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The Lincoln Plan

penny Climate change is a complex issue, but it can be summarized rather simply: the consensus of science is that global warming is a threat (1); the consensus of economics is that a carbon tax would be a cost-effective remedy (2). A carbon tax is a charge for emitting carbon dioxide (CO2), the main heat-trapping culprit.

For the last several years Ecological Internet has proposed a small U.S. government federal charge initially of $5 per ton of carbon emitted as CO2, which for gasoline is about 1 cent per gallon. Since Lincoln's portrait appears on both the penny and the $5 bill, the plan goes under his name - the "Lincoln Plan". A fundamental question in addressing climate change is whether cap-and-trade or a carbon tax would be more cost-effective. For a discussion of this matter, please see the following articles: Limiting Carbon Dioxide Emissions: Prices Versus Caps and After Kyoto: Alternative Mechanisms to Control Global Warming.

five dollars

Over 100% of the carbon tax revenue coming from the public would be returned to the public as dividends. 95% of the corporate revenue stream would be used to cut corporate income taxes; and nearly 5% would fund forest protection, energy efficiency, and clean energy supplies. The plan would thus tax pollution rather than employment and savings.

The carbon price would rise $5 a year, counting from the year 2001, so that it would be $50 in 2010, $55 in 2011, and so on. $55 per ton of carbon, or $15 per ton of CO2, is about 15 cents per gallon of gasoline and 1.5 cents per kWh of electricity from coal-fired power plants. This price trajectory, though moderate, would greatly speed up the development and adoption of low-carbon technologies.

Further boosting the plan's attractiveness would be its considerable side benefits. Saving forests, particularly tropical forests (3), would help safeguard the majority of Earth's species; efficiency gains could save us a lot of money (4) while reducing dependence upon overseas sources of energy; and moving to cleaner energy supplies would reduce harmful pollutants of many kinds. Indeed, these ancillary benefits are so large that the plan would be worth trying even apart from its core benefit of climate protection.

Sensible climate protection should, indeed, be profitable. As Amory Lovins writes, "If properly done, climate protection would actually reduce costs, not raise them. Using energy more efficiently offers an economic bonanza...because saving fossil fuel is a lot cheaper than buying it."

In short, the Lincoln Plan could handle a serious problem with great effectiveness and at low, even negative, cost. Those who would like to contact a legislator or write a letter to the editor in support of the plan may forward this page or quote from it as they wish.

Update, 2010

The Congressional Budget Office (CBO) has long said that a carbon tax would be the most cost-effective policy instrument for controlling climate change. And now, advances in technology, e.g. here [ http://web.mit.edu/newsoffice/2009/natural-gas.html ], may allow a CO2 price which rises just $1/ton each quarter for three years, and each year after that.

In three years the price of gasoline would be just 12 cents higher, households would be receiving over $300 in annual dividends, and the corporate income tax could drop below 30%-- a remarkably good deal for just about everyone.

Notes

1. IPCC, 8-14. Summary for Policymakers, Question 3: http://www.grida.no/climate/ipcc_tar/vol4/english/009.htm

2. Repetto, 2, 35-7. Summary: http://powerpoints.wri.org/climate_ccp/sld001.htm

3. Totten, 17, 23. Forest Trends

4. Lovins, 26. Download Climate: Making Sense...: Rocky Mountain Institute

References

IPCC 2001: Climate Change 2001: Synthesis Report, Cambridge University Press, Cambridge.

Lovins, A.B. & L.H. 1998: Climate: Making Sense and Making Money, 2nd ed., Rocky Mountain Institute, Snowmass, CO.

Repetto, R. & Austin, D. 1997: The Costs of Climate Protection: A Guide for the Perplexed, World Resources Institute, Washington, DC.

Totten, M. 1999: Getting It Right: Emerging Markets for Storing Carbon in Forests, World Resources Institute, Washington, DC.