Some Solutions to Help Address Global Warming

CO2 Labels

Labels would help us choose products wisely, and would influence producers to reduce their CO2 emissions as much as they can. A British system encourages labels on products. A Swedish system encourages fact sheets on the web (these are extracts of their "Environmental Product Declarations").

Cooling the Earth

Capturing CO2 in the oceans, with plants, or with other offsets does not seem to be feasible, but reflective roofs and burying charcoal can help.

Money Incentives

We can be creative when the incentives are strong. The strongest incentive is a rising fee for CO2 emissions, with wide public support for the fee. Wide support for a large fee will come only if we distribute all the revenue in a public dividend. Alaskans support oil royalties, because they get a dividend. Workers support Social Security, because it comes back to us. People will support a growing CO2 fee if the money comes back to us. Start at a penny per pound of CO2, which will provide $440 to each American. Then watch while we creatively save CO2 and support fee increases which raise our dividends, until the dividends finally fall off when CO2 use drops

The UN Development Program estimates 3¢ to 5¢ will stabilize the climate. Start at a penny and phase it in, which accomplishes 8 goals:

• Strong political support, since people are receiving dividends.
• Gains for people who use below average CO2, including the poor and energy conservers
• Losses for people above average CO2, giving an incentive to reduce
• A fiscal stimulus since people know the price of all products will rise, so better to buy now than after the next fee increase
• Long term planning by businesses, households and investors, since people would know what prices to expect
• Big sudden shocks are avoided
• Steady reduction in CO2 use
• The chance to stop raising the dividends when CO2 responds enough

Administering a CO2 fee is simpler than most taxes, since there are relatively few refineries, etc, where the tax would need to be collected. Each person could choose, as with income tax refunds, to get credit toward the next income tax, or immediate payment, such as by topping up a debit card each month with an equal share of CO2 fees received.

Imports can be charged fees to reflect their CO2 content also. These charges on imports would extend the reach of one country's CO2 price to encourage reductions in suppliers abroad too. The World Trade Organization allows such charges (p.xix of Trade and Climate Change, 2009, WTO & UNEP, also cited by Krugman).

CO2 levels and climate stability are discussed in our Goals page. UNDP's estimate of 3¢ to 5¢ per pound (p.127, 2007-8 Human Development Report) is smaller than the International Energy Agency estimate of 9¢ (p.11, World Energy Outlook 2008). Neither estimate is large compared to US average spending, so we should start and see how fast CO2 use drops.

Caps, Fees, Taxes, Auctions

Some authors call this a tax, others a fee for a permit to release CO2. In either case politicians will decide what is a reasonable level and start there.

Instead of setting the fee, one can set a cap on the annual amount of CO2 and auction permits. Businesses then bid whatever price it takes to get the CO2 permits they need. Environmentalists like this way of capping CO2, but it has two defects

• An auction for CO2 permits discourages long term planning, since people and businesses cannot be sure what price they will have to pay.
• A cap on CO2 emissions is not absolute, since politicians fear an auction price going too high and hurting the economy. So politicians will decide what is a reasonable ceiling which the economy can handle. That is a ceiling for the auction, with unlimited permits available at the ceiling price. The auction price can be anything up to the ceiling.

On the other hand if there is NO cap, politicians decide what is a reasonable ceiling which the economy can handle, and set that price, which they may call a fee or a tax. An auction will never be higher than the ceiling, and has a good chance of being lower, so an auction gives a lower price than the price set by politicians, and thus an auction under a cap has less carbon reduction than a simple fee or tax.

Who would want an auction which sets the CO2 fee below the reasonable level? Low fees encourage CO2 use now, and we would need to compensate by reducing the final CO2 levels even more: The cumulative total controls global warming. In other words the faster we cut, the less far we will have to cut, because we won't have as much catch-up to do. The more slowly we cut CO2, the more we emit now, the farther down we will have to cut, in order to compensate. Deeper cuts are a heavy price to pay for delay.

Tobacco and liquor taxes are not set by auctions. The government chooses a tax to discourage use and raises it periodically.

Other sites discuss Dividends to citizens, Carbon taxes, reasons for optimism, and an extensive discussion of the economics of pricing CO2.