This is an excerpt from his book "Storms of my Grandchildren," chapter 9, about 85% of the way through the chapter:
"Fossil fuels are cheapest because we do not take into account their true cost to society. Effects of air and water pollution on human health are borne by the public. Damages from climate change are also falling on the public, but they will be borne especially by our children and grandchildren.
How can we fix the problem? The solution necessarily will increase the price of fossil fuel energy. We must admit that. In the end, energy efficiency and carbon-free energy can surely be made less expensive than fossil fuels, if fossil fuels’ cost to society is included. The difficult part is that we must make the transition with extraordinary speed if we are to avert climate disaster.
Rather than immediately defining a proposed framework for a solution, which may appear to be arbitrary without further information, we need to first explore the problem and its practical difficulties. Two alternative legislative actions have been proposed in the United States: “fee-and-dividend” and “cap-and-trade.” Let’s begin by looking at the simpler approach, fee-and-dividend. In this method, a fee is collected at the mine or port of entry for each fossil fuel (coal, oil, and gas), i.e., at its first sale in the country. The fee is uniform, a single number, in dollars per ton of carbon dioxide in the fuel. The public does not directly pay any fee or tax, but the price of the goods they buy increases in proportion to how much fossil fuel is used in their production. Fuels such as gasoline or heating oil, along with electricity made from coal, oil, or gas, are affected directly by the carbon fee, which is set to increase over time. The carbon fee will rise gradually so that the public will have time to adjust their lifestyle, choice of vehicle, home insulation, etc., so as to minimize their carbon footprint.
Under fee-and-dividend, 100 percent of the money collected from the fossil fuel companies at the mine or well is distributed uniformly to the public. Thus those who do better than average in reducing their carbon footprint will receive more in the dividend than they will pay in the added costs of the products they buy.
The fee-and-dividend approach is straightforward. It does not require a large bureaucracy. The total amount collected each month is divided equally among all legal adult residents of the country, with half shares for children, up to two children per family. This dividend is sent electronically to bank accounts, or for people without a bank account, to their debit card.
As an example, consider the point in time at which the fee will reach the level of $115 per ton of carbon dioxide. A fee of that level will increase the cost of gasoline by $1 per gallon and the average cost of electricity by around 8 cents per kilowatt-hour. Given the amount of oil, gas, and coal sold in the United States in 2007, $115 per ton will yield $670 billion. The resulting dividend will be close to $3,000 per year, or $250 per month, for each legal adult resident; a family with two or more children will receive in the range of $8,000 to 9,000 per year.
Fee-and-dividend is a progressive tax. For example, my friend Al Gore (I hope he is still my friend after this book is published) will pay a heck of a lot more than $9,000 in added costs because he owns large houses and flies around the world a lot. Given the current distribution of wealth and lifestyles, about 40 percent of people will pay more in added costs than they will get back in their dividend. For the most part, it will be those with high incomes who pay more, but not always. A poor guy who commutes a hundred miles to work every day in a clunker may pay more than he gets in his dividend (although perhaps not, if he lives in a modest-size house, doesn’t do a lot of recreational motoring, and rarely takes airplane trips). Sorry, poor guy, but it is those kinds of practices that will be changed, in the long run, by a rising carbon fee. The cost will encourage the poor guy to figure out more efficient transportation or live closer to his work.
By the way, Al Gore agrees that fee-and-dividend is the best way to reduce carbon emissions, but his proposal is to reduce payroll taxes rather than give dividends to the public. I prefer the dividend because I don’t trust the government to make the tax reduction balance out the fee. Also, not everybody is on a payroll. A dividend is just simpler.
Few activities would be unaffected by a carbon fee-and-dividend. Today we often import food from halfway around the world, rather than from a nearby farm, in part because there is no tax on aviation fuel. Why? Lobbying. A deal was made in the 1940s to encourage the budding aviation industry—and lobbying makes it hard to get rid of sweet deals. All sweet deals will be wiped off the books by a uniform carbon fee at the source, which will affect all fossil fuel uses.
I’m asked, “If people get a dividend, won’t they just go out and spend that money on their gas-guzzler or whatever fossil fuels they have been using?” Maybe they will at first, but in the long run they will tend to adjust their decisions on vehicle choice and other matters as the carbon price gradually continues to rise.
