“We believe a well-designed, revenue-neutral carbon tax program provides a more cost-effective alternative to a cap-and-trade regime for reducing GHG (greenhouse gas) emissions. We believe this approach ensures a uniform and predictable cost of carbon, lets market prices drive solutions, maximizes transparency to stakeholders, reduces administrative complexity, promotes global participation, and is easily adjusted to future developments in climate science and policy impacts.”
Believe it or not, the above statement is the official position of the Exxon Corp. on climate policy! And Exxon is not alone. Shell Oil has also called for putting a price on carbon, and David Hone, Shell’s chief climate science advisor, has gone so far as to say that net emissions to the atmosphere of greenhouse gases such as carbon dioxide and methane (natural gas) must go to zero by the end of this century. He just wants it done in a way (through carbon capture and long-term storage, for example) that does not preclude a future for the petroleum industry.
One of the more remarkable recent developments in the debate over climate change and what to do about it is the growing chorus of business leaders and economists of all political stripes who are calling for action to address the problem. But they want action that provides regulatory predictability, minimizes government interference in the economy, makes price the driving force in making investment decisions, and allows sufficient time for the kind of technological change required to move us to an energy system that achieves David Hone’s goal of zero emissions.
George Shultz, President Regan’s Secretary of State and senior fellow at the conservative Hoover Institution, is one of these leaders. His proposal is to eliminate all energy subsidies — oil, gas, coal, nuclear, and renewables — and replace them with a gradually increasing, revenue-neutral carbon tax that he calls “fee and dividend.” This is also the proposal of the Citizens’ Climate Lobby, and here is how it works:
• A steadily increasing fee, starting at $15 per ton of carbon dioxide emissions and increasing by $10 per ton each year, is placed on fossil fuels at or near the first point of sale by the producer. Revenues from the fee are collected and immediately returned to all households on a per capita basis so that the government retains none of the revenues.
• Tariffs are placed on imports from countries that do not have an equivalent carbon-pricing mechanism in order to maintain a level playing field for American businesses, and these revenues are also returned to the people.
Regional Economic Models, Inc. (REMI), a firm regularly used by business and government for economic forecasting, has assessed the economic effects of this mechanism. REMI found that after 10 years, CO2 emissions would be cut 33 percent, and 2.1 million jobs would be added to the economy, primarily through the economic stimulus of putting all that money directly into the pockets of consumers.
Reducing greenhouse gas emissions will not be easy. Oil, coal and natural gas fuel the very engine of our economy, and for many applications there are no viable substitutes at this time. But we must begin to take action now to give us the time and the right price signals to enable the technological revolution that will make reducing greenhouse gas emissions an automatic choice, not a form of sacrifice. And we must take action now to avoid the more radical and disruptive changes that would be required in the future should we choose to do nothing.
George Shultz likens his fee and dividend proposal to taking out an insurance policy to hedge against the future damage of allowing unabated increases in greenhouse gas emissions. But just like household insurance, you can’t wait until your place is on fire to take out a policy.