We have two giant problems with our energy use. First we are destroying the planet via global warming. Second we are funding both side in the war on terror with our oil use. We need to address both issues.
The most effective answer is relatively simple. Politically difficult maybe but otherwise simple. And there is a twist that may make it politically palatable.
First there is what we should not do. We should eliminate all energy subsidies. Not just those for oil and gas but the subsidies for wind, solar, wave, etc. End all of them. (Don't shoot me yet, please keep reading.)
The problem with subsidies is they skew the market. Does corn based ethanol make more sense than coal gasification? Is nuclear a better alternative. Who knows? But I do know that the market does a much better job of making this decision than a bunch of legislators, some of whom come from coal producing states while others come from states with lots of coal (gee I wonder what each of them prefers?).
Second, forget carbon trading. First, it puts the total carbon output in the hands of the politicians which again allows companies to game the system through lobbying. Second, it creates a giant incentive to eliminate carbon down to the quota - and then no incentive to go lower. That last pound of carbon eliminated is not much different from the last pound still generated - but under a trading scheme they have a giant difference in value.
So what do we do? Two simple steps.
Step 1: A carbon tax. We set a tax rate on each pound of carbon produced. (It should probably be set to increase at a constant rate over 10 years so companies can adjust.) If you buy electricity that is generated from coal, you pay the tax in the price of your electricity. But if your electricity comes from solar or wind - no tax. So there is no subsidy for renewable energy generation, but there is a penalty for coal, etc and that differentiation has the same effect.
The beauty of this is it lets the market then determine the best way to reduce global warming. Does nuclear make economic sense vs "clean coal?" Can you pay the residents of Nantucket enough that they will accept wind generators offshore? Different companies will try each approach and the most effective will win.
Set the tax high enough and American businesses will invest enormous amounts of money and effort to find the most effective low carbon ways to produce electricity.
Step 2: Tax petroleum. Not just gasoline but everything generated from petroleum. At a rate that adds $5.00 or more to the price of a gallon of gas. The root problem with oil aside from global warming is it pours hundreds of billions into the middle east where large amounts of it make it's way to our enemies.
And it's not enough to stop US purchases of Middle East oil. We actually don't get that much from there. We need to get the world to stop using oil and that requires that we reduce oil use wherever it comes from. So a tax on all petroleum, regardless of what it is used for and where it is from.
How do we sell this? $8.00/gallon for gas will not fly. Maybe if we had a popular President who had the trust of the people but...
I think there are two ways this could be sold. People do understand that both of these problems are a giant crisis. They are willing to accept some trade-offs to solve these problems. But there have to be some direct advantages to match the money flowing out of their pockets. (Especially as after 6 years of Bush most people have less money in their pocket to start with.)
And now a word from the pollsters. The 4 big issues for people are Iraq, the environment, the economy, and health-care.
Ah, health-care. We are hearing lots of good ideas on how to fix it, but where to find the money? With Iraq bleeding us dry there isn't any more money. But wait, if we bring in these two taxes, we suddenly have all this additional tax revenue coming in.
This is the grand deal that can make this work. A carbon and petroleum tax that is used to pay for universal health-care. The health-care can be single payer, private insurance, or a mixed model. How it is structured can be worked out. But the money to pay for it for every person in the country would come from this tax.
So yes, you would pay more at the pump. But as you did so you would also think about how you have health insurance, you can't lose it, and you don't have to pay for it. And if you were getting it through work, your company now can pay you more as they are no longer paying for health insurance.
But wait, there's more. How does this affect the economy? Some parts will be hurt (tax accountants for one). But overall it will be a big positive due to two large impacts. First will be all the new industries created to generate energy in cleaner ways. And make no mistake, environmentally friendly energy generation is about to become a gigantic world-wide industry and this would put the US in the lead.
Second, many of our businesses become more competitive. No longer is $600.00 of each American car the cost of health insurance for the employees who built it. This will save some companies and make others much more competitive. For almost all it frees up money to invest in growing the company. Again, all of this generates new jobs.
I think this grand bargain would sell. And I think a presidential candidate who ran on this platform could win. And if they won on this platform, they would be able to get it passed. It's the combination that makes it work.
Comments?
