Fee-and-dividend: new support for a revenue neutral carbon tax

Suppose you were dying of cancer and had a year to live. The doctors tell you have only time to take one drug: Drug A or Drug B. Most of your doctors say in theory Drug A should work best (even though it has never worked on your cancer), but the world expert on your cancer says it will kill you and the company that invented the drug says Drug B will work better. For Drug B, almost everyone says it will work, it has worked in real life for people in British Columbia, but some doctors are skeptical of whether you’ll decide to actually take it.

Which Drug do you choose to save your life? Most of us would choose Drug B. But a lot of members of Congress want to force us to take Drug A because they don’t think you’ll take Drug B. So you can see, we have a big problem here.

Venture capitalist Steve Kirsch is now backing carbon tax policy. Steve has also contributed the much superior moniker Fee-and-dividend, which strikes me as more likely to capture the minds of voters. “Revenue neutral carbon tax” is a mouthful and doesn’t exactly soar with eagles in the rhetoric department.

Regular Seekerblog readers will recognize Steve Kirsch as the highly effective promoter of the Integral Fast Reactor (IFR), which is the other essential ingredient of an effective energy policy.

In the first major post “Why Hansen is Right: Cap-and-trade will Make the Climate Problem Worse, Not Better” on his new blog, Steve Kirsch wrote an excellent comparison of these two competing policy options. Steve has included a number of useful links to supporting information. I strongly recommend that you read the entire essay. Excerpts:

I’m going to summarize the reasons why cap-and-trade won’t work, why fee-and-dividend will work, and why most of the green groups got it wrong and will not change their position.

Australian climate scientist Barry Brook summed up the fundamental differences quite nicely (emphasis mine):

Carbon tax and fee and rebate are both more difficult to manipulate than a cap-and-trade, and for that reason are better. The cap-and-trade has a couple of theoretical advantages (potentially lowest costs abatement, best guarantee of actual reductions) but in practice it is distorted to hell with grandfathering, free permits etc. So KISS. The key thing is to get a price on carbon to make the alternatives much more attractive as a medium-term investment.

Very few of the analysts and virtually none of the big-media reporters will talk about one of the biggest flaws in cap-and-trade: that is corruption. Steve touches on this issue as #14 in his survey of cap-and-trade faults, though he does not discuss the obvious, which we have already seen rampant in the crafting of the cap-and-trade bills.

14. It provides too many opportunities to game the system. A very senior Senate staff person acknowledged that cap-and-trade isn’t the most efficient way to achieve carbon reductions, but politicians like it because it is “an easier tool for politicians to use as a revenue grab for purposes other than addressing climate change.”

So, please read the whole thing.