Magnificent Marvel Supersale

Special Offers see all

Enter to WIN a $100 Credit

Subscribe to
for a chance to win.
Privacy Policy

Visit our stores


Authors, readers, critics, media — and booksellers.


Who’ll Pay for Climate Stability?

Every public policy has winners and losers. Sometimes it's obvious who those are, but more often, it takes some digging to understand how the money flows.

The typical way special interests get money from government is through subsidies and tax breaks. In those cases, all taxpayers pay, and favored companies gain.In those cases, all taxpayers pay, and favored companies gain.

Subsidies and tax breaks are very much on the table in climate policy debates. But the climate crisis presents several other ways for businesses to enrich themselves at public expense, and citizens must watch carefully.

For example, one proposal to cap carbon emissions would give polluting companies free emission permits worth billions of dollars. Other proposals would create a loosely regulated system of carbon offsets that would help traders profit, but add little public benefit.

The big economic question in climate policy is whether polluters should pay or be paid. If carbon permits are given free to historical polluters, energy prices will rise and we'll all pay more to whoever gets the permits. That wealth transfer — which over time could exceed a trillion dollars — will flow straight from our pockets to the shareholders of polluting companies.

If rewarding polluters is the wrong way to go, the right way is to make them pay.If rewarding polluters is the wrong way to go, the right way is to make them pay. That requires a well-designed system.

Taxes vs. caps

Economists agree that, one way or another, we must raise the price of dumping carbon into the atmosphere. The debate is about how to do that.

A carbon tax is one way. Initially, fuel companies would pay the tax and government would get the revenue. But fuel companies would pass the tax on to consumers, so in the end, a carbon tax is like a sales tax on necessities. As such, it's a regressive tax — that is, the lower your income, the bigger the bite a carbon tax takes.

A carbon cap is an indirect way to charge for dumping carbon dioxide into the atmosphere.A carbon cap is an indirect way to charge for dumping carbon dioxide into the atmosphere. It puts a physical limit — a cap — on the supply of fossil fuels or the quantity of carbon dioxide emissions. To implement the cap, the government issues a gradually declining number of permits. As the supply of permits declines, the price of carbon rises. Since this price is ultimately paid by consumers, a carbon cap is as regressive as a carbon tax.

How much will a carbon tax or cap cost the average household? According to the Congressional Budget Office, when the cap is 15 percent below the current level of emissions, the average U.S. household will pay $1,160 a year in higher energy prices. As the cap goes down from there, the cost to households goes up. A tax that achieves the same reductions would cost as much.

That's no small burden to be adding to the already tight budgets of American familiesThat's no small burden to be adding to the already tight budgets of American families — it will pinch not just the poor, but the entire middle class. And it could dampen consumer buying power just when the U.S. economy needs a boost.

Fortunately, there's a way to offset this hit on household incomes — it's what economists call 'revenue recycling.' The idea is to return to households, in aggregate, the extra money they'll pay when carbon prices go up. Some households will pay more in higher prices than they get back, while others will pay less, but overall, household incomes will be maintained.

Most economists agree that revenue recycling in some form is a good idea.

Among political figures, Al Gore has come out squarely for it. "We need to put a price on carbon," Gore said in his Nobel acceptance speech, "with a tax that is rebated back to the people progressively." His preferred recycling method is to refund a portion of workers' payroll taxes.

A better way to recycle carbon revenue is to do what Alaska does with proceeds from its oil leases — pay equal dividends to all residents. This would cover everyone who pays higher energy prices, not just wage earners who pay payroll taxes.This would cover everyone who pays higher energy prices, not just wage earners who pay payroll taxes. Refunding only those who pay payroll taxes would leave out retired people, young people, stay-at-home parents, workers in the informal economy, and half the poorest people in America.

By returning higher carbon prices to all Americans equally, we'd have a system in which everyone pays to pollute, but conservers come out ahead. People who drive big cars and heat large homes would pay more in higher energy prices than people who ride buses and live in small apartments. Since all would get the same amount back, conservers would gain and guzzlers would lose. Green behavior would be rewarded while polluting behavior is penalized.

I'll say more about Alaska-style dividends in my next post. Suffice it to say here that a cap-and-dividend system would be the simplest, fairest and most effective way to solve the climate crisis — and the most politically popular way as well.

÷ ÷ ÷

The author of Climate Solutions, Peter Barnes is an entrepreneur and writer who has founded and led several successful companies. His previous books include Who Owns the Sky?: Our Common Assets and the Future of Capitalism and Capitalism 3.0.

Books mentioned in this post

Peter Barnes is the author of Climate Solutions: What Works, What Doesn't, and Why: A Citizen's Guide (Chelsea Green Guides)

