by Lauren V. Williams
Joe Biden’s ultimate legacy will not only be about the pandemic. 50 years from now the planet will either be engulfed in the worst effects of climate change or it will prosper as a brighter, more sustainable society. Unfortunately, Biden is constrained by Washington’s obsession with the short term. If Biden passes his nearly $2 trillion coronavirus stimulus package, it stands to wonder whether he will be able to muster the political capital to pass his $2 trillion climate proposal shortly afterwards. Biden’s best path for climate action that will actually pass Congress may be Carbon Dividends, a plan with the potential to unite environmentalists, populists and classical conservatives under one mission.
The Carbon Dividends solution proposes a steadily increasing tax on carbon emissions whose revenue is redistributed to the American people in the form of a dividend. Proponents of the bill also include a border carbon adjustment, which includes a carbon tax on imports, to ensure global buy-in and collaboration. They also promote regulatory streamlining to increase market efficiency.
Biden’s strongest argument to environmentalists is that Carbon Dividends is quick and effective at reducing carbon emissions. The House of Representatives’ proposed Energy Innovation and Carbon Dividends Act (EICDA) of 2019 supports a $15 tax per metric ton of carbon dioxide that would increase by $10-15 each year, depending on emissions levels. A Columbia University analysis of the EICDA reports that it would reduce greenhouse gas emissions by 36-38% by 2030. The goal of the EICDA is to reduce greenhouse gas emissions by 90% by 2050. Overall, these reductions would vastly exceed the US targets of the Paris Climate Agreement.
Global emissions will also decline because of the border carbon adjustment. Other countries will be incentivized to enact stricter regulations on their own companies to avoid the adjustment’s carbon emissions fee on imported products. These simple taxes could revolutionize the global energy economy. Buyers and sellers will invest more in renewable energy as it becomes the cheaper alternative. 82-84% of carbon emissions reductions in the US alone will occur in the power sector as sustainable energy and natural gas (accompanied with carbon capture technology) replace coal. Carbon Dividends appeases multiple factions of the 67% of Americans who think the federal government isn’t doing enough to address climate change. Biden can assure moderates by passing an effective climate bill that’s not as expensive as the Green New Deal but he can still please progressives by accelerating the transition to a green economy.
The populist appeal of the annual “Carbon Dividend” given to American families could also generate a grassroots effort to pass and maintain the law. The Columbia study estimates that carbon tax revenue could be $422 billion per year by 2030. Families would receive an annual dividend of about $1470 per adult and $735 per child. A family of four would receive $4410 of additional income per year. Although gasoline would rise about 90 cents per gallon and per capita energy prices would increase by about $1170 by 2030, 70% of American families would receive a net benefit in income. In this era of extreme economic inequality, a policy that helps the most vulnerable Americans would be incredibly powerful. Biden’s “climate stimulus” checks could be material evidence of his success in fighting for the working class instead of the wealthy. As populism rises on both sides of the aisle, Carbon Dividends would be that much harder to repeal in the future.
Biden may also garner the support of the classically conservative business community by streamlining regulations. The EICDA would pause most carbon emission regulations for 10 years. Top corporations and conservative institutions like the Chamber of Commerce and IBM have signaled support for Carbon Dividends because of the stability it would give them.
Biden’s Treasury Secretary Janet Yellen has even said, “There is wide agreement among economists that this is the most effective and market-friendly way to reduce carbon emissions.” Over 3,500 economists, including 28 Nobel Laureates and the Chief Economic Advisors to every Presidential administration in the last 50 years, have endorsed Carbon Dividends.
Biden can appeal to the intersection between fiscal hawks and environmentalists through Carbon Dividends. The endorsements of the business community, (which is a huge part of the donor class), and the economics profession would give Biden more credibility to fiscal conservatives and moderate Democrats who would be wary of his current $2 trillion climate plan. Although many liberals will fear deregulation, Biden can emphasize how regulatory ping-pong between Democratic and Republican administrations is ineffectual at fighting climate change in the long term.
Biden has a monumental challenge ahead of him. Congress is still closely divided amongst hyper-partisan lines. Even if a Democratic Congress repeals the filibuster, Biden’s climate proposal will still need the votes of moderate Democrats like Joe Manchin (D – WV). Carbon Dividends may be one of the rare solutions that moderate Democrats and even some Republicans would support. The bipartisan Senate Climate Solutions Caucus, which includes Republican Senators Romney, Collins, and Murkowski, has expressed interest in a Carbon Dividends-like bill. If the filibuster is eliminated, Biden could pass monumental bipartisan climate legislation as the true “unity” president. If he does, that will be a pretty good legacy.