The World We Leave for Our Children / Need for Carbon Fee-and-Dividend

The letter below was submitted for publication in the Benardsville News on July 26, 2013.  It was published in the print edition on August 8 and is published on line here.

A New York Times op-ed published on August 1 indirectly provides support for the system of carbon fee-and-dividend that is proposed here. 

There are other posts re carbon fee-and-dividend on this site.  To see the list click the tag carbon-fee.

EDITOR:

This letter is prompted by a recent conversation with another dad.  We agreed that we must provide for our children and grand children, but disagreed on how best to do this.

I believe that our first priority must be to leave a world in which our children can survive and thrive and leave the same kind of world for their children.  The greatest threat for this world is climate change.

An overwhelming majority of those scientists who study climate agree that:

• The earth is warming.
• Humans are contributing to this warming by burning fossil fuels to produce energy and producing CO2 (carbon dioxide) as a side effect.
• We can and must slow this CO2 production by conserving energy and switching to other sources of energy.

In a command-and-control economy, government can decree that people use less fossil fuel and then impose regulations to this end.  We have now, and we much prefer a market economy, where prices guide most consumer and business decisions.  Gregory Mankiw, Harvard professor and former chair of President George W. Bush’s Council of Economic Advisers, wrote in 2007:

“Among policy wonks like me, there is a broad consensus.  The scientists tell us that world temperatures are rising because humans are emitting carbon into the atmosphere. Basic economics tells us that when you tax something, you normally get less of it.  So if we want to reduce global emissions of carbon, we need a global carbon tax. Q.E.D.”

A proposal for a new tax is a political non-starter in our country today.  I propose that we introduce a better and more acceptable system called “carbon fee-and-dividend.”  Here’s how it works:

• Collect a fee at the source of every fossil fuel:  coal mine, oil or gas well, port of entry.
• Base this fee on the amount of CO2 that is produced when the fuel is burned.
• Set the fee low in the beginning.  Raise it by a predetermined amount each year in accordance with a multi-decade schedule related to CO2 reduction goals.  Adjust the fee schedule from time-to-time, say every five years, to reflect actual progress towards the CO2 reduction goals.
• Except for a small administrative cost, divide the revenue into equal shares and distribute them to all lawful residents:  one share for an adult and a fractional share for a child.
• Give credits to domestic manufacturers for the carbon fee content of their exports, and impose fees on imported products that reflect their carbon content.  Waive these credits and fees for trading partners who impose comparable carbon fees in their economies.

The carbon fee-and-dividend system has several attractive features:

• Everyone will have incentive to buy less fossil fuel and products and services dependent upon fossil fuel.  Business people will have incentive to help them.
• The fee schedule will provide a common basis for all to plan for the long term and to act in an orderly way to reduce the use of fossil fuel.
• Except for the small administrative cost, all fee revenue will return to the private sector.
• Billions of decisions will be made, almost all by people in the private sector.
• The drives to conserve energy (e.g. better insulation, more efficient appliances) and to develop alternative energy sources (e.g. solar, nuclear) will stimulate the economy.  The fee revenue returned to the economy will help fuel these efforts.
• And it will be fair.

New York Times columnist Andrew Revkin wrote in 2009:  “The public would not directly pay any fee, but the price of goods would rise in proportion to how much carbon-emitting fuel is used in their production. … Prudent people would use their dividend wisely, adjusting their lifestyle, choice of vehicle and so on. Those who do better than average in choosing less-polluting goods would receive more in the dividend than they pay in added costs.”

I see two important outcomes:

• Fossil fuel use will decline over the long term.  My goal is to phase out and get completely off fossil fuel in the US by 2050.  I call this “OFF by 2050″.
• The US will become the world leader in conservation and the use of alternative energy.  Economic and political leadership will follow.

When understood, I believe a system of carbon fee-and-dividend will be supported by a broad spectrum of the American people.  My goals here are to help this understanding and to promote OFF by 2050.

Bill Allen,  07-26-13     <>    OFFby2050