No exaggeration is needed to convey the seriousness of the threat or the difficulty of mobilizing an effective response. On the one hand, scientists are getting a handle on the high costs we will experience from a moderate temperature increase before 2100; but if the increase exceeds 2-3 degrees Celsius, it is anybody’s guess whether we can adapt to a new normal at immense cost or will face stark and irrevocable changes to life on earth. That is the future if we do not act: the downside risk is enormous. On the other hand, climate change is almost unique among policy challenges in the difficulty of marshaling a timely and effective response. Actions today will deliver benefits mostly to future generations, and today’s voters and politicians — even if they do not deny climate change –tend to discount uncertain future benefits in relation to the current sacrifice. Also, climate change is an inherently global problem, which cannot be solved without the participation of all of the world’s major greenhouse gas emitters. Not only must we motivate today’s leaders to protect the future, but also must we convince them all around the world to act on our common interest.
These challenges highlight the characteristics of a policy to fight climate change successfully. First, we must have high confidence that the policy will work: failure is not an option. Second, the policy must minimize the current sacrifice of bringing about the desired future impact: otherwise, we will not be willing to make the sacrifice. Third, the policy must serve as a simple, transparent, and verifiable anchor to an international agreement that binds countries in their efforts.
Fortunately, there is a policy response — maybe the only policy response — that satisfies all these key features. We need to put a price on carbon dioxide (and other greenhouse gas) emissions, so that the price of every product reflects its direct or indirect contribution to climate change. Most simply, this carbon price can be accomplished by placing a fee on the carbon content of fossil fuels and then returning the collected revenue back to citizens, equally, as a dividend. We know this policy works, because the “law of demand” holds: when the price of a product increases, we buy less. This policy reduces emissions in the cheapest possible way, because it uses the price system to send the right signals: each of us, in attempting to minimize the fees we pay, will by an invisible hand minimize the costs of combating climate change. By returning the revenue to today’s citizens, their current sacrifice will be as small as possible. Finally, the carbon fee is well-suited for an international agreement, because it requires countries to negotiate and agree on just one readily measurable instrument, the price of carbon.
A carbon fee and dividend can achieve broad, bi-partisan support. Conservatives should applaud the use of price incentives to solve a problem that unregulated markets fail to address. Progressives should be pleased that the equal dividend will leave the most households, especially the low and middle income, better off than without the policy. Those households are otherwise the most vulnerable to climate change. We should all appreciate that the quality of life of our children and grandchildren and beyond depends crucially on our willingness to curtail greenhouse gas emissions, soon. Our best shot at getting it done is a price on carbon.
Michael Jones is a Brunswick resident, a retired economist and a member of the Brunswick chapter of the Citizens’ Climate Lobby.
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