Marin Voice: An essential first step to reduce carbon pollution

By and July 26, 2020

The recent 100-degree temperatures in Arctic Siberia tell us we have no time to lose in facing the climate crisis.

Rep. Jared Huffman and the House Select Committee on the Climate Crisis deserve thanks for the comprehensive climate action plan that was released in June. The plan is full of policies that the federal government should enact as soon as possible.

Some of the ideas in the plan will require big investments and years to implement. But one particularly effective idea mentioned in the plan could be enacted and become effective almost immediately, at almost no cost to the government: a tax or fee on greenhouse gas pollution.

“When a ton of carbon pollution billows from a smokestack,” the report notes, “no one pays for that pollution. As a result, industry, investors and consumers … have less incentive to choose less-polluting products or technologies. Until the market reflects the true cost of carbon pollution, the U.S. economy will remain biased toward fossil fuel combustion.”

The beauty of a market-based incentive is it instantly affects every sector of the economy, from giant industries to households. As the report notes, a fee or tax that raises the price of fossil fuels “percolates through the entire economy, providing an incentive for all decision-makers in the economy to look for ways to reduce emissions.”

A rising fee on fossil fuels (a “carbon fee”) would make the rest of the committee’s plan much more effective by giving businesses an incentive to go above and beyond the minimum compliance required by regulations, and giving consumers more reason to respond to other program incentives such as electric vehicle tax credits.

That’s one reason nearly 3,600 U.S. economists, including 27 Nobel laureates and all former chairs of the Federal Reserve, have declared that “A carbon tax offers the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary.”

The report calls for any carbon fee to benefit low and moderate-income households—in other words, to be socially just. That principle should apply to any program that raises the cost of energy for residences and workers. Fortunately, carbon fees can easily meet this principle because the revenue they raise can be returned to individuals as dividends, easing the financial burden of transitioning to cleaner energy.

The fee should be paid by fossil-fuel companies on the oil, gas and coal they extract or bring across the U.S. border. Then, to ensure the policy is socially just and politically popular, every taxpayer should get an equal share of the revenue each month.

If all of the revenue were paid out as equal-share dividends, about 70% of families — from the low and moderate end of the income spectrum — would come out ahead, according to a Treasury Department study. In other words, they would get more money in their monthly checks than they spent on the fee that was embedded in retail prices.

That’s because low- and moderate-income households tend to travel less, have smaller houses and fewer vehicles, and buy fewer carbon-intensive consumer goods than high-income households. Wealthy, high-carbon users would be net payers of the cost increases from the carbon fee, since their dividend would not cover all the price increase of their total purchases.

Anyone, regardless of income, could increase the net value of their dividend by actively seeking out low-carbon goods and services, which will tend to be cheaper than high-carbon ones.

Under this socially just plan, fossil fuel companies would essentially pay people to reduce their personal carbon footprint. The more you reduced your carbon footprint, the more you’d earn.

Everybody likes a monthly check. Linking the financial rewards to everyone reducing their personal carbon footprint will build political support for the entire emissions reduction program outlined in the report. This support could become as strong as the support for Social Security.

Carbon fee and dividend isn’t a silver bullet. The climate crisis is too big and complex to be solved by any single measure. But a socially just carbon price is foundational to any lasting solution. Let’s take that simple, no-regrets, essential first step, so we can begin to reduce carbon emissions as soon as possible.

Ray Welch, of San Rafael, is an energy consultant and author. Jonathan Marshall, of San Anselmo, is the former economics editor of the San Francisco Chronicle. They are steering committee members for the Marin chapter of Citizens’ Climate Lobby.