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Use market prices to stop climate change

Guest Contributor
Guest Contributor
Opinion
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by Michael Collins

Have you checked in with global weirding recently? Reno had terrible air quality last summer because of four major wildfires on the Northern California coast. Our community largely escaped any other direct impacts from the the Camp Fire, but that tragedy was the most deadly wildfire in American history since the Cloquet Fire in 1918. At the end of January, the arctic region warmed up dramatically while dropping temperatures in the upper midwest to below the North Pole’s temperature.

Nevada’s unique tourism and agriculture businesses won’t keep growing if we lose priceless natural resources such as mountain snowpack or clean air. No area of science is settled on all of the details (just ask a cancer researcher), but most experts in the Earth sciences have concluded that human activities are responsible for the climate volatility we are seeing. These disasters will continue or increase for years to come, but much worse outcomes can be avoided if we take action now.

Thanks to the leadership of former Gov. Brian Sandoval, Nevada is already a renewable energy leader. Gov. Steve Sisolak has demonstrated significant support for Nevada’s clean energy economy. Our state’s solar and geothermal resources give us many natural advantages in the production of clean energy. Developing electric charging stations on our interstate highways with other Western states through REV West will improve our air quality and support more investments in our logistics hubs.

The recent vote of approval for Question 6, the Renewable Energy Standards Initiative, is another sign of continued technology advancement. I hope the Legislature can enact a law to accelerate this standard prior to the 2020 re-vote on the initiative. Nevadans spend $700 million on natural gas for electricity generation and heat, but we can create our energy locally and develop local energy businesses.

All of these changes to the Nevada economy put our communities ahead of the curve as climate action becomes more urgent, but is it enough?

Despite the promise of Nevada’s leadership over the last decade, global carbon solutions can’t be implemented only at the state level. Congress can vote to enact the Energy Innovation and Carbon Dividend Act and take the first step toward a sensible climate policy. It’s not a silver bullet, but this measure would reduce our country’s emissions of greenhouse gases, and especially carbon dioxide, by at least 40 percent over the next 12 years, and by 90 percent by around 2050. At the same time, we can create 2.1 million new jobs around the country over the next decade through clean energy investment. Because this climate solution does not expand the size of the federal government, it’s original House cosponsors include a Republican and a Democrat.

We need Congress to enact a new climate policy because the best new technology won’t rapidly reduce emissions without a market incentive to make efficient use of that technology. We are all treating an important resource, our atmosphere, like a dumping ground despite the superior technology sitting on the shelf. (One or two battery Gigafactories aren’t going to be enough for nearly 8 billion people. We need more of them, quickly, with a host of other investments in new technology.)

Putting a price on pollution is the simplest way to provide incentives we all need to accelerate to a cleaner economy. The bill would impose a carbon fee on coal, oil, and gas production and imports to capture the negative climate effects of these energy sources. In exchange, the House bill would suspend, for 10 years, EPA authority to regulate carbon emissions, but only that authority related to climate effects. The suspension of EPA authority may continue if benchmarked emissions reductions are achieved. The EPA will protect local air and water quality as it has done for over 50 years.

The cost of living would increase, but not by as much as you may assume. Companies will immediately compete for the lowest possible carbon footprint for each product they sell. They will minimize the fee passed on to customers by reducing their impact to the environment. Each product competes on quality and price, but now the price would include the climate cost of its production and distribution. Our trade balance will remain steady, because imports would also be subject to a carbon fee. In reverse, U.S. exports would receive a refund of the carbon fee because we know American products need to compete globally on an equal footing. The fee would allow both consumers and businesses to continue making each decision in financial terms, but with more truthful prices. The sources of our carbon pollution are remarkably complex, intertwined with almost every single human activity. Markets have always been indispensable for the coordination of complex economic systems.

Will Nevada and U.S. households have the financial resources to pay higher prices?

The bill places all carbon fees into a trust fund to be distributed equally to each household, one share for each adult and one half share for each child. The dividend increases each time the fee increases and the trust fund will not accumulate significant amounts of money. The monthly dividend per adult (or child) is equal everywhere in all 50 states, and it is set to distribute the entire fund every year. This would not work like Social Security, where every paycheck gets taxed now and paid out to a generation that is already retired. The carbon dividends are paid out at the same time that the carbon fees are collected.

If you file a tax return, you would receive a monthly dividend from the Treasury based on the number of dependents in your household under the age of 19. If you don’t file a tax return, you could enroll in dividends simply by notifying the Treasury of your bank account or prepaid card and the number of dependents in your household. Fifty-three percent of American households would receive more in the dividends than are paid in fees. Another 19 percent of households would incur a minor loss of less than 0.2 percent of annual income.

Lower- and middle-income households usually have lower carbon emissions because of their typically smaller homes (at least, smaller per person) with less frequent travel and shopping, so they typically would receive a slightly positive direct financial benefit, compared with wealthier households that often have higher carbon emissions and would experience a slight net increase in their cost of living. Apart from income groups, as stated earlier, the effects of climate change threaten entire industries, including a couple of Nevada’s most valuable industries: agriculture and tourism. For that reason, every single Nevada household will indirectly benefit from a safer climate and stable economic growth.

The bill is good policy because every business and family has a role to play in reducing emissions, and emissions reductions will go faster when everyone is working toward the same goal using a consistent price on pollution. It’s important that any climate policy prioritizes the freedom of businesses and families to innovate and to use new technologies whenever the price is right. It’s the American way.

I encourage House representatives and U.S. senators serving Nevada to support this bill. It will preserve our way of life and our natural environment for future generations. Climate change impacts have already come home to Nevada and it could get significantly worse. Those elected to represent our interests should consider this solution for a vote in both houses of Congress. From 1990 to 2015, the World Bank reports that extreme poverty fell from 36 percent of the world’s population to just 10 percent, a reduction of more than 1 billion people. Markets have tremendous potential for positive change. Why shouldn’t a market with a price on pollution be able to stop climate change?

Michael Collins is the volunteer Nevada State Coordinator for Citizens’ Climate Lobby and a College of Business graduate student at UNR.

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