US Conservatives Crack the Door on the Carbon Tax
December 13, 2011
For most countries, the simplest and clearest way to hit the price target would be with an outright carbon tax. The economic benefits are well known: By letting markets work, a tax achieves a given amount of emissions abatement at the lowest cost. The world needs to cap its greenhouse gas emissions, but there’s no obligation to do this in the most expensive, painful or disruptive way.
Climate-change campaigners made a great mistake early on in opposing this approach — arguing, in effect, that sin should be prohibited not taxed, and that cuts of a certain size had to be assured. The cost of this inflexibility is now apparent: Insist on known and guaranteed cuts in emissions, and the wheels of international cooperation turn too slowly.
So far, explicit carbon taxes have not been widely adopted (though where they have been, as in British Columbia, they have worked). It’s not only environmentalists who aren’t enthusiastic. In many countries, especially the U.S., conservatives are bitterly opposed as well. A carbon tax, after all, is a tax.
Yet with many countries in a fiscal crisis, a carbon tax is more attractive than before. A carbon tax could lift some of the burden from spending cuts and increases in other taxes. As this sinks in, what was once politically impossible may soon be merely hard.
Jim Hansen’s Conservative Climate Plan – Republicans for Environmental Protection:
Hansen describes himself as a moderate conservative and is registered to vote as an independent. More importantly, he has been shopping around a framework for climate legislation that conservative elected officials might find interesting if they find themselves in a problem-solving mood.
Hansen’s proposal is simple, far simpler than the 1,400-plus pages of the Waxman-Markey cap-and-trade bill that passed the House in 2009 but will die when the 111th Congress closes up for good later this year.
Hansen’s proposal makes use of market principles, by prodding the market to tell the truth about the costs of carbon-based energy through prices.
It would not impose mandates on consumers or businesses, create new government agencies, or add a penny to Uncle Sam’s coffers.
Hansen calls his approach “fee and dividend.” A gradually rising fee would be imposed on carbon-based energy sources at the points where they enter the economy – at mine mouths or ports of entry, for example.
Carbon-based energy imposes costs – on the environment, public health, and national security – and those costs would be made more obvious in the marketplace through the fees. Energy prices likely would go up. How much and for which uses of energy would depend largely on market dynamics.
Revenues collected from carbon fees would be returned 100 percent to the public through dividends. Hansen estimates that a $115-per-ton carbon fee would add a dollar to the per-gallon price of gasoline but would raise enough revenues to pay every adult American as much as $3,000 per year.
How would Hansen’s plan affect individuals? That would depend on how they exercise their right to make free choices.
Those who wish to use carbon-based energy with abandon would be free to do so – knowing up front that they would pay the environmental and other costs of using lots of carbon-based energy rather than shift those costs onto their fellow citizens.
Those who acknowledge the market signal and change their purchasing decisions could avoid some or most of the higher prices. Depending on the choices they make and the size of their dividends, they might even come out ahead financially.
Businesses would seek out more opportunities to improve their energy efficiency. Other businesses would sell products and services that enable them to do so. Low-carbon energy sources would be more competitive with high-carbon sources.
The idea behind the bill could be described in a 1-minute elevator speech. As legislation, Hansen’s approach could fit onto a few pages. The bill could be read and understood by anyone – voters and lawmakers alike willing to put in a few minutes of time.
Transparent. Market-based. Does not enlarge government. Leaves energy decisions to individual choices. Takes a better-safe-than-sorry approach to throttling back oil dependence and keeping heat-trapping gases out of the atmosphere.
Sounds like a conservative climate plan.