It's Time to Pick Up the Pace

The big Paris conference that is supposed to move the world closer to solving the climate change riddle starts just after Thanksgiving. If, like most people, you’re a bit confused about the past quarter-century’s efforts on this front, read Elizabeth Kolbert’s terrific story in The New Yorker:”

There’s something in Kolbert’s account for both optimists and pessimists. The former will nod as they read that economic growth is possible even when less carbon is burned. Here’s an excerpt:

In some parts of Europe, what has been called “conscious uncoupling” is already well along. Sweden, one of the few countries that tax carbon, has reduced its emissions by about twenty-three percent in the past twenty-five years. During that same period, its economy has grown by more than fifty-five percent. Last year, perhaps for the first time since the invention of the steam engine, global emissions remained flat even as the global economy grew, by about three percent.

Optimists might also take heart from stepped-up U.S. efforts to wrestle with climate change, including vehicle mileage standards and the new proposal limiting emissions by power plants, which Kolbert summarizes as follows:

According to the Administration’s calculations, these new rules, coupled with stricter energy-efficiency standards for equipment and appliances, will lower U.S. emissions by at least twenty-six per cent by 2025 (this is against a baseline of 2005). President Obama has said that this is an “ambitious goal, but it’s an achievable goal.”

She follows those numbers immediately with the cold water that pessimists are so mindful of:

Still, it will leave the world on track to burn through its two-degree budget within a matter of decades.

Later, Kolbert reports:

Even those who, like Figueres [the Costa Rican tapped by the UN to lead this effort], argue that the goal is still achievable acknowledge that the (nations’ emission-reduction pledges) aren’t nearly enough to achieve it.

Obama himself said in late August, “We’re not moving fast enough.”

So how do we pick up the pace? Let’s take a cue from Sweden and put a price on carbon.

Politically, the most significant question is how to allocate the proceeds of the fee, which would be sizable. About half of the revenue could be used to bring the corporate tax rate from 35 percent (the highest in the industrialized world) to 25 percent. In recent years Japan, Canada, and the United Kingdom have reduced their top rate to increase their competitiveness. Most of the balance of the revenue could be returned to low- and low-middle-income families through the Tax Code.

Bottom line: A carbon fee is the fastest, most efficient, most politically feasible way to avert the damage that climate change is bringing.

Looking to the Free Market to Mitigate Climate Change

One way or another, climate change affects all of us. Are you a South Carolina resident trying to get your insurance company to deal with your flooded home? Maybe you took a hit in 2012 when Hurricane Sandy moved up the Eastern Seaboard. Or you might be one of the growing number of Americans who have built homes near western forests that have erupted in flames as drought has intensified. If you live in one of the 30 Alaskan villages being swallowed up by rising sea levels, you are near the top of the list of climate change victims.

The plight of those villagers was brought home to all Americans during the president’s August trip to the 49th state. The Economist’s account was titled “Tales of Atlantis.”

Is the country that became the most powerful on the planet because of its “can-do” spirit now saying “can’t do” when challenged by climate change? The Obama administration has taken a number of actions to combat this problem, but no expert believes that we are on a path that will reduce greenhouse gas emissions quickly enough to forestall truly awful consequences.

So what can we do? We should turn to our old friend, the free market. Since scientists have concluded that carbon is the primary culprit, let’s make it more expensive by creating a carbon fee. That’s the best way to reduce its use.

It is probably also the best way to get Republicans in Congress to be part of the solution. Of course, the GOP is not going to get on board if the fee revenue is used to fund the federal government. So the fee should be revenue-neutral. If we applied about half of the revenue to reducing the corporate tax rate from 35 percent (the highest in the industrialized world) to 25 percent, we would make U.S. companies more competitive in world markets. Since the fee would be passed along to consumers, it probably would be only fair to return the rest of the revenue to low- and low-middle-income families through the tax code. Couple a carbon fee with a WTO-compliant border tariff adjustment when trading with countries that don’t match us and watch it spread to all our trading partners overnight.

This is not pie in the sky. In fact, almost 40 nations and more than 26 sub-national jurisdictions have adopted carbon pricing, and these programs cover 12 percent of the world’s greenhouse gas emissions. The list includes Sweden, Norway, and New Zealand. British Columbia has had one since 2008 and has reduced fossil fuel consumption by 16 percent, while use in the rest of that country has risen by 3 percent. Meantime, B.C.’s GDP growth has outperformed Canada’s.

This market-based response to climate change would foster economic growth, create jobs, end the long-standing deadlock over tax reform, and replace an expensive and unpredictable regulatory mechanism with a cheaper, faster, more predictable, and more effective solution.

Congressman John Delaney (D-MD), a former business executive, has introduced a carbon fee bill. So have Senators Sheldon Whitehouse (D-RI) and Brian Schatz (D-HI). There are other bills, as well.

Perhaps the best window for enactment is 2017 after national elections. But we can’t wait long. With each passing day, the threats to citizens living on the coasts, near forests, and everywhere else are increasing.