All I Really Need to Know…

In the 1986 book All I Really Need to Know I Learned in Kindergarten, Robert Fulghum explains how the world would be improved if adults would apply the lessons taught in kindergarten – one of which is “clean up your own mess”.

Clean up your own mess!  That’s something that most, if not all of us have heard from childhood and beyond (assuming you’re not living alone).  It makes sense in so many ways – you made the mess, now clean it up!  And there is an element of fairness – Others shouldn’t have to clean up your mess; you should!  I think most would agree with this.

In our world today, we have energy industries that are drilling for oil and mining coal, and we, as consumers are using these products to stay warm, plug in our appliances, and get around.  One of the by-products from this oil-burning and coal-burning energy we all enjoy is air pollution (which we can see) and CO₂ (which we can’t see but we can read about and understand).  As you probably know, CO₂ is the major contributor to global warming – largely because it goes into the atmosphere and stays there a long time.  It causes the earth to heat up because it acts like a greenhouse shield and traps the heat.  The accumulation of CO₂ – because we’re creating so much more of it now than in the past – is causing an increase in the earth’s temperature – which, if left unchecked – will have a terrible impact on our weather patterns, our ability to grow crops, the extinction of plants and animals, significant human migration because people can’t survive where they currently live, rising sea levels — chaos, to put it mildly.  (For a more complete and somewhat technical explanation of this, see my blogs, How’s Planet Earth Doing? and How’s Planet Earth Doing, Part 2?) . 

If we believe what virtually all scientists report, and we want to avoid devastating environmental conditions in the next 30 or so years, and we think of CO₂ as the “mess” that needs to be cleaned up, who should do it?  Maybe the energy companies – they extracted the stuff and burned it to create all the CO₂.  But wait, these companies only created what consumers want – namely energy.  Maybe we consumers should be responsible for the clean up – we bought and used all the energy that created all this CO₂. 

Seems to me, there are a lot of fingers that could be pointed about “who’s responsible for this mess”.  But one thing that I believe is that regardless of who’s responsible for our current situation, there is a “cost” to the world, namely all the CO₂ that is being created, that isn’t being paid for by anybody!

Here’s a hypothetical case.  Say there’s a restaurant located on a nice lake – and they serve wonderful food – and everyone likes the place.  But say this restaurant dumps all its trash in the lake and over time, the lake becomes polluted and people who previously enjoyed fishing or boating or swimming in the lake now find it disgusting because of all the trash that the restaurant dumped.   The restaurant claims they were able to provide lower prices for their meals because they didn’t have to pay a disposal company to take care of their waste – they simply dumped it into the lake, which was cheaper.  So the customers benefited from lower food costs, only to later learn they were indirectly soiling their own lake.  To me, this is what the energy companies (and we consumers) have been doing – enjoying the benefits of cheap energy without regarding the down-the-road-costs associated with the by-products (such as CO₂).

This brings me to “Carbon Pricing” – one of many terms that address how to use market forces to pay for the environmental impacts – particularly global warming – that CO2 is creating. As Marvin Gaye would say, “What’s Going On”. Some of the leaders of the world’s major oil producers recently attended a climate summit with the Pope at the Vatican and committed to supporting “economically meaningful” carbon pricing.  Pope Francis has personally appealed to this group to avoid “perpetrating a brutal act of injustice against the poor and future generations.”  Apparently, the Pope got their attention and this meeting and commitment is an encouraging development.  

The backdrop for these energy companies, however, is that they have conflicting issues with their shareholders.  Researchers have calculated that an additional 986 gigatons of CO₂ can be released over the next 50 years and still keep the earth’s temperature below the level that will create terrible consequences.  Energy companies, however, have promised their shareholders profits using known reserves equivalent to 1,541 gigatons – assuming they explored no more – but they have pledged to spend billions more in exploration.  So understand, as energy companies make pledges to “commit to protecting the planet”, these pledges are in conflict with the promises they are making to their shareholders.

So how would carbon pricing, if implemented work?  One approach is referred to as “Carbon Fee and Dividend”. Basically, it would establish a fee levied on the producer (e.g., the energy company) based on the carbon content of the fuel being burned.  That fee (e.g., $15 per equivalent CO₂ ton) would be added to the fuel product.  For example, a $15 /ton fee would translate into a 7% increase in the cost of gasoline.  Other fuels would be different, based on their carbon content with coal being one of the higher ones.  Click this link for a more detailed explanation and calculator examining various fuels and fee levels. 

Over time, these fees would progressively increase and thereby provide known and predictable incentives to energy producers and consumers to move to fuels that generated less carbon.  As gasoline prices increased, people would shift to cars with better fuel efficiency and power companies would similarly shift to more renewable sources.

Over the years there have been several plans along these lines introduced in Congress, the most recent bipartisan version is entitled “Energy Innovation and Carbon Dividend Act of 2019“, H.R. 763.  This proposed bill contains: (1) a Carbon Fee levied on fuels based on the amount of carbon they generate; (2) a Carbon Dividend funded by the Fee which, after administrative costs, is refunded to the public; (3) a Carbon Border Adjustment applied to our international trading partners to ensure fair pricing with countries having similar rules; and (4) a limited regulatory adjustment offering businesses certainty by placing a pause on new EPA regulations on greenhouse gases. That pause would remain in place so long as emissions-reduction targets are achieved.

It’s important to remember what happens to all the money collected from these fees.  Unlike a tax, the proceeds from these fees, less administrative costs, would be returned to the American people. By reducing your individual consumption of carbon-related fuel, your dividend should be greater than the added fees you pay. The intended effect of this approach is to recognize the true costs associated with the carbon-related fuel and incorporate that price into our market-based economy (i.e., pay for what you use).  The idea is that over time, non-carbon based energy sources (e.g., wind, solar) would be preferable to more costly carbon-based sources and, using market forces, CO₂ (waste) would be reduced.   

If enacted, H.R. 763 is expected to reduce U.S. emissions at least 40 percent over 12 years and 90 percent by 2050. Health improvements would be realized by reducing pollution and Americans who take advantage of using less fuel would realize a financial benefit. It is designed to be revenue-neutral, and unlike other regulatory approaches, should not increase the size of the government. The act is expected to create 2.1 million jobs in 10 years and has both Republican and Democrat co-sponsors. This act enjoys a broad range of support, including most oil super majors, conservative leaders such as James A. Baker III and Rex Tillerson, a range of environmental groups and progressive thought leaders.

With the current congressional makeup, it is unlikely H.R. 763 can become law, but it offers a vehicle on which policy issues could be debated. It’s up to us, citizens and voters, to find out where our representatives and senators stand regarding this or similar legislation.  We can (and should) write our representatives and senators and find out their position on this bill and global warming.  (I have.) Based on their responses, we can determine whether or not our elected representatives are committed to addressing global warming or are “blowing smoke”.  We know the longer we wait to address these issues, the more difficult it will be to solve them.  

Our children and our grandchildren are counting on us and expect that we’ll put into practice what we learned in kindergarten, “clean up your own mess”.