Fee‐and‐dividend, in contrast, is a non‐tax. The fee collected at the first sale of oil, gas and coal in the country does increase the price of fossil fuel energy. But 100 percent of the fee is distributed monthly to the public as electronic deposits to the bank account or debit card of all legal residents, with half shares for children, up to two children per family.
The dividend keeps families whole while providing an economic stimulus to boot. By the time the fee reaches $115 per ton of carbon dioxide (equivalent to $1 per gallon of gasoline) the dividend will be $2,000‐$3,000 per legal resident per year — $6,000‐$9,000 for a family with two or more children.
People who keep their carbon footprint smaller than average will make money. The fee will rise gradually so people have a chance to choose more efficient vehicles, insulate their homes, and so on. The dividend will help people afford these investments. Jobs will be created as society retools the economy from high‐carbon to low.
Perhaps coincidentally, the Times published alongside my op‐ed an by their columnist Paul Krugman extolling the merits of cap‐and‐trade. Krugman asserted that cap‐and‐trade provided the basis for a successful international agreement at Copenhagen on climate.
This one‐two punch, evisceration of my article via a nonsensical title and an opposing piece by Nobel Prize winner Krugman, was not enough. By the time readers were ready for their second cup of coffee, at 10:45 a.m., an titled “Unhelpful Hansen” appeared on Krugman’s heavily trafficked blog.
Krugman is one of my favorite columnists. I am amazed at his productivity, and I agree with most of his opinions. I am not suggesting that he was given prior knowledge of my piece by Times editors — I assume that he just works fast. My hope is that he is open to persuasion. Our aims are similar, and this matter is so important that it deserves careful reanalysis.
I also think the public can distinguish the forest from the trees. This topic is not rocket science. It is mostly a matter of common sense. And, contrary to Krugman’s insinuation, most economists are in closer agreement with my perspective than with his.
First we must recognize one basic fact. Then I will describe the three main issues on which Krugman and I disagree. Then you can make up your own mind.
Basic fact: As long as fossil fuels are the cheapest form of energy their use will continue and even increase.
Consider the Kyoto Protocol, which was negotiated at a prior UN climate meeting in 1997. National emissions of signatory countries were capped at some agreed levels. Nations evaded these limits by purchasing “offsets” — putative but often illusory reduction in greenhouse gas emissions from developing countries. Offsets destroy the effectiveness of the agreement, because the scientific requirement for stabilizing climate is that the fossil fuel emissions are phased down rapidly. And some nations just ignored the limits, because there was no realistic way to enforce them. However, the fundamental problem was that “Kyoto” did not increase the price of fossil fuels relative to non‐carbon energies.
The handful of nations that claimed to have reduced their carbon emissions were joshing their citizens and everybody else. They were just pretending to be “green”. Manufacture of products based heavily on fossil fuels simply moved to developing countries, which had no cap. Then the products were flown to the developed countries, while burning aircraft fuel that is untaxed because of a 1940s agreement to support the fledgling airline industry.
Prior to “Kyoto,” global fossil fuel emissions were increasing 1.5 percent per year. Afterwards, they increased 3 percent per year. Kyoto may not have caused the increase (although shifting production to developing countries, often by coal‐fired inefficient industries, with shipping to developed countries, did not help), but it certainly did not stop it.
Now let’s address the three main arguments of Krugman, common arguments wielded by proponents of cap‐and‐trade.
Krugman Argument #1: Cap‐and‐trade is the only way to get an effective agreement rapidly.
That is a myth. In fact, every cap‐and‐trade regime has taken many years to hammer out. Kyoto negotiations dragged on a decade and were not completed. Individual countries had to be bribed to participate, yet some still would not. And the result was not successful, as we have seen.
Proposed cap‐and‐trade within the United States would be even more complex than “Kyoto.” The Waxman‐Markey and Boxer‐Kerry cap‐and‐trade bills in Congress are larded with 2,000 pages of give‐aways to special interests, soaking the public who must pay higher energy prices.
Fee‐and‐dividend, in contrast, is defined by a single number: the fee (tax) rate that the fossil fuel companies must hand over at the first sale of oil, gas or coal. All the government must do is divide this collected revenue by the number of legal residents and punch a button monthly to deliver the dividend to the public.
What is the chance that a United States cap‐and‐trade law could be a precursor for a global agreement? Zero. There is no chance that China will accept a cap. Nor should they. They are still in the early phase of their economic development.