A rising carbon price does not eliminate the need for efficiency regulations, but it makes them work much better. Building codes, for example, usually have energy efficiency requirements, but every city finds that they are impossible to enforce well. The builder changes things after inspection, or the building operation is simply inefficient. The best enforcement is carbon price—as the fuel price rises, people pay attention to waste.
Economists are almost unanimous that a uniform rising carbon fee is the least costly way to phase out fossil fuels. This allows proper competition between energy efficiency and alternative carbon-free energy sources such as solar energy, wind, and nuclear power. It also “internalizes” the incentive to reduce the use of carbon fuels, especially coal, in literally billions of decisions ranging from commuting behavior to the design of vehicles, aircraft, cities, and so forth.
“Wait a minute,” you may be saying. “This carbon fee doesn’t sound like the deal I have been hearing about.” You are right. Most of the talk is about cap-and-trade, the basis of proposed legislation being considered by Congress, specifically Representatives Henry Waxman and Ed Markey’s American Clean Energy and Security Act. Cap-and-trade is what governments and the people in alligator shoes (the lobbyists for special interests) are trying to foist on you.
Whoops. As an objective scientist I should delete such personal opinions, or at least flag them. But I am sixty-eight years old, and I am fed up with the way things are working in Washington. Foolishly, I imagined that we might really get “change” in the way things worked there. As I said, I was among those who had moist eyes on Election Day in November 2008, when President-elect Obama gave his speech in Chicago. But things are still done in the same way in Washington. No doubt I was naïve to think that it might be otherwise, and, unfortunately, so were millions of young people.
I am not blaming President Obama. On the contrary, he is still our best hope. But he must actually look into this matter, not rely on watered-down advice from his sources of information and advisers. The leaders Obama appointed in science and energy are the most knowledgeable people in the field, but there are many others in his inner circle of advisers. The stakes in the policy adopted for energy and climate are too great to be based on aggregate advice or a sum of political compromises. The present situation is analogous to that faced by Lincoln with slavery and Churchill with Nazism—the time for compromises and appeasement is over...."
"Fossil fuels are cheapest because we do not take into account their true cost to society. Effects of air and water pollution on human health are borne by the public. Damages from climate change are also falling on the public, but they will be borne especially by our children and grandchildren.
How can we fix the problem? The solution necessarily will increase the price of fossil fuel energy. We must admit that. In the end, energy efficiency and carbon-free energy can surely be made less expensive than fossil fuels, if fossil fuels’ cost to society is included. The difficult part is that we must make the transition with extraordinary speed if we are to avert climate disaster.
Rather than immediately defining a proposed framework for a solution, which may appear to be arbitrary without further information, we need to first explore the problem and its practical difficulties. Two alternative legislative actions have been proposed in the United States: “fee-and-dividend” and “cap-and-trade.” Let’s begin by looking at the simpler approach, fee-and-dividend. In this method, a fee is collected at the mine or port of entry for each fossil fuel (coal, oil, and gas), i.e., at its first sale in the country. The fee is uniform, a single number, in dollars per ton of carbon dioxide in the fuel. The public does not directly pay any fee or tax, but the price of the goods they buy increases in proportion to how much fossil fuel is used in their production. Fuels such as gasoline or heating oil, along with electricity made from coal, oil, or gas, are affected directly by the carbon fee, which is set to increase over time. The carbon fee will rise gradually so that the public will have time to adjust their lifestyle, choice of vehicle, home insulation, etc., so as to minimize their carbon footprint.
Under fee-and-dividend, 100 percent of the money collected from the fossil fuel companies at the mine or well is distributed uniformly to the public. Thus those who do better than average in reducing their carbon footprint will receive more in the dividend than they will pay in the added costs of the products they buy.
The fee-and-dividend approach is straightforward. It does not require a large bureaucracy. The total amount collected each month is divided equally among all legal adult residents of the country, with half shares for children, up to two children per family. This dividend is sent electronically to bank accounts, or for people without a bank account, to their debit card.
