The case for a revenue-neutral carbon tax

By John D. Kelley 

“Men argue. Nature acts.” Voltaire

We have a moral responsibility to future generations to take powerful action now to moderate climate change by severely curtailing our greenhouse gas emissions. A revenue-neutral carbon tax that would change the economics of energy and reduce our greenhouse gas emissions is getting support across the political spectrum. The essence of this concept is to tax carbon production and return 100% of the proceeds equally to all citizens. This is a powerful way to cause a shift away from carbon fuels while protecting American families from higher energy prices.

A national carbon tax would be easy to administer. The tax would be charged at first point-of-sale, the mine, wellhead, or border crossing, and would be collected by the IRS. The funds would be placed in a Carbon Tax Trust Fund and rebated to American households. All adult citizens would receive equal monthly dividends and families would also receive ½ share per child under 18 years old, with a limit of 2 child-shares per family. It is estimated that 70% of families would see a net increase in income.

A national carbon tax would be reconciled with existing state programs such as California’s cap and trade system. There are several ways this would be done: 1. Preemption 2. Stacking 3. Integration.

In Preemption, the CA program would cease to function once the federal law took effect. In Stacking, the program would continue to function as is on top of the federal regulations. In Integration, the state and federal programs would work together. To ensure that U.S. made goods remain competitive in international markets carbon tax equivalent tariffs would be charged for goods entering the U.S. from countries without equivalent carbon pricing while carbon tax rebates would reduce the price of exports to those countries. These tariffs and rebates would provide an incentive for international adoption of carbon taxes.

Five years ago British Columbia implemented a revenue-neutral carbon tax. It gradually added to the cost of fossil fuels while cutting both personal and corporate income taxes. A recent study reports that BC’s use of petroleum fuels has dropped by 15.1%.” The study also finds that BC’s “personal and corporate income tax rates are now the the lowest in Canada, due to the carbon tax shift.

Perhaps we are finally approaching a political tipping point regarding climate change policies. Currently the Environmental Protection Agency is under court order to issue climate change rules. The fossil fuel industry is fearful of what the EPA may do, so there is a new congressional debate over climate change policy. As part of this national debate a revenue-neutral carbon tax must be considered. It would be efficient, transparent, and enforceable because market decisions would select the best clean energy programs and technologies, and the dividends would stimulate the economy. By acting now to implement a revenue-neutral carbon tax we can create a stronger economy and ensure a more livable climate for our children and grandchildren.

John D. Kelley AIA, an award-winning architect, specializes in healthy, environmentally-friendly home design. A former President of AIA Santa Barbara, he is a founding member of several local volunteer groups including: The Sustainability Project, the Green Building Alliance, and the Mesa Architects. As a concerned citizen he advocates for immediate action to address climate change by reducing greenhouse gas emissions.