Two Former Senators Back Carbon Fee With Full Rebate
- June 21, 2018
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Trent Lott, a former Republican senator, and John Breaux, a former Democratic senator, support a universal national price, or fee, on fossil fuels (coal, natural gas and petroleum), in an op-ed published June 21, 2018 Their proposal is based on the recent plan put forward by conservatives formerly holding high positions in earlier administrations (The Conservative Case For Carbon Dividends; by James A. Baker, III; Martin Feldstein; Ted Halstead; N. Gregory Mankiw; Henry M. Paulson, Jr.; George P. Shultz; Thomas Stephenson; and Rob Walton; the “Baker-Shultz plan”).
Emissions. When we talk about emissions in the context of global warming, it is important to remember that “emissions” actually refers to “the rate of greenhouse gas emissions per year”. As long as the rate of emissions is greater than zero, greenhouse gases continue to increase in the earth’s atmosphere. The long-term global average temperature is directly related to the total accumulated greenhouse gas burden of the atmosphere, not to an annual rate of emissions. Therefore we have to lower the annual emission rate toward zero as fast as possible in order to minimize further temperature increases.
In their op-ed Lott and Breaux write:
“Climate change is one of the great challenges of our generation…. [A] new approach is needed to address this urgent problem.
Both Democrats and Republicans can find [a] solution….
Congress should approve legislation to place a meaningful fee on carbon-dioxide emissions that ripples through all sectors of our economy, and return the revenues it generates to the American people in the form of cash payments. We must set it high enough to encourage a turn to cleaner energy sources and accelerate our transition to a low-carbon future….
The plan… calls for an initial fee of $40 on every ton of carbon-dioxide emissions…, raising it each year until we reach the necessary emissions reductions as [we] move to cleaner sources of energy. All revenue would then be disbursed to Americans. A family of four would receive approximately $2,000 a year.”
The authors then outline the advantages of the Baker-Shultz plan:
“… it would achieve far greater emissions reductions than all Obama-era climate regulations combined, which will appeal to Democrats and environmentalists. At the same time, this market-based solution would render carbon regulations unnecessary, which will appeal to Republicans and business interests.… 70 percent of Americans, including the most vulnerable, would come out ahead economically.”
The writers cite survey support for taking action:
“A poll released [June 19, 2018] shows that 81 percent of likely voters … agree the government should take action to limit carbon emissions. And by a 2-to-1 margin, likely voters support taxing carbon emissions and rebating the money directly to the American people.”
“We must put a meaningful price on carbon in America….
To do so, we must set our politics aside for the greater good. America has done it before, time after time. We believe the country will do so again.”
A Duke University-University of Ottawa study cited in the article found that CO2 emissions fell by 5 to 15% with “negligible effects on aggregate economic performance”. The carbon fee raised gasoline prices, for example, by US$0.19/gallon, providing incentives to BC residents and businesses to drive less and undertake energy efficiency initiatives. Polling shows that those opposed to the fee fell from 47% initially to 32% in 2015. Experts realize, however, that in order to achieve meaningful goals of reducing emissions the carbon fee has to be still higher. Indeed, as of 2018, BC is beginning to raise its fee again after staying unchanged since 2012.
Fuel-dependent carbon pricing. In carbon pricing regimes the size of the price is tied directly to how much CO2, the combustion product resulting when the fuel burns, is released. Relative CO2 yields are shown in the table below.
CO2 released per unit of heat obtained, relative to natural gas
Petroleum (fuel oil, gasoline)
It is seen that coal releases almost twice as much CO2as natural gas when burned to yield the same amount of heat. So in an industrial setting it may be expected that the price on coal, on a thermal basis, would be almost twice as high as that on natural gas. For example the BC pricing regime uses information such as this to set fees.
© 2018 Henry Auer