14. Cash-Back Carbon Pricing?

 

Energy Decisions:

Cash-Back Carbon Pricing?

Finding ways to solve the climate crisis facing humanity is quite vexing, chiefly due to complexity.  The crisis involves physics, chemistry, ecology, biology, history, sociology,  economics, - pretty much everything, especially human behavior.

The physics and chemistry and history are clear:  Since the industrial revolution, humanity has succeeded in stuffing the atmosphere with too many greenhouse gases, trapping more heat than it can contain to maintain the equilibrium necessary for life on earth.  There is no longer any credible refutation of this fact; this part is simple.

The complexity enters the scene with the humans who need to decide what to do.  Some refuse to  believe it.  Others refuse to do anything until every detail of the climate’s ecological trajectory is described with certainty, which is not possible. Still others take it seriously but refuse to take action because they perceive any remedy as too painful.  The result is a general inability to decide what to do.

Enter the economists.  Economists mostly attempt to describe, predict, -- and prescribe ways to manipulate -- human decision-making.  They theorize extensively, they range from very liberal to extremely conservative, and consensus among them is rare.  In the case of curbing carbon emissions, however, a consensus seems to have emerged among economists of all stripes:  it makes sense to put a price on carbon pollution, to get people to make the right decisions.

In fact, 3500 economists, including 27 Nobel laureates, 4 former Chairs of the Federal Reserve, and 15 former Chairs of the Council of Economic Advisers signed a Statement on Carbon Dividends in a Wall Street Journal ad in January of 2019.

They agree that there has been a market failure when it comes to pricing fossil fuels, historically. The “negative externalities” of burning fossil fuels were simply not accounted for, and the result is deferred costs that can no longer be ignored.  Most agree that putting a price on carbon pollution holds potential as a powerful economy-wide remedy to address this market failure.  

A consumer-friendly approach to this problem exists and is being called “cash-back carbon pricing.”  This policy calls for a  fee to be placed on all fossil fuels at the source (the coal mine, the oil or gas well, the port), assessed on the basis of calculated carbon emissions that will result from using the fuels.  The fee would start low and increase on a schedule that industry could work with over the coming 30 years.

It is referred to as a fee rather than a tax, since the revenues from it would not be given to the government; instead, it would be returned to all American households on an equal per capita basis in monthly checks to compensate for any higher prices that might result.  Since low- income households tend to use less fuel than high income households, studies show that two-thirds of all families will come out ahead.

This policy, outlined in HR 763, The Energy Innovation and Carbon Dividend Act (EIDA), is projected to result in a 40% reduction in U.S. carbon emissions in 12 years, and 90% in 30 years, create millions of jobs, and save hundreds of thousands of lives from reduced pollution.  

While many other countries have carbon pricing in place now, the EIDA contains provision for border adjustments to keep our exported products competitive with those from countries without a carbon tax.

There are other carbon pricing bills before Congress right now.  At last count there were 8.  HR 763 is the only one that returns all proceeds to households.  A handy comparison of bills out there (Carbon Pricing Bill Tracker) can be found at rff.org.  

Our modern lives are dependent on external sources of energy, but we must reckon with the fact that our sources of energy are no longer “modern,” or practical.  In order to make better decisions about our energy sources, and shift to non-carbon-producing fuels, we seem to need help.  A cash-back carbon pricing program might be an effective encouragement.

Of course, carbon pricing bills before Congress have no traction for some lawmakers until they are certain their constituents support them.  Constituents can make a big difference with conscientious lawmakers.  If you know a conscientious lawmaker, give him or her a call about carbon cash-back.  Chellie Pingree is already on board as a co-sponsor of HR 763.  

Paul Stancioff, PhD., is a professor of Physics at the University of Maine Farmington who studies energy economics on the side.  He can be reached at pauls@maine.edu.  Cynthia Stancioff is an amateur naturalist who likes to write.