A Global Quorum for Fee & Dividend?

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I felt more optimistic for a few seconds after reading James Hansen’s latest Assuring Real Progress on Climate. I won’t spoil your Holiday Spirit by enumerating the reasons my optimism quickly faded. Hopefully you will come back with compelling arguments why this time is different: multi-national negotiations will produce a binding commitment to Fee & Dividend. The main argument:

Alternative 2: Courageous leadership emerges. In this scenario, actions proposed in Lima are adopted, but also plans for a rising carbon fee to come into force once approved back home by a quorum of nations. Quorum is defined so that Protocol initiation practically requires acceptance by either the United States or the European Union and either China or a combination of nations such as India and Brazil. The gradually rising carbon fee would be accompanied by border duties on products from non-participating nations, collected by the importing country, unless the exporting country shows that no fossil fuel carbon was emitted in production of the product.

In Alternative 2 no single nation can blackmail humanity. Once a quorum is achieved, there is a huge incentive for other nations to join, to avoid economic disadvantage and enjoy the economic stimulation. A carbon fee, which would be collected at domestic mines and ports of entry, spurs an economy if the funds are fully distributed to the public. However, the fee becomes a tax and a drag on the economy if a government keeps the funds to expand its programs. Governments are prohibited from returning the funds to the fossil fuel industry as subsidies. Otherwise specific use of the fee is a national prerogative. However, it is noted that equal division of funds among residents tends to address income disparities, providing opportunities for low income people, while spurring essential efforts in conservation, energy efficiency and clean no-carbon energies. Alternative 2 is a challenge, but one that we must fight for with all our strength and intelligence.

I think the economic outcome will be net-positive over a couple of decades. I’m not confident the near term jobs & incomes data will be comforting to politicians who find themselves out of work after implementing a binding form of Alternative 2. What is our best evidence that Fee & Dividend will boost GDP per capita? Over what time frame?