Commentary: Carbon tax an elegant, market-based policy

By Peter Bryn

Climate alarmism has a familiar tune: The sky is falling and seas are rising, so stop using fossil fuels now!

That's countered by economic alarmism: Anything to address climate change will grind the economy to a halt and destroy every job in America.

Commentary: People, economy would suffer from carbon tax

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?

How about a policy that the largest oil and gas companies 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 type of policy is exactly what the Climate Leadership Council recently proposed with its Carbon Dividend plan. The day started with a news conference to introduce the founding members: George Shultz and James Baker, alums of the Ronald Reagan and George H.W. Bush administrations, alongside economists Hank Paulson, Greg Mankiw, and Marty Feldstein. Next was a private meeting with the president's advisers.

What are they proposing? First, repeal all of the well-intended but clunky regulations, subsidies, and mandates that have been implemented to nibble away at carbon emissions. Then, "replace" them with their Carbon Dividend plan. This plan has three parts:

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.

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.

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 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 faster than any government program ever could.

The better news? Per a Treasury Department study, there's a 70 percent chance you'll make money on this program. Why? Because about two-thirds of households, almost entirely in the lower- and middle-income range, will earn more in their dividend than they will pay in fees since their carbon footprint is lower than the average.

A carbon tax, in and of itself, would slow the economy since it shifts money from your wallet to government coffers. However, the dividend 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 back into the economy, creating net stimulus according to some studies.

Climate change 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 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.

The Gipper would be proud.

Peter Bryn is the conservative outreach director for the Citizens' Climate Lobby (http://citizensclimatelobby.org). He wrote this for InsideSources.com.