Answers for Crafting National Carbon Pricing Solution

There is a new bicameral Carbon Fee coalition in the House and Senate. The coalition is led by Rep. Waxman, Sen. Whitehouse, Rep. Blumenauer, Sen. Schatz & their respective staff, and they are asking for public comment.

Here are the four questions upon which the legislators are seeking particular guidance:

1. What is the appropriate price per ton for polluters to pay? The draft contains alternative prices of $15, $25, and $35 per ton for discussion purposes.
2. How much should the price per ton increase on an annual basis? The draft contains a range of increases from 2% to 8% per year for discussion purposes.
3. What are the best ways to return the revenue to the American people? The discussion draft proposes putting the revenue toward the following goals, and solicits comments on how to best accomplish each: (1) mitigating energy costs for consumers, especially low-income consumers; (2) reducing the Federal deficit; (3) protecting jobs of workers at trade-vulnerable, energy intensive industries; (4) reducing the tax liability for individuals and businesses; and (5) investing in other activities to reduce carbon pollution and its effects.
4. How should the carbon fee program interact with state programs that address carbon pollution?

Members of the public can send comments, analysis, informational resources and legislative suggestions to cutcarbon@mail.house.gov until April 12.

In order to really accelerate the consumer-driven transition from dirty, inefficient, climate-destabilizing combustible fuels to genuinely clean, renewable, high-efficiency expandable power-generation resources, we need to push the market price of GHG-emitting fuels to near $100 per ton of CO2 or equivalent emissions (CO2e) within about 10 years. There are two reasons we need to reach that price:

• GHG-emitting fuels are artificially underpriced; we need to make markets tell the truth, or consumers will not be free to escape the dynamics of a rigged market;
• The true price for clean fuels is much lower than this, and we need consumers, investors and energy suppliers to see the difference in real bottom-line terms.

The fee, then, should start out around $15/ton of CO2e emissions, increasing by $10 per year, every year. This will be manageable for major fossil fuel providers, in part because the clarity provided by the guaranteed fee price, projected out into the future, will allow for better planning, and for corrective calculations that will motivate more investment in the cheap, clean, eminently expandable alternatives.

For a comprehensive, market-wide CO2e fee to work, we need to do this in a way that motivates the healthy flow of prosperity-generating new investment in clean energy resources, without subjecting consumers (households, local government services like schools and fire departments, and small businesses) to unmanageable, economically crippling costs that will stanch the flow of capital through a vibrant middle class economy.

For maximum efficiency, the CO2e fee should be applied at the source—the first point of entry into the national economy (the mine, the drilling well, the point of entry). Doing this allows us to craft a relatively simple, straightforward solution that will span the entire marketplace, and embed corrective and generative economic incentives into all of our everyday activities.

This last part, we achieve simply by returning 100% of the revenues directly to American households, in a monthly check. This means the solution spans the entire marketplace, and moves economic clout from CO2e-emitting mutlinationals to American citizens, families and communities. The dividend, or bonus check, would then more than compensate the majority of households for the rise in costs from fossil fuel consumption.

This empowers households to spend according to their own interests, wishes, priorities, and to re-engineer their own energy portfolio in a way that helps to accelerate the transition to cheap, clean renewables, some of which will be cheaper than existing CO2e-emitting power generation options within 5 years, others within 10.

As households and businesses move away from CO2e-emitting fuels, the fee and the dividend will both decline in total volume. The plan will sunset on its own, as we comprehensively commit to the future of cheap, clean, abundant energy.

This plan can be summed up as follows:

• Fee on CO2e emissions, by volume, at the source (mine, well, port)—$15/ton + $10 more per year
• 100% revenue return to households, to motivate market-based people-centered solution
• Solution works because it 1) spans entire marketplace, 2) corrects failed market mechanisms for pricing CO2e-emitting fuels, 3) empowers consumers
• To ensure level playing field, add WTO-safe border adjustment for goods and services from countries without equivalent policy
• Private capital investment drives major new industrial transition (comparable to, but far in excess of Internet boom), new job creation
• No new bureaucracy required; plan sunsets on its own as economy heals

This plan is supported by a network of thousands of committed citizen volunteers, as well as by Dr. James Hansen of NASA. It is our best hope for solving this crisis in time.