On June 2, Environmental Protection Agency Administrator Gina McCarthy announced the EPA's Clean Power Plan, a proposed rule to reduce carbon pollution from existing power plants by 30 percent over the next eighteen years. Ms. McCarthy and the EPA deserve tremendous credit for taking this bold step to protect present and future generations from the ravages of human-caused climate change.
The Clean Power Plan was greeted with the expected enunciations of economic extinction; arguably the most lurid of these claims was Senate Minority Leader Mitch McConnell's assertion that the plan represented "a dagger in the heart of the American middle class."
However, those who oppose the plan have an obligation to submit an alternative proposal to reduce carbon pollution. A newly released study by the non-partisan Regional Economic Models, Inc. points to the effectiveness of one such alternative proposal.
The report, prepared by economists Scott Nystrom and Ali Zaidi, is entitled The Economic, Fiscal, Demographic, And Climate Impact Of A National Fee-And-Dividend Carbon Tax, and it promises to be a game-changer in the American climate change debate.
The report forecasts the economic benefits of a federal carbon tax if such a tax would be implemented in 2016. The modeling is based on the idea that such a tax would begin at $10 per metric ton of CO2 ("collected directly at the well-head, mine or port of entry, based on the carbon content of the material"), rising gradually by $10 per year, with border adjustments. All collected revenues from the carbon tax would be returned to households as a monthly dividend check.
The report concludes that the implementation of such a policy would create at least 2.1 million jobs over the next decade -- leading to an additional $70 billion to $90 billion in annual GDP -- while reducing carbon emissions 33 percent over the same time period. By phasing out the use of coal in the United States, a fee-and-dividend policy would, over the next decade, avoid at least 13,000 premature deaths from pollution annually. Far from killing jobs, this policy would create jobs and protect lives. When House Speaker John Boehner asks, "Where are the jobs?", advocates of market-based emissions-reduction policies can point to this study and say, "Right here!"
There is no rational basis for this policy not to receive strong bipartisan support in Congress. Democratic Senator Sheldon Whitehouse of Rhode Island has indicated strong support for returning all collected revenues from a federal carbon fee to the public. Republican economists Gregory Mankiw, Arthur Laffer, Irwin Stelzer, Douglas Holtz-Eakin and Eli Lehrer, as well as President Ronald Reagan's Secretary of State, George Shultz, and conservative former South Carolina Representative Bob Inglis have also called upon Republicans who hold federal office to embrace market-based legislation that curbs emissions without increasing the size and scope of government.
The REMI report makes it clear that a federal carbon fee that returns all collected revenue to households will be the most effective economic stimulus in modern history; with a border adjustment, other polluting countries, such as China and India, will have a compelling incentive to promptly cut their carbon emissions. A policy that reduces emissions substantially, protects households, creates jobs and eschews regulatory burdens is a cross-ideological winner -- but it has to be implemented first. So call your representatives and senators and urge them to do so.