A fee for polluters, a check for U.S. households

By Matt Zencey

What if Congress could slash the greenhouse gas pollution that's fueling climate chaos around the world, and do so in a way that actually leaves the majority of American households with more money to spend and creates more jobs?

You'd say - hey, Congress, you ought to take a hard look at that.

Fortunately, it's not a hypothetical question. One way for Congress to deal with the climate crisis is a policy known as "carbon fee and dividend."

This idea starts with a simple fact of economics: If you want less of something - like the greenhouse-gas pollution that's caused when fuels are burned - you raise the price of it.

Right now, energy companies get a huge subsidy for their polluting ways because they don't have to pay for the privilege of filling our skies with the carbon-based greenhouse gases that are disrupting the world's climate, raising sea level, and causing harmful changes in the ocean's basic chemistry.

You're not allowed to just throw your trash away in the street, for free - why is it OK for the pollution from burning fuels to be dumped on all of us for free?

The answer is to charge a fee, right at the source, on the types of energy that produce greenhouse-gas pollution. (Those pollutants are all carbon compounds, so it is a "carbon" pollution fee.)

Facing those higher energy prices, businesses and consumers will be motivated to save money, and they will decide for themselves the most cost-effective ways to use less fuel, thus cutting the pollution they create. The carbon pollution fee would start off low and steadily ratchet upward, driving the long-term transition to an economy based on clean energy.

No more need for government to fight catastrophic climate change by imposing complex industry-by-industry regulations, like President Obama's Clean Power Plan, a well-meaning and important interim step.

Conservative economists like Gregory Mankiw, former adviser to George W. Bush and Mitt Romney, endorse the carbon-pollution fee, because it uses a market mechanism - putting a clear price on pollution - to solve the problem.

Conservatives don't like the idea that imposing the fee could give politicians a lot more money to spend. That's where the "dividend" comes in.

In the version of this idea offered by Citizens Climate Lobby, 100 percent of the carbon pollution fee would be put in a trust fund. The money would be divided into equal shares that are paid out to every America household, preferably in a check sent each month.

Under this system, people who are rich enough to have big houses, own multiple cars, and jet around the world pay a lot more in pollution fees than they get back. Low- and modest-income families will actually come out ahead.

To level the playing field in international trade, countries that don't charge comparable pollution fees will face a system of "border adjustments." A fee would be imposed on imports from those countries, and any U.S.-made goods exported to those countries would get a rebate to cover the pollution fee they paid.

Citizens Climate Lobby hired Regional Economic Models Inc. to look at the payoff from a steadily rising carbon-pollution fee, in this case, a $10 a ton charge on carbon dioxide, with $10 increases each year. (That dollar a ton is roughly equal to a penny a gallon on gasoline or home heating fuel.)

The result? Carbon dioxide pollution drops by a third in 10 years, compared with the 1990 baseline, and in 20 years, it drops by 52 percent. Ultimately, using the fee and dividend would help the United States meet the 85 to 90 percent greenhouse-gas cut that the Intergovernmental Panel on Climate Change says the world needs to achieve by 2050.

As the free ride enjoyed by today's carbon polluters ends, some jobs will be lost in fossil-fuel extraction and energy-intensive industries. However, the REMI study found that sending all the proceeds back to households gives them spending money that ripples through the economy, creating even more jobs.

Carbon fee and dividend is the best hope for a meaningful, bipartisan response to the climate crisis. Democrats like that it shields low-income households from the new costs imposed on polluting energy sources. Republicans like that it is based on market mechanisms, and the fees aren't used to pay for more government goodies.

So, ask your member of Congress: Isn't it time to take a hard look at carbon fee and dividend?

Matt Zencey ( mzencey@hotmail.com) is a a former member of the Inquirer Editorial Board, and a volunteer with Citizens Climate Lobby, which is hosting a conference on climate change March 4-6 at Arcadia University. For more information, visit bit.ly/1U7GZGi.