Energy

Is This How to Sell Americans on Fighting Global Warming?


DTE Energy Co.'s coal-fired Monroe Power Plant in Monroe, Michigan, on June 30, 2014

Photograph by Jeff Kowalsky/Bloomberg

DTE Energy Co.'s coal-fired Monroe Power Plant in Monroe, Michigan, on June 30, 2014

Economists figured out long ago that the free market is the best way to curb greenhouse gases. But economists aren’t so good at packaging anti-global-warming plans to win over a skeptical segment of the public.

That’s where Representative Chris Van Hollen, a Maryland Democrat, comes in. Today Van Hollen introduced a bill he calls the Healthy Climate and Family Security Act of 2014, cleverly wrapping an economic concept in the virtues of health, family, and security.

The bill would require companies to have permits to produce or import carbon-containing fuels such as oil, coal, and natural gas. The permits, instead of being allocated politically, would be auctioned off by the government, so they would get into the hands of the emitters who need them the most. A similar auction system drastically reduced emissions of sulfur dioxide—which causes acid rain—quicker and cheaper than experts expected.

Here’s Van Hollen’s political twist: The money raised by the permits would make a U-turn and go straight back to the American people—specifically, every person with a Social Security number. The same amount of money to every person, even those who don’t earn enough to pay income taxes.

“This ‘Cap and Dividend’ approach achieves necessary greenhouse gas reductions while boosting the purchasing power of families across the country,” Van Hollen said in a press release.

Van Hollen’s bill would create winners and losers. Big Coal would lose because the cost of permits would induce companies to shift from carbon-intensive fuels like coal to such lower-carbon fuels as natural gas, or zero-carbon energy sources such as nuclear, hydro, wind, and solar.

Americans who consume more than an average amount of carbon would lose, too. Jet fuel would get more expensive, so plane ticket prices would rise. That would hurt people at the top of the income pyramid. On the other hand, ratty old cars with low gas mileage would cost more to operate, hurting the poor. The Pacific Northwest, which gets a lot of electricity from hydropower, would fare better than the industrial Midwest, with its reliance on coal-fired power generation.

Everyone would benefit from less global warming, which threatens to raise sea levels, cause desertification, spread tropical diseases, hurt polar bears, and so forth.

The checks going out to the public wouldn’t mean much to upper-income families but could be significant to the struggling poor and lower middle class, depending on how much money would be raised.

The bill got raves in a New York Times op-ed by University of Massachusetts, Amherst economist James Boyce published online on July 29. But when Van Hollen’s own op-ed ran on Huffington Post, some commenters were dubious. “This is just silly,” said one, who contended that there isn’t enough carbon in the atmosphere to affect the climate. “CO2 fear-mongering,” said another.

The carbon reductions in the 28-page bill are ambitious. Van Hollen envisions that by 2050, the amount of carbon that could be emitted by permit would be down 80 percent from the emissions of 2005. To avoid worsening the trade balance, the bill would reimburse exporters of carbon-intensive goods for the costs imposed by the legislation.

Coy_190
Coy is Bloomberg Businessweek's economics editor. His Twitter handle is @petercoy.

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