limit its emissions of planet-warming greenhouse gases from burning coal, gas and oil. Those plans, which would be published on a United Nations website, would form the basis of the accord to be signed next December and enacted by 2020…
…“This emerging agreement represents a new form of international cooperation that includes all countries,” said Jennifer Morgan, an expert on international climate negotiations with the World Resources Institute, a research organization.
“A global agreement in Paris is now within reach,” she said.
The bottom line, of course, is that every nation must eventually chart a course to reduce the greenhouse gas emissions that are heating up our planet, and the sooner the better. To make this happen, a consensus is developing to use carbon pricing as a means of motivating emissions reductions.
Rachel Kyte, the World Bank’s Vice President and Special Envoy for Climate, called for “a globally networked carbon market” or a mosaic of carbon pricing strategies. She said World Bank President Jim Yong Kim wants every country to commit to pricing carbon in Paris next year.
Already, about 40 countries have some form of carbon pricing or have announced plans to do so in the near future. Rather than watch from the platform as the train leaves the station, the United States has the opportunity to take the lead with an effective, market-based approach to pricing carbon that provides the incentive for other nations to follow our lead.
The approach we’re talking about is Carbon Fee and Dividend, a steadily-rising fee on the carbon dioxide content of fossil fuels coupled with returning the revenue from that fee to households. With the inclusion of border tariffs on imports from nations that lack an equivalent carbon price, Carbon Fee and Dividend provides the motivation for other nations to adopt a similar policy. Its simplicity and transparency would make it relatively easy to harmonize across borders.
The really great news about this free-market solution to climate change, however, is that it will be good for job creation and the American economy. A study from Regional Economic Models, Inc. (REMI) – released earlier this year by Citizens’ Climate Lobby – looked at the impact of a fee on the CO2 content of fossil fuels that started at $10 per ton of CO2 and rose $10 per ton each year. In the study, all the revenue from the fee was divided equally among every household and returned as monthly payments. The aforementioned border tariffs were also factored in.
Most impressive of the findings from the study were that, after 20 years, CO2 emissions were cut in half and 2.8 million jobs were added. The job growth comes primarily from the stimulus effect of recycling carbon fee revenue into the pockets of people who are likely to spend the money.
Throughout the COP20 meeting, the gulf between developed and developing nations was evident, as poorer nations sought to deal with the economic burden of transitioning away from cheap fossil fuels. Carbon Fee and Dividend can alleviate that burden by creating a market-wide incentive for carbon-efficient business and local investment, without requiring government action to direct investments. Because it also improves the fiscal efficiency of a country’s economy, it provides an effective means by which developing countries can affordably transition, motivate major new flows of climate-smart investment, and build local economies. The Lima Accord provides an opportunity for conservatives in the U.S. Congress to firmly establish American leadership, spread economically efficient, business-friendly climate policy, and bridge the divide between developed and developing countries on how best to motivate a global response to climate disruption.
“We have to operate in the realm of knowledge and science, and I still think we can bring forward conservative solutions to this, absolutely, but we have to recognize the reality.”
–– Rep. Chris Gibson, R-NY
Skeptics will scoff at the notion that a Republican-led Congress will entertain the possibility of legislation to price carbon, but since the election there are indications that Republicans may be ready to shift course on climate change:
- Lindsey Graham (R-SC), who worked on a climate change proposal in 2010 with then-Sen. John Kerry (D-MA), told Roll Call last month, “I think there will be a political problem for the Republican Party going into 2016 if we don’t define what we are for on the environment. I don’t know what the environmental policy of the Republican Party is.”
- With an exit poll after the elections showing that 58 percent of voters believe climate change is a “serious problem,” former South Carolina Republican Rep. Bob Inglis said, “If conservatives plan on winning the White House back, we’ve got to have something on the menu that addresses this felt need for action on climate.”
- Chris Gibson (R-NY) said he plans to introduce a resolution on climate change that will help others “recognize the reality” of the situation. In a National Journal article, Gibson said, “I hope that my party — that we will come to be comfortable with this, because we have to operate in the realm of knowledge and science, and I still think we can bring forward conservative solutions to this, absolutely, but we have to recognize the reality.”
- In reference to sea level rise in Louisiana, Republican Congressman-elect Garret Graves said, “For us to stick our heads in the sand and pretend it’s [climate change] not happening is idiotic, and it puts the lives of two million people who live in south Louisiana in jeopardy.”
Republicans who are looking to “bring forward conservative solutions” on climate change need look no further than Carbon Fee and Dividend, which has been recommended by Reagan-era Secretary of State George Shultz. By being revenue-neutral – giving ALL the money back to households – it will not increase the size of government. It also provides a market-based alternative to EPA regulations that conservatives abhor.
Most observers expect that the global treaty in Paris next year will be non-binding, raising the risk that emissions reductions agreed to by nations will not be met. By pricing carbon, we can improve the chances of successfully mitigating the worst impacts of climate change. Our Republican-led Congress can lead the way with revenue-neutral Carbon Fee and Dividend legislation that cuts emissions while adding jobs.