Increased costs for the fossil fuels industry would be passed to consumers through higher fossil fuel prices. Placing the tax at the source ensures that emissions are reduced economy-wide, rather than targeting certain sectors (transportation, electric generation), as EPA regulations do. By returning 100% of the revenue collected to American households equally, we would protect lower and middle-class families from the costs associated with a carbon tax and provide the financial incentive to remove fossil fuels from their everyday lives. Making the tax steadily-rising means the dividend returned would be steadily-rising as well. Consumers could actually make money by removing fossil fuels from their everyday lives as they continued to receive dividends. The Carbon Tax Center estimates that two thirds of households would break even, or come out ahead with their dividends.
The tax would signal to businesses that if their products or services were carbon-intensive, they should be removing fossil fuels from the equation in order to lower costs. They would substitute alternative forms of energy or materials in their business model, because surely their competitors would do the same to gain the competitive edge.
Investment money would shift from fossil fuels to clean, renewable forms of energy, lowering the cost of clean energy to consumers. A study by Mark Jacobson of Stanford University found that we can power the world with 100% clean, renewable energy in as little as 20 years, using technology available in 2009. We just need smart public policy to get us there. The barriers are political, not technological. We should be taxing carbon instead of letting carbon tax our future.
[Jon Clark is Mid-Atlantic Regional Coordinator for the Citizens Climate Lobby. He lives in Pennsylvania.]