Revkin speculates that Barnes’ proposal is a way to break the deadlock stopping climate change legislation.

I think he may be right. Tax emissions. (Or cap them and auction permits.) Refund the revenue to everybody. It has the following political advantages:

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  • It is simple and easy to understand.
  • It puts a price on emissions without really penalizing anybody. It is a no-hair-shirt solution.

This last point is worth emphasizing. It does not punish consumers, because the increased prices they pay are made up for by the dividend check. It does not really punish fossil fuel companies, because the tax they pay gets passed along to customers who have new money to pay those increased prices. Of course, fossil fuel companies do lose, as people use less of their product, but that is not punishment; it is an inevitable result of their selling a product whose side effects can no longer be tolerated. Since it will take time to phase out fossil fuels, oil and coal companies are free to use the time tax-and-dividend gives them to make the transition to other businesses, perhaps by expanding the investments they have already made in wind and solar.

I’m going to post soon on why I think the people who think tax-and-dividend (or any mechanism depending on price) can be the sole, or even main, solution are wrong. Price is insufficient by itself; public investment and rule-based regulation have to remain the primary solutions. But price is not avoidable as part of the solution.

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