Time for a carbon tax? 

Time for a carbon tax?

There's an economic concept known as "the free rider problem." It's a market
failure that occurs when people are benefiting from resources, goods or
services that they don't pay for.

Companies that mine fossil fuels fall into this category. As former Colorado Gov.
Bill Ritter wrote in a recent Denver Post op-ed, "The prices consumers
pay at the pump or on their electric bills are nowhere near the full
costs that these fuels impose on the economy, environment or society."

Scientists have linked carbon emissions to extreme global weather. When a drought
decimates crops or a hurricane flattens and floods coastal communities,
who pays for the damages? Not the companies releasing carbon dioxide
into the atmosphere. If they had to account for hidden costs, cleaner
sources of energy would be more affordable and attractive by comparison.

That's why Ritter and a host of current and former politicians on both sides
of the aisle are making the case for a carbon tax to level the playing
field for all fuels that compete in energy markets.

The idea isn't new, but it's gaining traction because it applies
free-market principles to correct a market failure. Republicans
especially find this more palatable than "command-and-control"
regulation. Two national organizations whose aim is to build political
action for climate solutions are pushing a concept known as carbon fee
and dividend.

The idea has gained support after President Donald Trump announced that he would exit
the Paris climate accord. Even major oil companies like ExxonMobil, BP
and Royal Dutch Shell back the carbon fee and dividend idea, though
critics contend it's part of a strategy to shield themselves from
climate-change lawsuits.

Nevertheless, both Citizens Climate Lobby and the Climate Leadership Council are
touting carbon fee and dividend as a pro-environment, pro-growth
bipartisan response to climate challenges.

Members of the newly formed Grand Junction chapter of Citizens Climate Lobby
explained recently to the Sentinel's editorial board how the plan would
work.

Companies would be taxedon the carbon dioxide and other greenhouse gases generated by mining,
drilling and other activities conducted in the U.S. The fee would be
assessed at the moment the material is removed from the ground and start
around $15 per ton and go up $10 a year from there until total U.S.
CO2-equivalent emissions have been reduced to 10 percent of U.S.
CO2-equivalent emissions in 1990.

The tax proceeds would then be paid out to Americans — regardless of income
level — in monthly installments. This is the "dividend."

Products imported into the U.S. would also be taxed based on their carbon
content. Proceeds from this border tariff adjustment would be paid
directly to Americans. Companies would get a rebate when they export
products abroad in order to ensure a level global playing field.

CCL members say their plan will reduce greenhouse gas emission enough to
stabilize the climate, boost the economy and encourage other nations to
adopt equivalent carbon pricing.

According to a study by RegionalEconomic models, Inc., CCL's plan would cut greenhouse gas emissions 52 percent over 20 years and add 2.8 million jobs to the American economy.

Carbon pricing seems inevitable. Whether CCL's plan is the answer, we owe it
to ourselves to start understanding the core dynamics of carbon taxes.
Under carbon fee and dividend, costs will be passed on to consumers, but
we'll get a dividend check to offset the financial pain.