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Republican Carbon Tax for Corporate Dividend

Recently some Republican political and business leaders in the United States seem to have had a change of heart in regard to climate change. They have formed the Climate Leadership Council (CLC), a conservative international policy institute, to advocate for what they refer to as a Carbon Dividend (Carbon Tax & Dividend) in the United States to reduce global CO2 emissions. In their publication, “The Conservative Case for Carbon Dividends," they give a justification for their plan, provide an overview of how it would work, and its benefits.


In brief, the CLC acknowledges in their document that climate change is real and represents a threat to “global stability,” which I take to be corporate-speak for human existential threat. This a major step in the right direction for the corporate members of the organization, many of which are oil companies, including Exxon (now ExxonMobile) that knew about climate change almost forty years ago and refused to acknowledge this fact publicly and actively promoted climate misinformation. Well, those days are over. “The Conservative Case for Carbon Dividends” is an admission of defeat and an attempt to control the message and co-opt climate change policy.


The world has long since acknowledged the reality of climate change and is working toward solutions, one of which is a carbon tax. If the Republican leadership doesn’t get on board their party will be left behind, or leave them behind. Many nations in Europe and worldwide have already implemented a carbon tax in one form or another, and the United States is one of the few industrialized nations that has not. Also, the majority of rank and file Republicans understand that climate change is real, and like their Democratic counterparts, want something done about it. The corporate attempt to create a pollution market via cap and trade has proven to be a miserable failure, if not an outright scam to continue business as usual a little longer. People want real and effective solutions to the problem. This means making polluters pay, plain and simple.


Currently, the Citizens Climate Lobby is pressuring the U.S. government and its congressional representatives to put a federal price on carbon, instead of a piecemeal, hard to manage, state-led approach. Like the Climate Leadership Council they favor a market-based approach of a Carbon Fee and Dividend to reduce carbon emissions. Indeed, George P. Schultz, the Republican elder statesman, is an advisor to both organizations.


If we look at the list of members of the Climate Leadership Council, we see a “who’s who” of the business, financial, and political status quo. These are same people who have been running a harmful global free market economic system that promotes growth at the expense of the environment and society, while pretending until now that the climate change they are causing does not exist or does not represent an existential threat. If we look at the NGOs represented (Conservation International and The Nature Conservancy), and their Boards of Directors, we find an overlapping list of corporate representatives, along with a handful of environmental professionals or activists to provide the requisite veneer of legitimacy. Investment banks are overrepresented in all these corporate and non-corporate organizations. These financial firms and publically traded companies get help from politicians whose campaigns they fund, to shape the financial rules in their favor, while harming the environment and society in the pursuit of profit for their stakeholders and upper management. Why would they change heart now and accept the truth of climate change they have been denying for so long, when it clearly impacts their short-term profitability and globalization agenda? Because they have no choice.


As the Climate Leadership Council admits in its report, if conservatives, that is Republicans, want to continue to win elections, they can’t do it with climate denialism. For the holdouts in their party that see the environment as a drag on their self-interest, or are just ignorant or delusional, the self-appointed Republican climate “leaders” tell them cynically that they don’t need to believe the science in order to reap the benefits of the plan.


So just how does the Climate Fee and Dividend plan work, and what are the supposed benefits? According to the Citizen’s Climate Lobby, the plan would:


  1. Place a steadily rising fee on fossil fuels
  2. Give 100% of the fees minus administrative costs back to households each month
  3. Use border adjustment fees to stop business relocation


The benefits according to a study they commissioned from Regional Economic Models, Inc. (REMI), the plan would provide a 50% reduction of carbon emissions below 1990 levels, the addition of 2.8 million jobs above baseline, and the avoidance of 230,000 premature deaths. The Citizen’s Climate Lobby claims the gains from the dividend will be concentrated among those with lower incomes, the youngest and oldest, and minorities.


The Climate Leadership Council sees it somewhat differently and opportunistically. In exchange for establishing a price on carbon and paying the general population a dividend from the tax collected from CO2 emissions, they want the following:


  1. To pass on the added cost of corporate carbon pollution to the consumer
  2. A “phasing out” of the regulatory authority of the EPA over carbon emissions, including “an outright repeal of the Clean Power Plan”
  3. An end to federal and state tort liability for emitters (notably, members of the CLC and other corporations and businesses)
  4. The option of payment of dividends to individual retirement accounts


On this last point, it is not implausible that the government would find ways to “nudge” citizens into favoring the IRA dividend payment option over a check in the mail or direct deposit to a bank account. This would pump a lot of new money into the financial markets. It is worth noting that Hank Paulson, former Chairman and Chief Executive Officer of Goldman Sachs, who presided over the bank bailout in 2008 as U.S. Treasury Secretary, is a member of the Climate Leadership Council; as is Larry Summers, former Chief Economist of the World Bank, former Treasury Secretary, and former director of the U.S. National Economic Council. We know where their interests and loyalties lie.