2 Responses to "Who’ll Pay for Climate Stability?"

    TROUBLED AMERICAN February 27th, 2008 at 12:33 pm

    Don’t believe one optimistic word from any public figure about the economy or humanity in general. They are all part of the problem. Its like a game of Monopoly. In America, the richest 1% now hold 1/2 OF ALL UNITED STATES WEALTH. Unlike ‘lesser’ estimates, this includes all stocks, bonds, cash, and material assets held by America’s richest 1%. Even that filthy pig Oprah acknowledged that it was at about 50% in 2006. Naturally, she put her own ‘humanitarian’ spin on it. Calling attention to her own ‘good will’. WHAT A DISGUSTING HYPOCRITE SLOB. THE RICHEST 1% HAVE LITERALLY MADE WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. Don’t fall for all of their ‘humanitarian’ CRAP. ITS A SHAM. THESE PEOPLE ARE CAUSING THE SAME PROBLEMS THEY PRETEND TO CARE ABOUT. Ask any professor of economics. Money does not grow on trees. The government can’t just print up more on a whim. At any given time, there is a relative limit to the wealth within ANY economy of ANY size. So when too much wealth accumulates at the top, the middle class slip further into debt and the lower class further into poverty. A similar rule applies worldwide. The world’s richest 1% now own over 40% of ALL WORLD WEALTH. This is EVEN AFTER you account for all of this ‘good will’ ‘humanitarian’ BS from celebrities and executives. ITS A SHAM. As they get richer and richer, less wealth is left circulating beneath them. This is the single greatest underlying cause for the current US recession. The middle class can no longer afford to sustain their share of the economy. Their wealth has been gradually transfered to the richest 1%. One way or another, we suffer because of their incredible greed. We are talking about TRILLIONS of dollars. Transfered FROM US TO THEM. Over a period of about 27 years. Thats Reaganomics for you. The wealth does not ‘trickle down’ as we were told it would. It just accumulates at the top. Shrinking the middle class and expanding the lower class. Causing a domino effect of socio-economic problems. But the rich will never stop. They will never settle for a reasonable share of ANYTHING. They will do whatever it takes to get even richer. Leaving even less of the pie for the other 99% of us to share. At the same time, they throw back a few tax deductable crumbs and call themselves ‘humanitarians’. IT CAN’T WORK THIS WAY. This is going to end just like a game of Monopoly. The current US recession will drag on for years and lead into the worst US depression of all time. The richest 1% will live like royalty while the rest of us fight over jobs, food, and gasoline. Crime, poverty, and suicide will skyrocket. So don’t fall for all of this PR CRAP from Hollywood, Pro Sports, and Wall Street PIGS. ITS A SHAM. Remember: They are filthy rich EVEN AFTER their tax deductable contributions. Greedy pigs. Now, we are headed for the worst economic and cultural crisis of all time. SEND A “THANK YOU” NOTE TO YOUR FAVORITE MILLIONAIRE. ITS THEIR FAULT. I’m not discounting other factors like China, sub-prime, or gas prices. But all of those factors combined still pale in comparison to that HUGE transfer of wealth to the rich. Anyway, those other factors are all related and further aggrivated because of GREED. If it weren’t for the OBSCENE distribution of wealth within our country, there never would have been such a market for sub-prime to begin with. Which by the way, was another trick whipped up by greedy bankers and executives. IT MAKES THEM RICHER. The credit industry has been ENDORSED by people like Oprah, Ellen, Dr Phil, and many other celebrities. IT MAKES THEM RICHER. So don't fall for their 'good will' BS. ITS A LIE. If you fall for it, then you're a fool. If you see any real difference between the moral character of a celebrity, politician, attorney, or executive, then you're a fool. WAKE UP PEOPLE. The 1% club will always say or do whatever it takes to get as rich as possible. Without the slightest regard for anything or anyone but themselves. Vioxx. Their idea. Sub-prime. Their idea. NAFTA. Their idea. Outsourcing. Their idea. The commercial lobbyist. Their idea. The multi-million dollar lawsuit. Their idea. $200 cell phone bills. Their idea. $200 basketball shoes. Their idea. $30 late fees. Their idea. $30 NSF fees. Their idea. $20 DVDs. Their idea. Subliminal advertising. Their idea. The MASSIVE campaign to turn every American into a brainwashed credit card, pharmaceutical, love-sick, celebrity junkie. Their idea. All of which concentrate the world's wealth and resources and wreak havok on society. All of which have been CREATED AND ENDORSED by celebrities, athletes, and executives. IT MAKES THEM RICHER. So don’t fall for their ' good will' ‘humanitarian’ BS. ITS A SHAM. NOTHING BUT TAX DEDUCTABLE PR CRAP. Bottom line: The richest 1% will soon tank the largest economy in the world. It will be like nothing we’ve ever seen before. and thats just the beginning. Greed will eventually tank every major economy in the world. Causing millions to suffer and die. Oprah, Angelina, Brad, Bono, and Bill are not part of the solution. They are part of the problem. EXTREME WEALTH HAS MADE WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. WITHOUT WORLD PROSPERITY, THERE WILL NEVER BE WORLD PEACE OR ANYTHING EVEN CLOSE. GREED KILLS. IT WILL BE OUR DOWNFALL. Of course, the rich will throw a fit and call me a madman. Of course, their ignorant fans will do the same. You have to expect that. But I speak the truth. If you don’t believe me, then copy this entry and run it by any professor of economics or socio-economics. Then tell a friend. Call the local radio station. Re-post this entry or put it in your own words. Be one of the first to predict the worst economic and cultural crisis of all time and explain its cause. WE ARE IN BIG TROUBLE.

    Igor Ocash February 28th, 2008 at 9:56 am

    Yesterday, in an outstanding and rare moment of truthfulness, the mainstream media reported that measurements taken over the last year indicate between a .45 and .75 degree Centigrade *DROP* in global average temperatures - a change sufficient to erase the last 100 years of (alledged) "global warming".

    I'm wondering how you cope with adverse data like this - or do micro-climatic events only take on significance if they support your prejudices?

Post a comment:

Get Your Gravatar

  1. Please note:
  2. All comments require moderation by staff.
  3. Comments submitted on weekends might take until Monday to appear.
PowellsBooks.Blog uses Gravatar to allow you to personalize the icon that appears beside your name when you post. If you don't have one already, get your Gravatar today!
  • back to top


Powell's City of Books is an independent bookstore in Portland, Oregon, that fills a whole city block with more than a million new, used, and out of print books. Shop those shelves — plus literally millions more books, DVDs, and gifts — here at