Name a common goal of Nike, the World Bank, Barack Obama, Coca-Cola, and Henry Paulson, George W. Bush’s Treasury Secretary. Did you answer “economic growth?” Bingo! Now name a common concern. You may be surprised to learn that according to a recent New York Times article the answer is the changing climate. All noted that the detrimental effects of climate change are putting an increasing drag on economic growth throughout the world.
What to do? In his state of the union address President Obama gave us his plan. “I directed my administration to set new standards on the amount of carbon pollution our power plants are allowed to dump into the air.”
How about a better solution that uses one of America’s greatest strengths - free market innovation? Instead of government control we should employ a policy favored by conservative economists including Arthur B. Laffer, senior economic adviser to President Ronald Reagan; the Harvard economist N. Gregory Mankiw, who was economic adviser to Mitt Romney’s presidential campaign; and Douglas Holtz-Eakin, the head of the American Action Forum, a conservative think tank. They, along with numerous folks on the other side of the political aisle agree the best solution is to pass carbon fee and dividend legislation.
How would such legislation work?
- A fee is collected on carbon-based fuels at the source (well, mine, port-of-entry).
- This fee starts at $15 / ton of CO2 emitted (less than a dime per gal. of gas) and increases by $10 / ton each year.
- All of the money collected is returned to every American household as a dividend. Estimates are that the dividend will put 2/3s of households financially ahead in spite of slowly rising carbon-fuel costs.
- The predictably rising price on carbon will send a clear market signal about the future costs of carbon–based fuels. Alternative energy sources become increasingly competitive.
- Adjustments at the border will encourage our trading partners to adopt similar policies. Those who do will not be put at a disadvantage.