We are in trouble, folks. If the record high temperatures, extreme droughts, and historic wildfires weren’t enough to convince us of the need to change our ways, Hurricane Sandy sure was. Damages from the recent super storm are estimated to be upwards of $50 billion. More than the money, it is the images of the ocean water inundating Manhattan subways that really ought to drive it home. That was a new event in New York’s history. Climate change is here and it is now and it is only going to get worse.
Our problems run deeper than just a changing climate. It is the changing climate, I believe, that is a symptom of a broader, social problem that has created unprecedented and immoral levels of inequality, exploited and destroyed entire ecosystems to fuel our thirst for economic growth, and left most people believing for the first time in 250 years that the future will be worse for their children. Humanity is no longer living in balance with the rest of life on earth, as we consume 40 percent of the biomass of the planet annually.
We have a choice. We can continue to deny the events that are unfolding in front of our eyes or we can start to come together with proposals to do something about it. We can begin to change our ways to try to prevent the worst of climate change or we can keep the same dysfunctional system and ride it into a place where no amount of money will be able to save anyone. Some have written off climate change as a hoax. But even the climate deniers can’t deny that the burning of fossil fuels is hazardous to the air quality, environment, and our health (does anyone want to live next to a coal power plant?). Furthermore, all fossil fuels are finite. Within a generation or two, we will need to move beyond them as dwindling supplies lead to prohibitive prices. A planned transition to renewable energy economy is preferable than a forced transition with dramatic price fluctuations in the price of energy. So how do we fix it?
While many dream of a money-less, sustainable, volunteer-based utopia as a solution, the world as it is today is nowhere close to that world. We need to begin the transition with the governing tools available to us. In 2012, money still rules the day. Government intervention to correct climate change, the mother of all market failures, will be required to send the proper price signals to the market. While Europe has experimented with a cap-and-trade system with questionable success, a carbon tax-and-dividend plan is much simpler and straight-forward, and has a number of other potential benefits as well. A cap-and-dividend plan would work as follows…
An escalating carbon tax would be applied at the source of all emissions (i.e. fossil power plants and refineries), raising the cost of electricity and gasoline. The producers would pass the additional cost along to the citizen. Many carbon taxes proposals use the revenue to pay down the deficit or fund some other government programs. This amounts to nothing more than theft. Alternatively, the cap-and-dividend plan would take 100 percent of the proceeds of the tax and distribute it evenly to each citizen. At the end of each period, each person would receive a check amounting to the cost of the average carbon tax paid per capita (and could be even higher if you factor in the carbon taxes paid by tourists).
This scheme gives each citizen some skin in the game. Each of us are provided with an incentive to reduce our footprints. The smaller your footprint, the more money you make. New business opportunities will arise to create products and services with smaller eco-footprints. Most importantly, the market will begin to reflect the true cost of using fossil fuels, propelling a shift to renewable forms of energy. After all, the best way around a carbon tax is to use alternative technologies that don’t emit carbon! Each year, the tax will rise by some percentage, providing businesses and citizens with clarity about future carbon costs, which is a big advantage over cap-and-trade systems where the price of carbon can fluctuate widely.
A proposal like carbon tax-and-dividend could be paradigm-shifting, forming the basis for a social dividend that can – once carbon taxes are high enough – help to alleviate the gross inequalities within the current system. To help encourage participation in democracy, the distribution of the dividend could be based on whether each person voted in the previous election. I have a feeling that if you received $1000 or more for voting, we would see much higher than the estimated 60 percent of the population that voted in the most recent election. Democracy cannot function without an informed and educated citizenry that participates in the governing process. In time, this plan might be extended globally, which could begin to compensate those people who have suffered a disproportionate share of the burden from climate change.
Make no mistake. This is a progressive tax, one that can begin to combat climate change and poverty at the same time. A possible proposal to restrict high-income earners through a means test for the dividend distribution could generate revenue to further research and development of renewable energies.
There are some people that oppose any government intervention in the markets. They say that government can’t be trusted. While I can empathize with this view and even share it at times, there really isn’t any other method at our disposal for correcting the incredible externalities that the fossil fuel industry imposes on the rest of society. The time has come to take action that is aligned with morals which understand the impact our collective actions have on future generations to come.