The Conservative Case for Carbon Dividends

By James Dail PO ’20

A new faction has emerged within the Republican Party that has put its unique stamp on a solution for climate change. Former US Secretary of State James Baker, combined with seven other politicians and economists, proposed a carbon tax that would replace the Obama Administration’s Clean Power Plan, which forced businesses to cut back on emissions through the use of federal regulation. The Republican Party has been split on the plan so far, receiving support from moderate Republicans such as former Massachusetts governor Mitt Romney, while being lampooned by several influential conservative organisations, such as the Heritage Foundation.

The proposal, called the Conservative Case for Carbon Dividends (CCCD), would set the tax at $40 per ton from the outset, and the tax would be increased later in order to further reduce carbon emissions.1 The tax would originally amount to $194 billion per year in federal revenue, and would eventually increase to $250 billion after the rate increase. The revenue from the tax would be returned to the public by a quarterly check from the Social Security Administration to every US household. The initial check would be for $2,000, and the dividend payout would increase every time there was an increase in the carbon tax itself.2 This check would be equal for all Americans no matter their household income.2 According to the Department of the Treasury, this would boost the disposable income for the bottom 70% of the US workforce.2 The measure also includes measures for the import and export for all products involving CO2. Countries without a comparable carbon tax would receive rebates for exports, while any imports from such countries would be subject to a tariff.2 All revenue earned from such tariffs would also contribute towards the dividend checks for the American populace.2 Lastly, the proposal would completely rollback all Obama-era regulations involving CO2, as well as many others from previous administrations.

At first glance, this looks like fantastic policy. Carbon taxes have long been praised by economists for taxing a negative externality. In other words, they earn revenue, and at the same time, reduce something that is harmful to the general public. Any detrimental effect the tax would impose upon the private sector could be offset by the massive regulatory rollback. This dividend payout could also build bridges across all political affiliations and shore up support among the American public, who normally balk at the prospect of a general tax increase.

However, the plan is not without its critics. A carbon tax has already been attempted in Australia, and it failed after just three years at a much lower tax rate of $21.50 per ton. This plan even include tax rebates like the ones proposed in the CCCD. However, to be fair, there are several fundamental differences between Australia’s plan and the CCCD. The most prominent of which include the proposed regulatory rollback, which may not expose it to the harsh criticism Australia’s plan endured at the hands of the private sectors.3 Even if this objection does not come to fruition, there are still some causes of concern. One is that the carbon tax only targets CO2 emissions, which is not the only source of climate change.4 Focusing solely on carbon while doing nothing to address other warming factors could have severe consequences. Furthermore, there is worry that, if installed, the new carbon tax would not be nearly as effective at reducing emissions as the current set of regulatory requirements.

Though it could still use some patch work, this proposal holds up well in contrast to the Clean Power Plan of the Obama administration. Although there is still a glut of opposition from within the Republican Party, the CCCD gives a voice to Republicans who are eager to take action against climate change. It lays the foundation for further discourse, and it provides an opportunity to change the party platform.

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