Bleak Future for World and GOP Can Be Avoided With Market-Based Climate Solution

The future of the world is looking rather bleak at the moment, and the same could be said for the Republican Party. A recently leaked draft of the next installment of a UN report warns about the impact of climate change -- food shortages, extreme-weather disasters, etc. -- if greenhouse gas emissions continue unabated. Meanwhile, the GOP got a preview of what will happen in 2014 if the public continues to identify them with the most extreme elements of their party.

The most disconcerting news from the leaked report of the Intergovernmental Panel on Climate Change is that global warming's impact will reduce food production during a time when the world will gain an additional 2 billion mouths to feed.

Like Ebenezer Scrooge confronted by the Ghost of Christmas Yet to Come, we can't help but ask, "Are these the shadows of the things that will be, or are they shadows of things that may be, only?"

The good news is that the worst consequences can be avoided, but only if we quickly take steps to reduce greenhouse gas emissions, thereby preventing future warming from exceeding a manageable increase of 2 degrees Celsius. Another UN report, just released, warns that the chances of limiting this warming will soon slip away.

President Obama's climate action plan, heavily dependent upon new EPA regulations, is running into stiff opposition from Republicans on Capitol Hill as well as a legal challenge that the Supreme Court will hear next year.

For Republicans, the aversion to government regulations is understandable, part of the conservative ethos at the foundation of the party. But blocking steps to reduce the future risk of climate change without offering their own solution does little to help the GOP's image, which took a beating during the recent government shutdown. The repercussions of the party's intransigence and fealty to its most radical elements were on full display in the gubernatorial elections in Virginia and New Jersey: Tea Party-darling Ken Cuccinelli went down to defeat in conservative-leaning Virginia, while moderate Republican Gov. Chris Christie was re-elected in a landslide in left-leaning New Jersey.

Republicans looking at the result in Virginia see the Ghost of Elections Yet to Come. Like Scrooge, they have a choice: Continue on the path the Tea Party blazed in this election, or start to rehabilitate their image -- and improve electoral prospects -- by embracing true conservatism in the form of a market-based solution to climate change.

The market-based solution to which we refer is a revenue-neutral carbon tax that gives all proceeds back to the public.

A number of conservative economists believe that the market, rather than the government, is the best vehicle for solving the climate problem. But the market fails when there's a distortion in the price of something. Such a distortion exists with fossil fuels, whose price does not reflect the cost of damage done to society -- health costs related to air pollution, security costs related to imported oil, extreme weather damage made worse from climate change. Adjust the price to account for those costs, with a gradually increasing carbon tax, and the market will work its magic. As renewable energy like solar and wind becomes competitive with and eventually cheaper than coal, oil and gas, the economy will transition to clean energy and greater fuel efficiency, lowering greenhouse gas emissions.

Our tax on cigarettes is a perfect example of fixing a market failure. When cigarettes were cheap, their price did not reflect the damage done to society in the form of smoking-related health costs. Taxes on cigarettes have since pushed the price beyond $5 a pack in most places, creating a strong disincentive to smoke. The result: Far fewer smokers than we had a generation ago.

With carbon, Citizens Climate Lobby suggests a tax that starts low -- $15 per ton of CO2 - and ramps up aggressively, adding $10 per ton each year. For the sake of simplicity, the tax should be applied as far upstream as practical. Distributing the carbon tax revenue back to the public, preferably through equal payments to all households, would give consumers the additional income to deal with price increases associated with the carbon tax. Republicans may prefer a tax swap rather than direct payment. Provided the poor and middle class are protected from rising costs, that's a conversation worth having.

Republicans can ease their way into discussion of a revenue-neutral carbon tax by holding a hearing in the House Ways and Means Committee to present testimony from conservatives who support this approach. Such witnesses could include Art Laffer, former Reagan economic adviser; Greg Mankiw, economic adviser to George W. Bush and Mitt Romney; Andrew Moylan of the R Street Institute; Gary Becker, Nobel laureate economist; and George Shultz, former Secretary of State.

Time is running out for both civilization and the Republican Party. By embracing the market-based approach of a revenue-neutral carbon tax, the GOP can save both the world and itself.