Free Market Solution To Climate Disruption

Conservatives taking action against climate change?  You bet!

People of all political leanings are recognizing the seriousness of climate disruption, not just for the world and the future, but for business as well. Conservatives are developing responses that use free-market principles and remain consistent with the ideals of smaller government.

A conservative Republican group is called The Climate Leadership Council and includes James A. Baker, Henry M. Paulson, and George P.Shultz, among others. They are promoting something called a “carbon tax and dividend,” that is being endorsed by climate activists, conservatives, progressives, pretty much all sorts.

The Costs of Fossil Fuels are Largely Socialized

 The simple fact is that The costs for fossil fuels have been largely “socialized” to keep the prices affordable. This has been a good thing in that it has made the benefits of the industrial revolution available to all. 

Economists call these “externalities” which means they are not included in what you pay for products.  Dr. Jeffrey Bennett points out in his book A Global Warming Primer, that because it is society itself that pays these costs, often the government directly, it is a form of “socialism.” Not exactly “free-market.”

What are the socialized costs of coal and oil energy? They are numerous, and some are not easy to quantify.

First there is the direct subsidizing of the industry which weighs in at about 20 billion a year. Then there are health costs from pollutants that increase our premiums and government spending on health. These are dwarfed by the huge military costs needed to protect sources of oil, shipping lanes, and deal with the fallout from regimes and dictatorships that we reluctantly finance by buying their oil.

Of course, there are the hard to measure, but very large costs of environmental damage from extracting and transporting these fuels, as well as the increasing costs “natural” disasters to which climate change is contributing.

While there is plenty of room for debate about how much the hidden government and societal contributions are, there is no argument that it is substantial. The price for fossil fuels at the meter or pump is artificially low. If free market principles were used, and prices reflected more accurately the cost of the products, there would be a shift from fossil fuels to renewables with little need for government regulation.  

This is the reality that these Republican statesmen are addressing.

Carbon fee Dividend

The Climate Leadership Group is proposing a fee starting at 40 dollars per ton of coal. Fees would rise steadily and predictably over time which would allow companies to plan effectively.

This idea generally has support from people across the political spectrum including stalwart environmentalists and conservative business people. There is good agreement that this could  begin to put energy costs on an more even footing, reduce fossil fuel use, and speed the transition renewable energy.

This fee (they like to avoid the word tax) would be returned to citizens in the form of a dividend. All citizens would receive the same amount, which is estimated to be about $2000 annually for a family of four. It would grow over time.

As the carbon fee is increased, the more the climate would be protected and the greater the dividend payments to citizens.

Since all people would receive the same dividend, more of the money would go to poorer people than the wealthy and would therefore be an economic stimulus. This makes it basically progressive.

Conservatives like the fact that it will effectively address climate change without being a tax that grows the government. Rather it is money returned directly to citizens through the social security administration.

As Baker has said: “it is a good proposal, it’s simple, it’s conservative, it’s free market, it’s limited government.”

Jim Henson, a former NASA scientist and climate activist summarized the Carbon Fee and Dividend proposal in a 2012 TED talk:

We can solve (climate change) with a simple, honest approach of a gradually rising carbon fee collected from fossil fuel companies and distributed 100 percent electronically every month to all legal residents on a per capita basis, with the government not keeping one dime. Most people would get more in the monthly dividend than they'd pay in increased prices. This fee and dividend would stimulate the economy and innovations, creating millions of jobs. It is the principal requirement for moving us rapidly to a clean energy future.

It’s a solid “free-market” solution whose time has come.

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