By Garrett Gruener and Daniel M. Kammen
It is now painfully obvious that the oil-addicted United States must take action to stop global warming — and equally obvious, after President Bush’s anemic State of the Union Address, that sensible energy action will have to come from Congress, the American people and the business community. Piecemeal approaches won’t work. What we need are market-based incentives that make it attractive to stop emitting the carbon that causes global warming – and quickly.
The longer we wait, the more global warming will cost us the long run. So it makes sense to adopt a tax on carbon emissions now. The trick is to design a “global cooling fee” that a majority of Americans will want to pay. We propose a tax that will hit energy hogs hardest. But under our scheme, whether you use a little or a lot, you will be able to invest your tax dollars directly in technologies that will clean up the environment now and lower your energy bills.
Americans consume 300 billion gallons of gasoline per year, and staggering quantities of coal and natural gas. What can we do to stop drastic climate change while we wait for viable alternative sources of energy? Plenty – if we are willing to pay and make our investments work for us. We can reduce carbon emissions by installing scrubbers on power plants, switching to hybrid and then plug-in hybrid cars and planting trees, building wind farms, and constructing the most energy efficient buildings on the planet. By several estimates, a fee of about 27 cents per gallon of fuel consumed and $30/ton of carbon dioxide emitted from electricity generation would tip the balance on our economy from one where pollution is essentially rewarded, to one based on ‘clean tech.’ This amounts to only $180 billion per year; less than 1% of the $17 trillion dollar U.S. economy.
Our carbon tax proposal is based on the principle that every consumer of fossil fuel energy should have to pay the price of getting rid of the carbon generated by burning it. At the $30 per ton of carbon dioxide level, the owner of a gasoline-powered Hummer who drives it 10,000 miles a year would pay $200 per year, while a Prius driver would pay only $50.
The carbon tax would also be imposed on gas or oil used to heat homes. Energy sources that don’t generate carbon, such as wind, solar and other renewable resources, would not be taxed; instead, producers could sell emissions credits to carbon polluters. A diverse group of industry leaders – termed the U.S. Climate Action Partnership – has already called for this sort of regulatory clarity.
Voters on the American political left might be content to stop there and let the federal government spend the tax proceeds to fight global warming as it sees fit. Voters on the right would likely object on the grounds that taxes are already too high, that market solutions to the energy problem are preferable, or that government programs to promote clean energy will only spawn more inefficient bureaucracies. Since taxes are well known to be the third rail of American politics – touch it and you die – politicians might never get around to making us pay for what most of us agree we need.
The alternative is to place the authority to spend the tax money directly in the hands of the American people. This approach would make a carbon tax more palatable, equitable, and efficient at reducing greenhouse gases. The average American would pay roughly $555 the first year for all of the carbon used in his gasoline, electricity and home heating. But instead of going straight to the federal Treasury, the tax money would be credited into individual web-accessible Energy Savings Accounts. Each taxpayer could decide how best to spend it to reduce carbon emissions, to his own – and the planet’s – benefit.
You could use your $555 to install solar panels on your roof, reducing your electricity bill to zero for the next two decades. Or, you could direct your tax money to a charity that plants fast-growing trees at the equator, or to a private company that would suck up carbon dioxide in the atmosphere and sequester it under the ocean floor. You could pool your “cooling tax” money with your neighbors and commission a windmill to supply your town with electricity, or a plant to supply you with a non-carbon alternative to gasoline. Any plan that produces energy without emitting carbon, or gets rid of carbon already in the atmosphere, would qualify. Companies would compete for your business, and more would surely spring up to serve the burgeoning clean-energy market.
If you don’t want to be bothered with this scheme, or if you believe the federal government is the best “decider” for how to solve global warming, you could just do nothing. The Treasury would collect unallocated funds from Energy Savings Accounts and put them to work tackle global warming as it deems best. Poor people could apply for tax rebates, so that the tax would not be regressive. And better market choices would presumably reduce the tax bill for most people each subsequent year.
Meanwhile, the results would be transformative. The United States would no longer be a net generator of greenhouse gases. Instead, it would become a global leader in environmental protection. American companies would lead the way with new markets and new technologies funded by the investment choices of individuals.
It is in our national interest to invest in our energy future, and in our power to innovate our way out of this crisis. It’s time to seize the opportunity.
Garrett Gruener is a venture capitalist and the founder of Ask Jeeves (now Ask.com).
Daniel Kammen the Class of 1935 Distinguished Professor of Energy at the Universty of California, Berkeley and is co-director of the Berkeley Institute of the Environment at UC Berkeley.
This post originally appeared in a different form in the January 31 Los Angeles Times as an Op Ed.