Should we each pay a carbon tax, a fee assessed on the relative carbon content – and therefore the pollution potential – of coal, oil and natural gas? If so, how would such a tax help the environment?
Before answering those questions, let’s explore some of the objections people have to paying a carbon tax. Their reasons tend to fall into two groups: (1) We don’t need a tax because carbon pollution isn’t a problem, global warming is a hoax and so on; (2) the affects of the tax would be to hurt poor people and the economy by raising the price of fuel and commodities and to “grow” government, which already is too large.
I’ll answer the first group of questions briefly. Carbon pollution is real. In addition to the overwhelming scientific consensus that it causes global warming/climate change, there is incontrovertible evidence it directly harms human health is acidifying our oceans. If a carbon tax can reduce carbon pollution, that’s good.
The second group, which challenges effects of the tax, tells us if we decide to impose a carbon tax, we must do so carefully if we want to speed the transition to a green economy without causing serious economic disruption. The guidelines for levying an equitable and effective carbon tax are plain enough.
First, any carbon tax would need to be revenue neutral: It would not yield additional funds for government coffers. Second, that neutrality must be created not by a trade-off that reduces existing government revenue sources (taxes and fees), thus reducing the availability of services, but by redistributing the carbon tax revenue as a direct “dividend” to every American taxpayer. Each household’s dividend would be an equal “slice of the pie”: that is, each household would get the same amount of money regardless of how much energy it used.
Setting up a revenue-neutral carbon tax is simple enough: The revenue goes into a special fund (similar to Social Security), not the government’s general fund. After administrative costs are deducted (they’re about 3 percent for Social Security), every taxpayer is sent a check for an equal share of the revenue.
How does this protect the poor, who would see some increase in their cost of fuel for heating and driving? Although it’s an imperfect metric, there is a close correlation between a person’s or family’s income and the amount of energy they use to heat their (usually larger) houses, consume goods, drive, travel and so on. So if everyone gets the same amount, the poor will get, on average, disproportionately more. Yet people will not suffer unduly, because any additional energy costs they incur because of taxation will be at least partially offset by their dividend.
Additionally, a properly designed carbon tax would increase gradually, so our fossil fuel-based economy would have time to adjust. Concurrently, investment in fossil fuels would shift toward other forms of energy or economic sectors as the price of carbon went up and people used less and less polluting energy by conserving and turning to green energy sources.
As carbon revenue ramped up, those who use less energy through conscious lifestyle choices would be rewarded by having proportionately more money with which to “grow” the green economy, something I think most people can support at our ecological house.
Philip S. Wenz, who grew up in Durango and Boulder, now lives in Corvallis, Oregon, where he teaches and writes about environmental issues. www.your-ecological-house.com.
