Ian Todd | Carbon Fee and Dividend: A step Forward

With dismal new reports on climate change and the increasing popularity of proposals like the Green New Deal, more and more energy companies are finally throwing support (read: a small fraction of their ever-growing profit) towards legislative solutions. One of the most popular plans is the Carbon Fee and Dividend model, a plan that places ever-increasing fees per ton of carbon released into the atmosphere that is paid to the taxpayers directly to help offset any increase in energy cost. It’s one of few proposals that has seen any Republican support, making it one of the most conventionally viable solutions without substantial change to the makeup of Congress. Is Carbon Fee and Dividend a model I stand behind and would vote for? Absolutely. Is it my preferred solution to the world’s largest threat? No.

The Carbon Fee and Dividend model asks for a fee based on the calculated carbon emission of fuel as soon as it enters the U.S. economy. It is not called a tax even though it is collected in a similar manner because it does not enter any government revenue stream; instead, it is regularly paid directly to Americans. Which Americans? That has not been decided. How large is the fee? Undecided. However, the fee does increase on a regular basis in order to incentivize green energy solutions that require little to no carbon (keep in mind, even the act of manufacturing a solar panel has a sizable carbon footprint that will cost more money due to the fee, so all aspects of production and transportation will be looking for green alternatives). That regular basis and the amount that it increases is also undecided.

The Carbon Fee and Dividend model has the potential to be a free market solution to climate change or a dog and pony show with the goal of making us believe a solution to climate has been reached even though it does nothing substantial enough to save us. The devil’s in the details. All those undecided values could easily make this bill mighty or useless, and all of them are up for debate. Which Americans? It may be that citizenship will become a hang-up for this aspect of the eventual bill. Should immigrants get the money as well? What about (gasp) undocumented immigrants? Not providing this payment (meant to subsidize the likely increase in the price of electricity, mind you) to non-citizens creates an economic force that essentially decreases the household income of all immigrants in the face of rising energy costs. The solution is easy, though; just give the payment to everyone who files their taxes. All immigrants, documented or not, can use ITINs in the absence of an SSN to pay taxes and report household size to receive a proper carbon divined.

How large is the fee and how much does it increase over how much time? If these values are set low, it will not incentivize fossil fuel companies to do anything. The fee must be set high and increase rapidly in order to incentivize a change of behavior in these companies. If the price is set low and the steady increase is also set low, the Carbon Fee and Dividend model becomes a system that justifies the increased price of fuel while providing no incentive at all to change from a carbon-based economy. Eventually, the constantly decreasing price of green energy will become economically attractive enough to switch to, but by then we will likely have blown far past the point of no return.

We’re late. If we could sign this solution into law today, it would be well past due. That means the solution must be more extreme, and the longer we wait, the more extreme the solution will have to be in order to matter. This simply cannot wait. I support a Carbon Fee and Dividend model because I believe even in the face of moderates and conservatives that are terrified of enacting any large-scale change, it can pass. However, the increased support coming from the industries responsible for climate change themselves is somewhat worrying. It could be that they simply see the error of their way and know the entire institution will not change without bold legislative policy, or it could be the less naïve possibility that these companies wish to create a way to slowly and easily meander their way to clean energy while getting the American public off their backs.

This can’t be allowed; the time for an easy transition was decades ago, and they squandered the opportunity. Carbon Fee and Dividend may be our best bet in the current political climate, but we all need to be ready for the dirty tactics that are all too obvious. However, I did say that this was not my preferred solution. Instead, I believe that climate change can be dealt with in another revenue-neutral way. My solution actually saves the government somewhere between 10 to 20 billion dollars every year and creates the free market incentives that would allow green energy to surpass fossil fuels almost immediately. It’s simple, really; remove the colossal subsidies the fossil fuel industry has been collecting for over a century.

Every energy subsidy has a sunset. Wind energy subsidies will end this year. Solar panel subsidies will end in 2022. Not so for fossil fuel subsidies; they simply have no sunset clause and will never end without direct Congressional action. That’s brazenly anti-capitalist; how can new innovations compete with an industry propped up by billions of taxpayer dollars? If a bill to put a sunset on fossil fuel subsidies cannot find bipartisan support, it would indicate extreme hypocrisy in our legislative body. This is exactly why I believe the Carbon Fee and Dividend model to be a much more likely solution. It’s still possible to do something about climate change, so when we finally have a bill that can enact progress, we must all be vigilant for bad actors and saboteurs.