To really cut carbon emissions, we must think bigger: Delaware Voices

As most economists will tell you, the most efficient and effective way to change a human behavior is to make it more expensive. 

This principle was first articulated by the British economist Arthur Pigou, after whom such taxes were named. Pigovian taxes are levied on market activities that generate negative externalities – that is, costs that are not factored into the market price of a product but are instead borne by society in other ways, such as the costs of poor health or pollution.

A different view:Carbon tax plans are expensive, don't work

Right now, energy companies essentially get a huge subsidy because they don’t have to pay for the privilege of filling our atmosphere with pollution: the carbon-based greenhouse gases that are disrupting the world’s climate. 

That’s why, as the debate shifts from whether climate change is real to what we should do about it, one of the first solutions to emerge from both sides of the political spectrum is to make fossil fuels more expensive by taxing their carbon content.

Editorial:Get serious about Delaware's health care costs

Let’s be clear: Any plan to put a price on carbon, whether it’s a straight-up tax or a cap-and-trade system, is going to raise the cost of using carbon-based fuels. That’s the whole point—if you want less of something, like greenhouse gas pollution, make it more expensive.

This is what the nine northeastern states participating in the Regional Greenhouse Gas Initiative (RGGI) are attempting to do with their cap-and-trade system for the electricity generation industry. 

In his Delaware Voice column of September 3, David T. Stevenson decries the increased cost of electricity in Delaware imposed by RGGI, which he claims offers no benefit to society in return. While I don’t necessarily agree with all of his points, I do believe that we can do better than RGGI. But we need to think bigger.

I volunteer for Citizens’ Climate Lobby (CCL), a nonprofit, nonpartisan organization that has proposed a carbon-pricing plan called Carbon Fee and Dividend that avoids the pitfalls of a regional cap-and-trade system like RGGI. 

First, we need a nationwide plan. Mr. Stevenson points out that regional carbon pricing schemes can put states at a disadvantage when energy-intensive industries simply relocate to another state without a similar carbon tax. Not only is CCL calling for a uniform carbon fee nationwide, we also advocate for a border adjustment that would remove the incentive for companies to relocate to other countries.

Second, we should assess the fee at the well, mine or port of entry. As fossil fuel companies pay this steadily rising fee and pass the added cost on to their customers, every economic sector would be held accountable for its fossil fuel use — not just power generation, as is currently the case with RGGI.

Eventually, the added cost would reach individual consumers in the prices we pay for most goods and services, providing an incentive for households and businesses to become more energy efficient and switch to renewable energy sources which will become much more cost-competitive.

Finally, we want the fees returned to American households on an equal basis in the form of a monthly dividend.

Mr. Stevenson claims Delawareans receive little benefit from RGGI proceeds. Under CCL’s plan, economic studies indicate that more than half of American households would come out ahead financially, receiving more in dividends than we pay in price increases.

In fact, the dividend could raise disposable income for the 20 percent lowest-income Americans by seven to eight percent. Many others would break even or experience only minimal losses. And, unlike plans where the government redistributes the proceeds as tax swaps or uses them to support other programs, you would get to decide how best to spend your own dividend.

Could you explain to your neighbor exactly how RGGI works? Cap-and-trade systems are notoriously difficult to understand, leading to the perception that they are easily scammed. Carbon Fee and Dividend, on the other hand, is simple, transparent and harder to rig. 

In the absence of a more comprehensive national plan like Carbon Fee and Dividend, a strong regional system may be the best we can do, and I applaud the recent extension of RGGI. But if you agree that we need to think bigger to bring down carbon emissions, then let your state and national representatives know.

Beth Chajes is the leader of the Wilmington-Newark chapter of Citizens’ Climate Lobby.