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Conservative climate policy.

[Editor's note: This column is adapted from a post that originally appeared on, where your comments and insights are welcome.]

A group of prominent Republican policymakers recently put forward a fee and dividend proposal to reduce greenhouse gas emissions. It is a serious proposal that would provide serious climate protection. As offered, it would likely be among the most aggressive efforts for reducing greenhouse gas emissions that has ever been put forward. It also constitutes what might be considered a truly conservative policy approach.

The approach is an emission fee starting at $40 per ton of carbon dioxide that increases over time. All revenue would be returned on a per-capita basis to the American people with checks coming every three months.

From a policy standpoint, the proposal is unambiguously conservative--it is based in conservative ideals, values, and approaches. It recognizes that greenhouse gas emissions constitute a market failure that results, in part, from nonexistent property rights for the atmosphere. The proposal corrects the market failure as directly as possible using an emission fee, which is a market-based solution. The approach does not increase the size of government and preserves individuals' freedom to emit greenhouse gases but only after accounting for the market failure by ensuring that those who emit pay for the costs of their use of the atmosphere.

Emitters of greenhouse gases currently get to use the atmosphere for free. That leads to a market failure-emitters who make decisions that maximize their own economic well-being are not simultaneously maximizing overall economic well-being. The reason is that polluters enjoy the benefits of emitting but do not pay all the costs--particularly for their use of the atmosphere and for the climate damages that greenhouse gases cause. Instead, those costs are paid for (i.e., subsidized) by everyone else. That subsidy encourages the profligate use of the atmosphere and leads to economically harmful damage of the climate system. Basic economics (and common sense) tells us that's a bad idea.

Think of it this way: In some cases, when we sum up all of the costs that emitters don't pay because they get to dump in the atmosphere for free, the total of those costs will exceed all of the benefits that the emitter receives. For the emitter, it still makes sense to go ahead and pollute because they only pay a fraction of the costs. But the economy as a whole would be better off if those emissions did not occur.

A $40-per-ton fee to dump greenhouse gases in the atmosphere helps account for this harmful subsidy and creates a strong incentive to emit less. That would cause emissions to decline over time and that would reduce our future contributions to climate change. If we are reasonably lucky, that might keep the future impacts of climate change manageable.

The dividend is an important component of the proposal for two reasons. First, it ensures that the approach would not expand government, which satisfies a central conservative principle. Second, it would help reduce the potential hardships from a carbon price and the political backlash that those hardships may cause.

Energy and transportation prices will very likely increase, at least in the short term, as a result of a carbon price. For some, particularly low-income families, higher energy and transportation costs could cause financial difficulty. The dividend would take care of that problem because the vast majority of low-income families would get back somewhat more through the dividend than the extra they would pay for energy and transportation.

Increasing energy and transportation prices also creates a political obstacle to carbon pricing. If the carbon price is to be sustained over time, as it must be, then people will need to accept potentially higher energy and transportation prices. Receiving a check every three months for an equal share of the revenue would take the sting out of higher energy and transportation prices and therefore reduce the potential for public backlash.

It will be interesting to watch how politicians from both parties and environmentalists react to this proposal. Each of those groups will find things to like, but it is also easy to see how political calculations might trump the substantive policy issues. For those interested in a deeper dive, we'll examine all of this in more detail on For now, it's worth noting that those who developed this proposal are making a very serious effort to reduce the risks of climate change. They deserve a great deal of credit for that.

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Author:Higgins, Paul
Publication:Bulletin of the American Meteorological Society
Geographic Code:1USA
Date:Apr 1, 2017
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