Why a Carbon Fee Makes More Sense Than Ever

A lot has changed since November 8, and more change is coming. But two things have not changed: 1) The planet is getting warmer, day by day, and 2) A carbon fee remains the most practical and effective way to restrain the thermometer.

President-elect Trump’s initial personnel moves indicate that he is fully committed to eliminating as many federal regs as he can. That squelches any hopes that the Clean Power Plan, limits on methane, and higher vehicle mileage standards would help us fight climate change.

Now what? Should we retreat to the sidelines for the next four, or eight, years and hope that the other 194 countries will ramp up their climate efforts to compensate for U.S. inaction?

I don’t think anyone visiting this website considers that a responsible option.

As we look at the new political realities, we start with the well-known priorities of the incoming president and the congressional leadership. At or near the top of the list are a $1 trillion infrastructure program and significant tax cuts. Combined, the price tag could be $4.4 trillion to $5.9 trillion over 10 years, according to the nonpartisan Tax Foundation.

Question number one: How can we pay for those two initiatives? Some proponents maintain that both will lead to a flood of new tax revenue, washing away any increase in the already-high national debt.

Maybe. But most economists call that wishful thinking. The last time this was tried was in the Reagan administration, and the higher growth stimulated by the tax cuts recouped only about 20 percent of the lost revenue. So let’s be practical and ward off a potential fiscal calamity. By far, the most plausible option is a carbon emissions fuel fee. For example, a fee beginning at $35 per metric ton (MT) of CO2 and increasing by inflation-plus four percent for ten years would generate $1.5 trillion to $2 trillion. No other prospective tax measure, including repatriation, a millionaire tax, or a transaction tax, would produce revenue in that ballpark.

So job one is to pull together a coalition that can persuade Congress to adopt the fee. That coalition could include business people and deficit hawks--from both parties--who believe that it would be irresponsible to fatten our debt beyond its current level, a sobering 100 percent of GDP. The coalition should include the growing number of people making a living from the clean energy industry, many of whom live in the rural communities that supported the president-elect. Add those who stand to benefit from a massive infrastructure program. Support also would come from the conservation community. Until November 8, many environmentalists were fervent backers of a federal regulatory approach to climate change and not so enthusiastic about a market-based one. Today, their only option is to price carbon.

President-elect Trump is a deal-maker. So let’s offer him $2 trillion to enable him to rebuild America’s infrastructure and tackle the tax code--without busting the bank. It’s a free-market solution that will make it possible for President Trump to show all the naysayers, here and abroad, that he can, in fact, “make America great again.”

This new path to a market-based climate solution means we have a lot to do. We are moving full-speed-ahead, in partnership with Ceres and the We Mean Business Coalition, to recruit companies (and then organizations and individuals) to publicly endorse a set of Carbon Pricing Principles. Worked out over the summer and fall with corporate and nonprofit participants, these principles stipulate the parameters of a market-based, pro-growth approach to the climate challenge.