Now in theory, this should be an easy problem to fix. Economists agree that the best solution is to put a price on the carbon content of fossil fuels, otherwise known as a carbon tax. This would discourage carbon emissions in every single economic transaction, every day of the year. However, a carbon tax by itself has proven to be unpopular and a political dead end. The answer is to return all the money raised directly to citizens, in the form of equal monthly dividends.
This would transform an unpopular carbon tax into a popular and populist solution, and it would also solve the underlying psychological barrier that we discussed, by giving everyone a concrete benefit in the here and now. And these benefits would be significant.
Assuming a carbon tax rate that starts at 40 dollars per ton, a family of four would receive 2,000 dollars per year from the get-go. According to the US Treasury Department, the bottom 70 percent of Americans would receive more in dividends than they would pay in increased energy prices. That means 223 million Americans would win economically from solving climate change. And that is revolutionary, and could fundamentally alter climate politics.
But there’s another revolutionary element here. The amount of the dividend would grow as the carbon tax rate increases. The more we protect our climate, the more our citizens benefit. This creates a positive feedback loop, which is crucial, because the only way we will reach our long-term emission-reduction goals is if the carbon tax rate goes up every year.
The third pillar of our program is eliminating regulations that are no longer needed once a carbon dividends plan is enacted. This is a key selling point to Republicans and business leaders.
So why should we trade climate regulations for a price on carbon? Well, let me show you. Our plan would achieve nearly twice the emissions reductions of all Obama-era climate regulations combined, and nearly three times the new baseline after President Trump repeals all of those regulations. That assumes a carbon tax starting at 40 dollars per ton, which translates into roughly an extra 36 cents per gallon of gas.
Our plan by itself would meet the high end of America’s commitment under the Paris Climate Agreement, and as you can see, the emissions reductions would continue over time. This illustrates the power of a conservative climate solution based on free markets and limited government. We would end up with less regulation and far less pollution at the same time, while helping working-class Americans get ahead. Doesn’t that sound like something we could all support?
The fourth and final pillar of our program is a new climate domino effect, based on border carbon adjustments. Now that may sound complicated, but it, too, is revolutionary, because it provides us a whole new strategy to reach a global price on carbon, which is ultimately what we need.
Let me show you an example. Suppose Country A adopts a carbon dividends plan, and Country B does not. Well, to level the playing field and protect the competitiveness of its industries, Country A would tax imports from Country B based on their carbon content. Fair enough. But here’s where it gets really interesting, because the money raised at the border would increase the dividends going to the citizens of Country A.
Well, how long do you think it would take the public in Country B to realize that that money should be going to them, and to push for a carbon dividends plan in their own land? Add a few more countries, and we get a new climate domino effect. Once one major country or region adopts carbon dividends with border carbon adjustments, other countries are compelled to follow suit. One by one the dominoes fall. And this domino effect could start anywhere. My preference, strongly, is the United States, but it could also start in the United Kingdom, in Germany or another European country, or even in China.
Let’s take China as an example. China is committed to reducing greenhouse gas emissions, but what its leaders care even more about is transitioning their economy to consumer-led economic development. Well, nothing could do more to hasten that transition than giving every Chinese citizen a monthly dividend. In fact, this is the only policy solution that would enable China to meet its environmental and economic goals at the same time. That’s why this is the killer app of climate policy, because it would enable us to overcome each of the barriers we discussed earlier: the psychological barrier, the partisan barrier, and, as we’ve just seen, the geopolitical barrier.
All we need is a country to lead the way. And one method of finding what you’re looking for is to take out an ad. So let’s read this one together. Wanted: country to pioneer carbon dividends plan. Cost to country: zero. Starting date: as soon as possible. Advantages: most effective climate solution, popular and populist, pro-growth and pro-business, shrinks government and helps the working class. Additional compensation: gratitude of current and future generations, including my daughter.
CHRIS ANDERSON: Just one question for you, Ted. I’m actually not sure I’ve seen a conservative get a standing O at TED before that. That’s pretty cool. The logic seems really powerful, but some people you talk to in politics say it’s hard to imagine this still getting through Congress. How are you feeling about momentum behind this?