A bill now before Congress — The Energy Innovation and Carbon Dividend Act (H.R. 763) — may be our best hope for effective action on carbon pollution. This bipartisan bill, enthusiastically supported at the grassroots level by the Citizens’ Climate Lobby, would impose a gradually increasing fee on fossil fuels like coal, oil, and natural gas. Revenue from the fee would be distributed equally to all Americans as a citizens’ dividend, to spend however they wanted.
But wait, you might ask. How would that work? I can see how I might drive less or buy a more efficient car if the price of gasoline went up, but if I got the money back as a monthly check, wouldn’t that just cancel out the incentive effect?
Good question, but think it through. The key is the fact that you wouldn’t have to spend your dividend check on gasoline. You could spend it on anything you wanted.
If you could save money by driving less, or buying a more fuel efficient car when it’s time to replace the one you have now, wouldn’t you take the opportunity to spend your dividend on something else? Something you really need, like new shoes for your family? Something like dinner out that you don’t really need, but want?
Or, why not go for an electric car and buy both the dinner and the shoes?
But personal driving habits are only a part of the story. The carbon fee would also affect the choices made by business managers, from your local grocer to your regional utility. The fee would give them an incentive to introduce new, low-carbon technologies that are already on the shelf but not quite worth investing in today. For your grocer, could mean something simple, like installing more efficient display cases for the frozen food, or something high-tech like heating the whole store with ground source heat pumps installed under the parking lot. For the utility, it could mean something as basic as fixing leaky gas lines or something innovative like time-of-day pricing.
Really, though, the biggest advantage of a carbon fee is that it doesn’t try to pick winners and losers as we transition to clean energy technologies. No legislature or government agency could possibly know in advance which ones are best. What we need is a universal, decentralized, tech-neutral incentive that tells every homeowner, every business manager, and every researcher to try what looks most promising and see what works. That might just be using paper bags instead of plastic. It might be figuring out how to grow crops efficiently with fewer chemical fertilizers. Or it might be developing a new type of battery that can store daytime solar energy to keep your house warm at night.
Meanwhile, while the incentive effects of the carbon fee are doing their work behind the scenes, cash your dividend check and buy your kids some new shoes. The carbon fee will nudge you toward the ones with low-carbon natural-fiber soles.