With a Carbon Dividend plan as envisioned by the Climate Leadership Council, money that would have gone to fund environmental projects and programs, particularly in regard to climate change mitigation, goes into the pockets of Americans to spend on more stuff. The logic is that as businesses begin to externalize their costs onto their customers as a result of having to pay for their pollution, customers will choose less polluting products, services, and activities. This in turn would spur innovation as companies who are more sustainable and produce less CO2 would gain customers, while those who pollute more would lose them. This is rather utopian. If any nudging is to happen it should be to encourage behavioral change in the general public toward a more sustainable mindset. While many people are already conscious of their environmental footprint and work to improve it, some government PSAs along with other incentives (following the example of solar rebate programs) would help others get on board to address the climate threat.


Border adjustment fees are politically challenging. The last time the U.S. Government proposed a border adjustment fee to stop social dumping and keep businesses in the United States, they balked on its implementation. It is very hard, as we can see today with trade tariff negotiations, to impose unilateral policy and sanctions globally, even if it is the right thing to do in regard to fairness. But for many of the representative corporations of the CLC, this is a moot point since they have subsidiary operations around the world that are already “relocated.” And while much of the world is ahead of the United States in climate policy, most of the countries where production occurs have weak environmental regulations, weak enforcement, or both. It would be much more efficient if the world met in a climate-focused Bretton Woods and determined the fair global price of carbon discounted to local cost of living and relative currency exchange rates, and applied it across the globe. It would then be up to each nation and the businesses in those nations to determine how it and they would manage their own CO2 emissions.


The market can’t solve everything. In the United State and elsewhere, regulation is still needed to maintain basic standards of clean air, as with all other elements of a healthy environment. The Climate Leadership Council thinks otherwise. It wants to tax carbon, give the tax back to the people to spend, as explained above, and then use that as a justification for rolling back regulations and even taking authority over the environment away from the EPA. If that weren’t enough, they also want to protect polluting companies from liability for any environmental harm they cause.


Well, it is their report, so they might as well reach for the pie in the sky, in their attempt to co-opt the global effort to stop climate change to serve their own business interests. But down deep not even they believe they will get what they want. It is so transparently cynical, it is pathetic, and shows that the ruling class of Republicans is in defense mode and on the losing side of the issue. To be fair, the ruling class of Democrats are hypocritical about the environment. Their virtue signaling does not match the reality of their jetsetting high CO2 lifestyles. They crow about helping to pass the Paris climate accord and it turns out to be non-binding. That being said, the proposal of a Carbon Tax and Dividend plan has put the issue of climate change and a carbon tax firmly on the U.S. political agenda. It has furthermore led to a consensus between some college Republicans and Democrats, who have embraced the plan. This is a good start to ending partisanship on the most important issue facing humanity, ever.


Ultimately, the Climate Leadership Council’s policy paper deceptively presents the challenge of climate change as a binary choice between a pro-business Carbon Dividend or government regulation of CO2 emissions. But the real solution lies in keeping climate and energy-related environmental regulations in place, while also implementing a carbon tax. The money from this tax should be used for climate change mitigation. Of course the devil is in the details of how this will be administered. In my opinion, the paying of dividends to citizens still needs more debate.


Companies that are sincere about solving climate change should have no problem complying with existing and future environmental regulations. Instead of passing on the cost of environmental impact to the public, they will have to find less polluting ways of doing business, which they should have done a long time ago. Those who do not won’t be competitive and will fail. This will lead to true sustainable innovation in the production of goods and the provision of services leading to a more prosperous overall economy and improved health and quality of life for more citizens. That is better than a few more dollars in your pocket to pay for more expensive stuff. Don’t be fooled by the corporate Republicans, or corporate Democrats for that matter. The Carbon Tax Dividend scheme as envisioned by the Climate Leadership Council is just another way for corporate America to externalize the cost of pollution onto the public, while also avoiding accountability.


American citizens must demand of their government that it maintains and improves existing environmental standards while also implementing a carbon tax with no corporate concessions. Now that’s a good deal for America and the environment!

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