Don C. Brunell: Carbon Dividend is Worth Exploration

Recently, some of America’s most respected statesmen announced a different strategy to reducing carbon pollution–one which is based on incentives as opposed to penalties.

Believing that carrots work better than sticks, the Climate Leadership Council (CLC) announced a new plan to enact a federal tax on carbon emissions with an accompanying payment program to U.S. citizens.

The centerpiece is a “carbon dividend” which, as they put it, would increase the disposable income for the majority of Americans while disproportionately helping those struggling to make ends meet. They are our citizens most impacted by increased costs.

The dividends would be processed by the Social Security Administration and paid to people with valid Social Security numbers.

Former presidents Ronald Reagan and George H.W. Bush cabinet members, James Baker and George Shultz, penned a recent column in the Wall Street Journal explaining the proposal.

They wrote that while the extent to which climate change is due to “man-made cause” can be questioned, the risks associated with future global warming are “so severe that they should be hedged.”

CLC advocates believe their methodology is more of a blanket insurance policy which more effectively addresses climate change. They reject the “heavy-handed, growth-inhibiting government regulations” approach from President Barack Obama’s time in the White House and coming from Gov. Jay Inslee in our state. Instead, they are proposing a market-based system with limited governmental directives.

CLC’s plan has four pillars.

First, it creates a gradually increasing carbon tax which could start at $40 per ton. If that sounds similar to the I-732 which our state’s voters rejected last November, it is. But that is where the similarity stops. Remember, it is a national, not a state carbon tax.

The second pillar is new.

Money collected from the carbon tax would be returned to Americans as a dividend. That dividend would offset higher energy and product costs from the carbon tax. CLC estimates a family of four could receive a $2,000 dividend in the first year alone.

CLC leaders believe their proposal encourages innovation in existing energy companies and auto and truck manufacturers which now rely heavily on carbon-laced fuels. They believe their plan provides predictability for utilities and manufacturers attempting to navigate the myriad of complex rules and regulations currently in place at federal and state levels.

A third CLC pillar allows for border adjustments for the carbon content of exports and imports. It would protect American competitiveness and punish free-riding by other nations which do not address carbon emissions.

Here is how it works.

American companies exporting to countries without comparable carbon taxes would receive rebates for carbon taxes they paid. On the other hand, imports from those nations would face fees on the carbon content of their products. Those import fees would be returned to our citizens in the form of a larger dividend.

The fourth pillar is regulatory relief. Baker and Shultz believe EPA’s carbon dioxide regulations inhibit growth and should be phased out. A key result would be fewer lawsuits.

CLC backers hope to build bipartisan consensus. They believe the key is to carefully rollback regulations, tie the initial carbon tax rate to the level of current regulations, and return dividends to people and not fill government coffers.

If CLC projections are correct, the Treasury Dept. calculates the bottom 70 percent of Americans come out ahead. They are our citizens who can least afford to simply absorb the higher costs of products, electric and gas heating bills, and higher prices at the gas pump.

Their proposal deserves serious consideration because change best occurs when people have incentives to try something new.

(Don C. Brunell is a business analyst, writer and columnist. He retired as president of the Association of Washington Business, the state’s oldest and largest business organization, and now lives in Vancouver. He can be contacted at [email protected].)