As an example, consider the point in time at which the fee will reach the level of $115 per ton of carbon dioxide. A fee of that level will increase the cost of gasoline by $1 per gallon and the average cost of electricity by around 8 cents per kilowatt-hour. Given the amount of oil, gas, and coal sold in the United States in 2007, $115 per ton will yield $670 billion. The resulting dividend will be close to $3,000 per year, or $250 per month, for each legal adult resident; a family with two or more children will receive in the range of $8,000 to 9,000 per year.
Fee-and-dividend is a progressive tax. For example, my friend Al Gore (I hope he is still my friend after this book is published) will pay a heck of a lot more than $9,000 in added costs because he owns large houses and flies around the world a lot. Given the current distribution of wealth and lifestyles, about 40 percent of people will pay more in added costs than they will get back in their dividend. For the most part, it will be those with high incomes who pay more, but not always. A poor guy who commutes a hundred miles to work every day in a clunker may pay more than he gets in his dividend (although perhaps not, if he lives in a modest-size house, doesn’t do a lot of recreational motoring, and rarely takes airplane trips). Sorry, poor guy, but it is those kinds of practices that will be changed, in the long run, by a rising carbon fee. The cost will encourage the poor guy to figure out more efficient transportation or live closer to his work.
By the way, Al Gore agrees that fee-and-dividend is the best way to reduce carbon emissions, but his proposal is to reduce payroll taxes rather than give dividends to the public. I prefer the dividend because I don’t trust the government to make the tax reduction balance out the fee. Also, not everybody is on a payroll. A dividend is just simpler.
Few activities would be unaffected by a carbon fee-and-dividend. Today we often import food from halfway around the world, rather than from a nearby farm, in part because there is no tax on aviation fuel. Why? Lobbying. A deal was made in the 1940s to encourage the budding aviation industry—and lobbying makes it hard to get rid of sweet deals. All sweet deals will be wiped off the books by a uniform carbon fee at the source, which will affect all fossil fuel uses.
I’m asked, “If people get a dividend, won’t they just go out and spend that money on their gas-guzzler or whatever fossil fuels they have been using?” Maybe they will at first, but in the long run they will tend to adjust their decisions on vehicle choice and other matters as the carbon price gradually continues to rise.
A rising carbon price does not eliminate the need for efficiency regulations, but it makes them work much better. Building codes, for example, usually have energy efficiency requirements, but every city finds that they are impossible to enforce well. The builder changes things after inspection, or the building operation is simply inefficient. The best enforcement is carbon price—as the fuel price rises, people pay attention to waste.
Economists are almost unanimous that a uniform rising carbon fee is the least costly way to phase out fossil fuels. This allows proper competition between energy efficiency and alternative carbon-free energy sources such as solar energy, wind, and nuclear power. It also “internalizes” the incentive to reduce the use of carbon fuels, especially coal, in literally billions of decisions ranging from commuting behavior to the design of vehicles, aircraft, cities, and so forth.
“Wait a minute,” you may be saying. “This carbon fee doesn’t sound like the deal I have been hearing about.” You are right. Most of the talk is about cap-and-trade, the basis of proposed legislation being considered by Congress, specifically Representatives Henry Waxman and Ed Markey’s American Clean Energy and Security Act. Cap-and-trade is what governments and the people in alligator shoes (the lobbyists for special interests) are trying to foist on you.
Whoops. As an objective scientist I should delete such personal opinions, or at least flag them. But I am sixty-eight years old, and I am fed up with the way things are working in Washington. Foolishly, I imagined that we might really get “change” in the way things worked there. As I said, I was among those who had moist eyes on Election Day in November 2008, when President-elect Obama gave his speech in Chicago. But things are still done in the same way in Washington. No doubt I was naïve to think that it might be otherwise, and, unfortunately, so were millions of young people.
I am not blaming President Obama. On the contrary, he is still our best hope. But he must actually look into this matter, not rely on watered-down advice from his sources of information and advisers. The leaders Obama appointed in science and energy are the most knowledgeable people in the field, but there are many others in his inner circle of advisers. The stakes in the policy adopted for energy and climate are too great to be based on aggregate advice or a sum of political compromises. The present situation is analogous to that faced by Lincoln with slavery and Churchill with Nazism—the time for compromises and appeasement is over...."
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