Economist Paul Krugman writes a column in the NY Times twice weekly and blogs almost daily. He has an excellent blog post on April 28 on the issue of “carbon taxes”, which are taxes on the CO2 that is produced when a fossil fuel is burned. See Krugman April 28.
In the post he refers to two very interesting columns in Vox by economist David Roberts. The links are Roberts April 22 and Roberts April 26. The latter column ends with a good discussion of a system of carbon fee and dividend. He sees both pros and cons.
There were 100+ comments on the Krugman post, and some discussed carbon fee and dividend. I submitted the comment that follows.
Bill Allen, 04-30-16
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Let’s begin with some basics.
The earth is warming and climate is changing.
Humans can slow this warming by reducing burning of fossil fuels.
A good way, perhaps the best way, to reduce the use of something is to raise its price.
A fee imposed on fossil fuels will do this.
A fee on fossil fuels, usually called a “carbon tax”, has been proposed by some for decades.
The word “tax” is toxic in the current political environment.
Now consider a system of “carbon fee and dividend” that is mentioned in some earlier comments. Here’s how it will work.
- Put gradually rising fee on all fossil fuels.
- Divide revenue into equal shares and return it to citizens as dividends.
- Rising price of fossil fuels will send price signal to conserve energy and to replace fossil energy with non-fossil sources.
- Business community will respond with more energy efficient products and alternative energies like solar and nuclear.
- Dividends will help citizens adjust and facilitate transition from fossil fuels.
The fee will not be a tax, because government will not keep the revenue or control how it is used.
Billions of private purchase decisions in consumer and business communities will drive the transition to a low carbon economy. Hundreds of billions of dollar will fuel the transition.
The government can get out of the business of regulating or subsidizing the transition.
What’s there not to like?
Bill Allen 04-29-16