I could probably fill a bookcase with what’s been written about carbon fees, aka carbon taxes. I’ve written and blogged about a carbon tax before. A new discussion of carbon fees seems particularly germane at this moment. William Nordhaus, a Yale professor, has just won the Nobel Prize in Economics for his work on carbon pricing. The Intergovernmental Panel on Climate Change (IPCC) has just reported on the precocious impacts of the ongoing changes in global climate. And as a result of the recent tax cuts, the United States seems destined to develop huge Federal budget deficits that will raise interest rates and stymie the economic growth so desired by the President.
Specifically, a fee could be set and collected for every pound of carbon dioxide emitted to the atmosphere by human activities. The fee could be higher for carbon derived from fossil fuels, but at least some tax should be collected for biogenic fuels as well, since they emit CO2 with the same impact as that from fossil fuels.
A carbon fee may seem like a retrogressive tax that impacts folks at lower income levels. That may be true for gasoline use in personal transport, but consider the fees that would be captured by the use of big cars, airplanes, and yachts by the upper crust. Overall, a carbon fee would reflect the resource use and thus climate impact equitably across our society. The impact at lower economic levels can be mitigated by a carbon dividend each year to reduce or eliminate traditional taxes on wages and income by the Internal Revenue Service (IRS) and offer a net income for those who do not emit much carbon. We could shift our economy from one that taxes productivity to one that taxes excessive resource use. A carbon dividend could essentially negate the tax on lower income levels.
Carbon fees would penalize fuels that are less efficient (e.g., coal) over those that are more efficient, and it would reward fuels that emit no carbon dioxide (e.g., solar and wind power). Coupled to rapidly improving battery capability, the latter are expanding into non-traditional markets (e.g., electric cars and heating). Even in Maine, we heat our house with a combination of passive and active solar photovoltaics, and have no net annual draw of electricity from the grid. Importantly, a carbon fee program would preserve the personal choice of how we live our lives—big car or little car, lights on or lights off, heat at 65 F or 72F.
At least a partial fee collected on biogenic energy would recognize that substituting corn-ethanol for gasoline and biomass (aka firewood) for coal emits carbon dioxide to the atmosphere. A carbon fee could be set at low levels for biogenic fuels that emit CO2 that is recaptured from the atmosphere rather quickly and high (perhaps higher than for coal) for the perverse suggestion that we can burn trees for electricity to stave off climate change.
We know how to collect carbon fees. We do it now for every gallon of gasoline you buy. Electric power plants know the tonnage of coal that they burn each year. We can adjust the fees up or down quickly to reflect their effect on total CO2 emissions and economic conditions. By all accounts carbon fees are less easily manipulated than “cap-and-trade” systems proposed to reduce CO2 emissions. The effect of a carbon tax would be transparent and immediate. In the past, a carbon fee has seen bipartisan support, as well as support from big corporations, such as Exxon-Mobil.
The seas are rising, hurricanes are blowing, fires are burning, and seawater acidifying. With the costs of climate change estimated at 1.2% of Gross Domestic Product (=$250 billion) per year for each 1o C of warming, can we afford to wait?
7 documented reasons why YOU should care about climate change
References
Hsiang, S. and 11 others. 2017. Estimating economic damage from climate change in the United States. Science 356: 1362-1369.
Nordhaus, W. 2013. The Climate Casino. Yale University Press, New Haven.
Oreskes, N. 2011. Metaphors of warfare and the lessons of history: time to revisit a carbon tax? Climatic Change 104: 223-230.
Schlesinger, W.H. 2006. Carbon trading. Science 314: 1217 doi: 10.1126/science.1137177
