Public awareness has posed a significant challenge to environmental advocacy in recent decades. Fortunately, education efforts have paid off. Today, most Americans recognize the need to protect our environment and address the threat of climate change. But with our attention now turned toward the economic crisis, policymakers must further develop our commitment to addressing climate change -- aligning our most important environmental goals with our economic interests.
Rebuilding the economy and dealing with climate change are not mutually exclusive objectives; we need only to identify and support the correct policies.
The necessary approach is actually quite simple. We need to enact a straightforward policy that discourages pollution while encouraging the growth of income and jobs that the U.S. economy so badly needs right now. Based on that logic, most economists now favor a carbon-based tax combined with tax relief.
Despite that endorsement, Capitol Hill is touting a different policy right now: cap-and-trade. In contrast to the direct nature of a carbon tax, the complexities of this kind of emissions trading system would introduce several risks:
- Pork Problem: Washington’s pork propensity could turn well-intentioned policy into a special interest bonanza at the expense of the environment and American families.
- Closed-Door Dealings: Since cap-and-trade doesn’t offer much transparency, it opens the door for a great deal of closed-door dealings. The Waxman-Markey bill hasn’t even passed out of committee, and lawmakers are already offering up billions of dollars in free emissions credits to favored industries.
- Wall Street Manipulation: The government-regulated trade of carbon dioxide (CO2) requires a complex system, which opens the door to manipulation by Wall Street opportunists. Emissions trading could drive the creation of risky financial tools like the derivates, hedges, credit default swaps that led to our recent economic crisis and the scandals associated with it.
- Market Volatility: The emissions trading system already in place in the E.U. has seen a great deal of volatility associated with emissions trading; the price of CO2 has fluctuated by a monthly average of 17.5 percent, and daily price shifts have been as great as 70 percent. If the U.S. were to join Europe in cap-and-trade, volatility like the kind experienced in the E.U. would disrupt markets across the board in this potential multi-trillion dollar system.
This unsettling combination of special interest earmarks, unpredictable price swings, and unchecked industry handouts imposes a huge daily burden on consumers and their families, while spreading further instability throughout our marketplace.
We need to put aside political expediency and work with scientists, economists and opinion leaders to deliver workable climate change legislation based on merit. That starts with a willingness to explore all the options.
A carbon tax strategy offers a more efficient, more transparent and far easier policy to implement. We can use the existing tax infrastructure rather than create new agencies. Plus, the predictable nature of a carbon tax would encourage investment in technological innovation and more energy efficient energy sources. And best of all, revenues generated by a carbon tax will be used to stimulate job growth through a reduction in payroll taxes and put money right back in to the pockets of average Americans through tax relief.
With the carbon tax, meeting the challenges of climate change would become a sort of economic stimulus, guaranteeing both our future prosperity and our future environmental safety.
Read the Opposing Views debate, Are Environmental Laws Worth the Cost?