The answer to what ails us

Re dirty: witness the million gallons of oil pouring daily into the
Gulf of Mexico, as West Virginia mining communities and Louisiana
coastal communities mourn their dead, their wrecked lives and their
devastated ecosystems. Re entangling: count up eight years’ worth
of soldiers dying in Iraq and Afghanistan and worrisome saber-rattling
by “oiligarchs” in Venezuela and Iran. Re volatile: consider how the
roller-coaster of gasoline prices helped enable the housing bubble
and the Crash of ’08, and how spending and debt from our Asian and
Middle Eastern oil wars inhibit Congress from investing in programs
and policies that could restore millions of lost jobs, improve
education and bolster health care.

And then there’s uncontrolled climate change, which, as a Stanford
polling expert reminded us yesterday, a clear majority of Americans
regard with serious concern ­ and rightly so, according to an
overwhelming consensus of informed scientists.

Disturbing signs that our economy and society are being corroded by
this trifecta of dirty, entangling and volatile energy have been
ubiquitous since the 1973 Arab oil embargo. A few bright spots
notwithstanding–emergence of a growing wind power industry,
rises in economic output per unit of energy input–most key
indicators are again headed south. Indeed, of the many lessons
to be learned from the BP disaster, the most salient may be that
obtaining hydrocarbons from “extreme” sources, be they oil sands
or shale gas or mountaintop coal or ultra-marine petroleum, is far
more risky, damaging, and brutally costly than the more conventional
resource extraction of the past.

Which makes it all the more maddening that a simple but powerful
antidote that could be codified in a dozen pages of law, legislated
in weeks, and quickly rejuvenating our economy has been known for
decades, yet has been locked out of the Congressional energy and
climate debate.

I’m referring to a carbon fee-and-dividend: an annually-rising charge
on the carbon content of fuels levied at the minemouth, wellhead or
import dock, with 100% of revenues returned to Americans via equal
monthly checks or corresponding reductions in taxes that now burden
and discourage work.

This is not a Kerry-Lieberman or Waxman-Markey cap/trade/offset system
­ a scheme so oblique that it could never provide the clarion price
signal needed to drive investment in efficiency and low-carbon energy,
and so manipulable that it was bound to degenerate into horse-trading
on a scale to make even Beltway cynics blush. Nor is fee-and-dividend
the same as the improved but still wobbly Cantwell-Collins cap-and-dividend
alternative, which, as currently written, would do little more than meet
emission targets that our fitful economy is headed toward on its own.

No, a carbon fee goes straight to the heart of what ails us. By taxing
dirty energy, it lifts away the damage costs that are weighing down our
people and environment, and internalizes them instead into the prices of
fossil fuels. This transmutation of costs into prices creates incentives
across-the-board ­ for utilities to switch from coal to renewables, for
families to want and automakers to make high-mileage cars, and for
literally billions of daily decisions that collectively shape our energy
usage to be made in carbon-appropriate ways, which happen also to be
energy-independent and job-creating ways as well.

The dividend part is what makes fee-and-dividend fair and affordable.
Rather than hand out the revenues as soft bribes to win votes, or let
government agencies bestow them on well-connected technologies,
fee-and-dividend returns all of the revenues to the American people.
Everyone gets the same share. Those of us whose carbon footprint is
relatively modest will pay less in higher energy prices than we’ll
get back monthly, while those who expend carbon on lavish homes or
far-flung getaways will pay more. But all will have the same incentive
to economize on energy and emissions; ditto, businesses, especially the
inventors and entrepreneurs whose ingenuity will help build the bridge
to the sustainable, low-carbon future.

Can carbon fee-and-dividend make it through Congress this year? Of course
not. It will take time for the toxic residue left by cap/trade/offset to
subside and for the public as well as Representatives and Senators ­ and
the White House ­ to be brought up to speed on the beauty and benefits
of the fee-and-dividend approach.

Meanwhile, the energy and climate bills now under consideration will do
little to alleviate our disastrous energy trifecta and will likely make
it worse. Congress should shelve the legislation now before it and make
a fresh start in January, beginning with full hearings on fee-and-dividend.

Komanoff, an economist, directs the Carbon Tax Center.