A fee on carbon: good for the economy and the climate
By David Folland
Imagine receiving $45 per month directly deposited into your checking account just because you are an American. This deposit would increase to $396/month in today’s dollars over 20 years. This sounds like a sweet deal, so you might ask, what’s the catch? The risk would come from legislation that would put a fee on carbon-based fuels, moving our economy to clean power that comes from free and endless sources.
With such a policy, a national fee is placed on fossil fuels (coal, oil, and natural gas) at the source-the wellhead, port of entry or mine. The fee is based on the amount of carbon dioxide or equivalent greenhouse gas that is produced when the fuel is burned. All of the revenues would be returned equally to individuals as a monthly direct deposit or as a check. The increased cost of fossil fuel would filter down through the economy, so the price of goods would reflect the amount of fossil fuel used in production and transport. Meanwhile the money returned to households will help offset the increased price of fuel and goods. It is estimated that two-thirds of households will come out ahead with the dividend, and this includes citizens with the lowest incomes. The dividend would shield them from rising energy costs. Yet anyone who chooses lower carbon options will have more money in their pocket.
Even now local institutions like Weber State University are demonstrating that reducing carbon emissions makes sound economic sense. In 2007, WSU launched an aggressive campaign to make the University more energy efficient and shortly thereafter, committing the University to be carbon neutral by the year 2050.
Since that time, WSU has seen a steady decline in its carbon emissions. The university has cut its natural gas consumption by 28.5 percent and electricity by 28.7 percent which is the carbon footprint equivalent of taking 1,877 vehicles off the road. WSU has reaped the rewards of this investment with a total of $3,130,960 in saved utility costs over the past four fiscal years.
On the national level, evidence that tackling global warming can provide significant economic benefits can be found in a recent study of carbon fee and dividend legislation by the widely respected firm Regional Economic Models, Inc. (REMI). The nonpartisan Citizens’ Climate Lobby commissioned the study. REMI has developed economic models for a great variety of organizations for the past 36 years. For instance, 47 of 50 state governments, including Utah, have used their expertise. In the model they calculated the effect of putting a fee on fossil fuels of $10/ton of carbon dioxide released, and increasing that fee by $10/year for 20 years. At a time which many people claim that reducing carbon pollution will harm the economy, the model showed dramatic positive results. In 20 years, there would be 2.8 million additional jobs added, the economy would grow by an extra $80-$90 billion/year, deaths from air pollution would decrease by 13,000/year, and greenhouse gas production would decrease by 52 percent. (https://citizensclimatelobby.org/remi-report/)
A carbon fee and dividend policy would be good for the United States, but would also be important for the rest of the world. Border adjustments would be an essential element of the policy, that is, a tariff would be charged based on the amount of carbon that is used in the production of imported goods. Our trading partners would quickly find that it makes more sense for them to set their own price on carbon emissions, rather than have their exporters pay the tariff. Also, as the country responsible for the largest amount of greenhouse gasses in the atmosphere, the United States could in good conscience ask other countries to follow suit by setting their own carbon fee.
This policy makes sense for other reasons. In contrast to government dictates, like the proposed EPA regulations on power plants, carbon fee and dividend uses market forces. The predictably rising fee on carbon will realign markets, stimulating energy efficiency and innovation, while speeding the transition to clean energy.
Carbon fee and dividend mitigates our emissions while society adapts to the new climate that we have created. Shouldn’t our federal elected officials pursue this policy that will grow the economy, add jobs, improve health, and reduce greenhouse gasses? Now is the time to ask your candidates where they stand with carbon fee and dividend legislation.
David Folland, M.D. is a retired pediatrician and is co-leader of the Salt Lake City Chapter of Citizens Climate Lobby.