The United States has an urgent, economic need to implement a nationwide carbon tax. The societal costs of greenhouse gases are not included in the price of goods that produce these harmful pollutants. A carbon tax would correct for this market failure, which costs an estimated 5% of our GDP every year (Stern). Further, this policy change would reduce the air-pollution death toll and the current rate of climate change (Choi) (Pricing Carbon). We must slow climate change to mitigate the frequency and severity of extreme weather events, sea level rise, and mass migrations in order to save our economy a predicted hundreds of billions of dollars a year by 2090 (Climate Action Benefits: Key Findings) (Nuccitelli). Although a carbon tax may face initial backlash from interest groups representing polluting corporations such as ExxonMobil, the future benefits to US citizens and our economy will outweigh these initial costs.
We must implement a carbon plan that features a carbon fee, rebate, and refund approach.
The carbon fee taxes any producer, importer and refiner of crude oil, coal and natural gas. This tax will multiply the metric tons of CO2 emitted by the fuel by the carbon fee rate for that year. The carbon fee rate for 2020 will be $15, and for subsequent years the fee rate will increase yearly at a constant rate of $15. The starting $15 dollar rate will not cover the cost of climate change immediately. To completely mitigate the costs of climate change, the fee rate should be $183, which is a statistic based off of the Stern Review, which estimates that the cost of climate change is 5% of GDP (Stern). This rate would be too steep for companies to adjust to in one year, which is why this proposal suggests starting at $15 and gradually increasing the rate every year.
All revenues from the carbon fee will be placed into a trust fund, and these funds will be designated as follows—79% for a carbon dividend, 1% for administrative costs, 10% for innovation funding, and 10% for transition costs. The carbon dividend will divide the revenues from this tax among all individuals who are citizens or lawful residents of the U.S.. Individuals under 18 will be weighed half as much as those who are over 18 when revenues are divided. Innovation funding will include research funding of carbon capture and direct air capture, efficient energy storage, nuclear technology, and energy efficiency in buildings. Funding for transition costs will be distributed among the Departments of Labor, Energy, and Health to assist workers who may be displaced and to assist low income communities facing increased costs as a result of this policy. This redistribution of funds will help US citizens pay for the cost of climate change, support green energy solutions and help transitions labor sectors to new areas of employment.
Carbon capture facilities will be paid the current fee rate per ton of captured carbon placed in permanent geological storage. The funds for these payments will be drawn from the revenues of the fee prior to its disbursement as a rebate.
Some critics consider this policy politically infeasible, especially since similar proposals have been voted down repeatedly both in states and in Congress (Price On Carbon) (DePillis). However, current data suggests that the public opinion is changing in favor of climate change action. The Yale Program on Climate Change Communication (n>22,000) estimated that nationwide 61% of people are worried about global warming, and 68% are in favor of taxing fossil fuel companies while equally reducing other taxes (Howe et al). These estimates were derived utilizing a multilevel regression with poststratification, were validated using three different methods, and the error range on these national averages is ±3 percentage points (Howe et al). Voters are in favor of a carbon tax, yet their representatives are voting against it. These representatives often cite the increase in energy cost for consumers and its disproportionate effect on low income communities to justify their opposition stance. However, the carbon rebate we propose addresses this increase in energy costs and mitigates the impact on low income communities by distributing revenues from the carbon fee back to the people.
Taken together, the three pronged solution outlined in this proposal leads to a carbon policy that is both effective and well-rounded. This policy has the capacity to disincentivize releasing carbon into our atmosphere and consequently reduce rates of climate change and air pollution.