The Better Way to Price Carbon by Loren Johnson

The global climate crisis is serious and calls for immediate action.  One solution to the climate emergency is to price carbon to more accurately reflect its true cost.  

Economists agree that levying a tax or fee on fossil fuel emissions is the best way to address the climate crisis.  Several proposals before Congress would do this, but one stands out for its simplicity and fairness.  It is market-based and more effective than regulations. 

The Energy Innovation and Carbon Dividend Act (EICDA) will soon be reintroduced in this session of Congress.  

 It has three parts:   1) Fee, 2) The dividend, and 3) Border Adjustment.  

1) Fee.  Coal, oil and natural gas producers would pay a fee upfront based on how much global warming pollution their fuels generate when burned.  The fee would begin at $15 per ton – enough to raise the price of gas 16.5 cents per gallon – and increase annually by $10 per ton until emission goals are met.  The fee is proportional to the amount of carbon-based energy used.   We usually act in our own self-interest, especially if there is a monetary cost or benefit involved.  As carbon based-energy prices rise and ripple through the economy there is a powerful incentive to shift to cleaner forms of energy.   

2) Dividend.  The revenue collected is refunded in equal shares in the form of a monthly payment to every US citizen and lawful resident.  Minors get a half share limited to two minors per family.  Because all of the fees are returned, the government does not grow.  Higher energy costs for the poor would be more than offset by their ensuing dividend.

3)  Border adjustment.  Exports to foreign countries without a similar carbon fee would receive a rebate while imports from those countries would be subject to a tariff.   This would discourage companies from relocating abroad to avoid the fee and would incentivize other countries to adopt a similar carbon fee, thus leveling the playing field.

Other carbon pricing proposals are similar to the EICDA but differ in the level of the fee, how fast it increases and how the collected fees are spent.  Some use the money for infrastructure, social security, or a “tax swap” such as payroll taxes. 

The EICDA is the most robust climate legislation on the table and is most likely to meet our emission goals.   It stimulates the economy by putting disposable income in the hands of most Americans. It is bipartisan and creates jobs as we transition to more climate-friendly sources of energy

The climate crisis will not be resolved by voluntary sacrifices on the part of a few. The EICDA uses market forces to leverage behavioral and systemic change, allowing all of us to be part of the solution.   The concepts in the EICDA are a product of a decade of work by Citizens Climate Lobby.  Let not our most regrettable mistake be that we failed or were too late to act.  

 

Loren Johnson        Elkhorn      Citizens Climate Lobby

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