Cap and trade? Try tax and dividend

Such a system operates like a Rube Goldberg device, with many moving parts employed in a convoluted process to perform a simple task — raising the cost of carbon-based energy. The trouble with Rube Goldberg machines, however, is that if one of the parts breaks down, the task is left uncompleted.

We need fewer moving parts.

As the Senate gets bogged down in the debate about cap-and-trade and prospects for effective climate legislation begin to fade, leaders must take a serious look at Plan B — a tax on carbon with revenue returned equally to all residents through monthly payments.

When compared with cap-and-trade, the carbon tax and dividend has several advantages. Let’s start with effectiveness.

An analysis from the Carbon Tax Center shows that a steadily increasing tax on carbon can yield a 28 percent reduction in carbon dioxide emissions (from 2005 levels) by the year 2020. The current House and Senate proposals, if they perform as advertised, would achieve reductions of 17 and 20 percent, respectively.

This is crucial. Climate scientists, led by Dr. James Hansen of NASA’s Goddard Space Institute, tell us that we must reduce the concentration of CO2 in our atmosphere to 350 parts per million. With CO2 levels already at 389 ppm and climbing, failure to make steep cuts in carbon emissions quickly will trigger “amplifying feedbacks” that will accelerate the climate change process. For example, as permafrost in arctic regions thaws, methane — a powerful greenhouse gas — is released, trapping more heat in our atmosphere.

From an economic standpoint, carbon tax and dividend also comes out ahead.

Opponents of climate change legislation point out that the price of energy will go up, with consumers bearing the increased cost. That argument is muted, however, if the revenue from a carbon tax is returned equitably among all Americans. A monthly payment — I’ll take direct deposit, if you don’t mind — from carbon tax revenue will offset higher energy bills. For Americans who use less energy — most notably, low-income families — this monthly payment will become a windfall that actually stimulates our economy.

The carbon tax and dividend also passes the KISS — keep it simple, stupid — test. Two versions of a carbon tax and dividend bill were introduced in the House earlier this year. Rep. Bob Inglis’ (R-S.C.) bill was 15 pages. Rep. John Larson’s (D-Mass.) proposal was 16 pages. Compare those with the 1,400 page cap-and-trade bill passed by the House or the 800-plus-page bill introduced in the Senate.

The reason carbon tax bills are so much shorter is because they don’t establish a bloated bureaucracy to auction off permits, set up a trading system or allow carbon offsets for polluters who want to spew more CO2. Amazing how simple and efficient something can be when you eliminate unnecessary moving parts.

Proponents of the cap-and-trade model argue that any legislation with the word “tax” attached to it is doomed to rejection. But that’s an argument that rings hollow, given that cap-and-trade opponents already have labeled it “cap-and-tax.” If anything, a carbon tax and dividend has a greater chance of bi-partisan support. Republicans should like the revenue-neutral aspect and that it doesn’t increase the size of government. Democrats should like the reductions in CO2 emissions and the fact that low-income households would receive more than they’re likely to pay in increased energy costs.

In the end, however, it isn’t a question of what the political climate will tolerate. It’s what the earth’s climate will tolerate.

Steve Valk is director of communications and regional manager for Citizens Climate Lobby.