The letter below was submitted to the Bernardsville News on 03-27-16 and published in the print edition on 04-07-16.
EDITOR:
I expect that most of your readers know that the earth is warming and changing our climate, and that we contribute to this warming when we burn fossil fuels and produce the greenhouse gas carbon dioxide (CO2).
And there may be some who resist the evidence of warming, and even deny that there is a problem, because they fear that action to slow this warming will grow government and regulation. I write here for them.
Under authority granted by the Clean Air Act, the Environmental Protection Agency (EPA) designed and promulgated the Clean Power Plan (CPP) to reduce overall CO2 emissions to 68% of 2005 levels by 2030. This plan assigns a CO2 reduction goal to each state and directs the state to submit a plan to achieve its goal.
Twenty-seven states and other organizations sued EPA and claimed it had exceeded its authority. These challenges were consolidated into one case to be heard before the D.C. Circuit Court. In February the Supreme Court stayed further action to implement the CPP until the issues are argued and decided in the lower court.
The CPP illustrates what some people fear: Regulations will be designed, implemented, and enforced by governments. Compliance will be monitored, reported, reviewed, and probably questioned. The work of federal and state agencies will grow, and so will costs. Regulations may be controversial and generate costly litigation, producing delays and unpredictable outcomes.
The CPP has two other critical flaws: The American people will not be fully engaged in solving the warming problem. If implemented, the CPP will solve only a small part of the problem.
There is a better way, one that is driven by free market forces and that engages all participants in the economy. I have discussed it several times in these pages. It is a system of “carbon fee and dividend” (CFD).
Impose a “carbon fee” on each fossil fuel (coal, oil, natural gas) and collect it at its source (mine, well, port of entry). Base the fee on the amount of CO2 produced when the fuel is burned. Start the fee low and raise it by a set amount each year until total CO2 emissions decline to a target level, say to 10% of the current level by 2050.
A fundamental holding in economics is that the use of something tends to decrease when its cost increases. The cost of almost everything we buy is influenced by the cost of energy, and fossil fuels are the source of most of that energy.
Rising fees on fossil fuels will gradually raise the costs of most products and services. The prices of things that depend most on fossil fuels will rise most rapidly and push buyers away from those things most rapidly. The business community (entrepreneurs, inventors, investors, manufacturers) will see profit opportunities and act to facilitate this transition.
A key provision of CFD is that all revenue be divided into equal shares and returned to citizens as “dividends.” These dividends will facilitate their transition to smaller “carbon footprints” and their purchases will do the same for businesses.
Example: The national transition will be decades-long. A family may choose to improve its home insulation, buy more efficient appliances, live in a smaller house, and/or live closer to work or mass transportation.
Example: The nuclear power industry may project the phase out of fossil fuels from electricity generation, recognize the ongoing need for 24/7 baseline power, and commercialize small modular nuclear power plants, for which many designs already exist.
CFD has important features that should appeal to those who want smaller government and less regulation.
First: The transition to a lower national carbon footprint will be driven by billions of private purchase decisions in consumer and business communities, not by governments.
Second: It will be fueled by hundreds of billions of dollars of fee revenue, all of which will be returned to the economy. None will be captured by government.
Third: The federal government can discontinue subsidies relating to conservation and commercial energy production (no more Solyndras), and then focus on support of basic research where it has historically done a good job.
What’s there not to like?
Bill Allen 03-27-16