I’m no climate scientist. In fact, I’m more prone to complain about the weather than do anything about it. But even I am not immune to reports about the growing impacts of ever-rising levels of carbon we humans dump into our atmosphere. Even so, in today’s political climate (pun intended), climate - and what to do about it - has become bitterly partisan. Thus far, most proposals have broken down along ideological lines, resulting in fits and starts at best and outright loggerheads at worse.
Now comes a proposal that breaks with the above paradigm and brings Democrats, Republicans, environmentalists, and business leaders together to address climate change using market forces. This approach, led by Americans For Carbon Dividends, is the brainchild of James Baker and the late George P. Shultz. It’s also supported by thousands of economists and a broad cross section of voters. Here’s how the AFCD can address our climate problem:
1. A Gradually Rising Carbon Fee: Economists agree that an escalating carbon fee offers the most cost-effective climate policy solution, sending a powerful price signal to steer businesses and consumers towards a low-carbon future. Accordingly, this plan would implement an economy-wide fee on carbon emissions starting at $40 a ton (2017$) and increasing every year at 5% above inflation. If implemented in 2021, this will cut U.S. carbon emissions in half by 2035 (as compared to 2005) and far exceed the U.S. Paris commitment. To ensure these targets are met, the fee will temporarily increase faster if key reduction benchmarks are not achieved.
2. Carbon Dividends for All Americans: Return all of the carbon fees to the American people on an equal basis through quarterly checks. A family of four will receive about $2,000 per year. This amount will grow as the carbon fee increases, creating a positive feedback loop: the more the climate is protected, the greater the dividend payments to all Americans. According to a study by Oxford Economics, the vast majority of American families will come out financially ahead with this plan.
3. Simplified Regulations: Streamline regulations that are no longer necessary upon the enactment of a rising carbon fee. Trading regulations for a carbon price will promote economic growth and offer companies the certainty and flexibility they need to innovate and make long-term investments in a low-carbon future.
4. Border Carbon Adjustment: Compel other countries such as China and India to reduce emissions by charging a fee on the carbon content of imported products. Carbon-intensive imports from other countries will face fees on the carbon content of their products. A well-designed system of border carbon adjustments will enhance the competitiveness of American companies that are largely more energy-efficient than their foreign competitors, while preventing carbon leakage and free-riding by other nations. This will put America in the driver’s seat of global climate policy and compel large emitters like China and India to play by the same rules.
Imagine this: One Maine family of four receives a dividend check - $2,000/year in addition to existing state and federal tax credits (note: Sens. Collins & King have proposed additional credits in the federal code as well). They use it to install energy efficient, natural gas heat pumps to replace their aging heating oil furnace. Now, they have reduced their carbon footprint and will save on monthly energy bills. Furthermore, this money stays in our community. The technician the family hired to do the work was trained at one of our State’s community colleges. His earnings from this job will pay the wages of local grocery workers, waiters and waitresses, and other service providers in our community.
Going forward, our family will use the additional savings - plus follow-on dividend payments - to make their own decisions on the best way for them to transition to a clean-energy future. Now multiply that scenario by thousands - even millions - of families.
Rather than strict regulatory mandates handed down by fiat, the AFCD solution benefits consumers by putting the power in their hands and sending signals to businesses to adjust to simple market dynamics. Important business groups like the Business Roundtable, U.S. Chamber of Commerce, and even the American Petroleum Institute have recently embraced this type of approach.
As with the weather, carbon pollution impacts us all. Unlike the weather, we can actually do something about it. The carbon dividends solution deserves serious consideration.
Bobby Reynolds (email@example.com) is a government relations specialist at Maine Street Solutions, the public affairs affiliate of Verrill Law.