The reality of climate change has hit hard over the past week with the deadly heatwave in the Pacific NW. The issue of how to combat rising emissions can no longer be kept off the front pages. On Friday 2nd Carbon Brief Daily reported that a frontpage story in the Times stated that “ministers have drawn up radical plans to reduce carbon emissions that would increase gas bills and the cost of running a car by hundreds of pounds a year”. They are proposing a carbon reduction scheme, copying the EU ETS plan to cover emissions caused by heating buildings and transport. The paper states that it “has been told that the prime minister does not want to include petrol in the scheme amid concerns that it would penalise motorists”, while the government “said last night that no decisions had been made”. This is the trouble with designing a regressive policy which will adversely affect most households. To be cynical is this a ‘leak’ in the hope that a backlash will mean it can be scrapped? 

On Sunday there was an editorial in the Washington Daily Post arguing why a carbon fee and dividend plan would be a far more effective means of mitigating climate change in the US than Biden’s current strategy. One of the authors, Republican nonogenarian James A Baker co-authored the 2018 Baker Shultz Carbon Dividends Plan (this is not the plan supported by CCL US but shares similar principles). 

The editorial points out the elephant in the room in discussions about climate change mitigation. Republicans in the US are worried that Biden’s plans, based on limiting US fossil fuel production without any plan to affect the price of imports, will reduce its competitiveness with China….Most nations won’t risk their own economic well-being in the hope of reversing what is clearly a global problem……  A plan co-authored by Secretary Baker and the late George P. Shultz holds the key to placing market pressure on China and other nations to start doing their part. It would place a fee on all carbon emissions in the United States, an approach that most economists believe is the most efficient and effective way to reduce such emissions.

But rather than giving that money to the federal government, all of the revenue from the fee would be returned to Americans in the form of a quarterly dividend. A household of four would receive $2,000 annually, enough to provide the vast majority of households with more money than they would pay in higher energy costs. As a result, this fee would not expand the federal government, and therefore should not be considered a tax.

But it would incentivize the private sector to find new and better ways to reduce emissions. This is a far better route than forcing the United States to wean itself from fossil fuels (while other nations fail to do so) because it harnesses a set of critically important strategic assets of our country: our abundance of affordable and cleaner energy, and our unmatched powers of innovation. 

It discusses the European Carbon Border Adjustment Mechanism (CBAM) plans  to place a tariff equivalent to the carbon price  on imports which have not had a price imposed in the country of origin – probably easier than trying to talk them into equally restricting their output!  It points out that…..The economic upside here is unmistakable. U.S. steelmakers, for example, are far more efficient in low-carbon production than their major global competitor, according to a recent study commissioned by the Climate Leadership Council. By applying a carbon fee to domestic and imported steel, U.S. industry would win across the board. Overall, the study found, the U.S. economy is 40 percent more carbon efficient than the world average, and nearly every U.S. industrial sector enjoys a carbon advantage over most of our key trading partners.