Three very influential international figures are saying that the best way to address climate change is to put a fee on carbon.
International Monetary Fund chief Christine Lagarde and World Bank President Jim Yong Kim expressed that view October 7 during a panel discussion at the joint annual meeting of their organizations in Lima.
“It is just the right moment to introduce carbon taxes,” Lagarde said. "I know that a lot of people would rather do emissions trading systems, but we believe that carbon taxation would be a lot better," she said.
Another supporter is the Korean economist just elected to chair the Intergovernmental Panel on Climate Change. Hoesung Lee. He told The Climate Brief:
“Climate change is a typical example of externalities and the way to correct the externality problem is to have a price on certain activities that cause those externalities. In our case, that is a price on carbon emissions – what you may call a carbon tax. Now, I think if you ask me to choose the most important work in climate change issues, then I’ll choose carbon price. That’s because it is the driver to put us into the right track. I would like to pursue, as much as possible, to increase our knowledge of carbon price and future emissions, and our knowledge on reducing the institutional barriers to adopting a carbon price system.”
The oil and gas industry seems to be singing a similar tune. Industry leaders are meeting October 16 in Paris, and ExxonMobil CEO Rex Tillerson has called for a revenue-neutral global carbon fee, according to an October 7 Reuters dispatch. "We believe the risks posed by climate change are serious. We also believe by taking sound and wise action now, we can better mitigate those risks," Tillerson said. "We have held the view that a revenue-neutral carbon tax is the best option. (It) could be a workable policy framework for countries around the world. They can tailor it to their own economic conditions."
Would Congress ever go this route? At the moment, the outlook for any climate-related action on the Hill is grim. Politico’s Andrew Restuccia reports that the Senate GOP leadership is working tirelessly to block Obama administration initiatives. Those quoted in the story did not say what they could support.
We believe there is a climate change concept that could draw enough support from both sides of the aisle. Enact a revenue-neutral carbon fee, starting at about $30 per metric ton. Use half the proceeds from that fee to reduce the corporate tax rate, the highest in the industrial world, from 35 to 25 percent. The rest of the revenue could go to low- and middle-income Americans to protect them from slightly higher energy prices. Include a WTO-compliant border tariff adjustment to protect domestic industry and to make it in the self-interest of our trading partners to enact a similar fee so that their exporters won’t have to pay it to us at our border.
If the business community, including the oil and gas industry, tell their elected leaders that something like this is the best option, we will have a chance to honor our obligations to future generations.