Editor’s Note: For an alternative viewpoint, please see: Point: Trump’s Too Smart to Fall for Harmful Republican Establishment Tax Plan
Climate alarmism has a familiar tune: the sky is falling and seas are rising, so stop using fossil fuels now!
But that’s countered by economic alarmism: the unmistakable drumbeat that anything to address climate change will grind the economy to a halt and destroy every job in America. One could be forgiven for thinking the words “climate change” themselves would drop the Dow 500 points.
Those in the center recognize both that we need affordable energy and that climate change presents a real risk that warrants action. Can we do both? Where’s the middle ground?
How about a policy that the largest oil and gas companies in the world support? That won’t grow government? That allows the free market to find cost-effective solutions? That some studies say will stimulate the economy? That looks forward rather than backward?
That type of policy is exactly what the Climate Leadership Council proposed last week with its Carbon Dividend plan. The day started with a press conference to introduce the founding members: Ronald Reagan and George H.W. Bush alums George Shultz and James Baker, alongside conservative economists Hank Paulson, Greg Mankiw and Marty Feldstein. This was followed by a private meeting with the president’s advisers at the White House.
What are they proposing? Basically it’s “repeal and replace” for climate. First, repeal all of the well-intended but clunky regulations, subsidies and mandates that have been implemented over time to nibble away at carbon emissions.
Then, “replace” it with their Carbon Dividend plan. This plan has three parts:
First, create a simple and predictable price signal to reduce carbon emissions by applying a fee on them, thereby allowing the marketplace to seek the most cost-effective emission reductions.
Second, take all of the money collected and rebate it back to American families in the form of a Dividend, so the government doesn’t keep a cent and to protect households from rising energy costs.
Third, since American manufacturers will be left paying more for energy, apply a tariff or rebate at the border when trading with countries that don’t have a similar policy. This will protect our businesses and prevent jobs and emissions from moving overseas.
Why will this reduce emissions? Because price signals drive behavior. Carbon fees are avoidable — if you don’t want to pay them, you’ll choose to buy less-carbon-intensive goods. The carbon fee will be baked into the purchase price of everything you buy, so being a savvy consumer will also mean you begin minimizing your carbon footprint. The invisible hand of the market will then weed out carbon emissions — from individuals and businesses alike — faster than any government program ever could.
The better news? Per a Treasury Department study, there’s a 70 percent chance you’ll actually make money on this program. Why? Because current spending habits show that about two-thirds of households, almost entirely in the lower- and middle-income range, earn more in their Dividend than they will pay out in carbon fees since their carbon footprint is lower than the average.
But won’t a carbon tax hurt the economy? Actually, yes: a carbon tax, in and of itself, would slow the economy since it shifts money from your wallet to government coffers. However, the Dividend entirely changes the economics by sending all proceeds back to consumers. If you’re in the majority of folks who come out ahead under this plan, chances are you’ll put that cash right back into the economy, creating net economic stimulus according to some studies.
Sound radical? British Columbia has had a similar policy for years and soon all of Canada will as well. And let’s not forget why we’re doing this in the first place: we need to reduce our carbon emissions. Whether you’re convinced that climate change is a big problem or not, there’s no denying that it presents a risk, and when faced with risks to our health or our automobiles, we take out insurance. The Carbon Dividend is a simple, elegant, market-based insurance policy with the lowest premiums going.
That shouldn’t be a surprise, as it was crafted by some of the same folks that helped us slow and eventually stabilize the ozone layer hole in the 1980s.
Indeed, it was George Shultz working with his boss, Ronald Reagan, who crafted the Montreal Protocol to phase out chlorofluorocarbon emissions. They did so without resorting to alarmism or hyperbole, but instead by keeping cool heads and practicing reasonable risk avoidance.
I think The Gipper would be proud.