Readers Write (April 10): Paying for pollution, executive compensation

Mike Meyers' commentary "You pollute, you pay" (April 3) started to get personal.

And I liked it. He called me out, the owner of a 1999 F-150 Ford pickup that ironically logs 10,000 fewer miles per year than the average Prius owner. Coincidental to Meyers' article, I also grew up directly across the street from Nobel Prize winner Leonid Hurwicz. Thanks to Meyers, I now know the valuable role of his economics, and the work of the Heller-Hurwicz Economics Institute in convening the 2014 international forum to calculate the cost of climate change.

Climate-change doubters, as Meyers suggests, might be unable to give science a chance, but he writes anyway, hopeful that the money will talk some sense. I predict that Meyers' truckers and Bible-thumpers will read only his headline and remain inattentive to two sciences. That's why the issue of climate change must now get much more personal. It's time to call out — one by one — our elected ones. Those who control the people's money.

Prudent spending and economic efficiencies are the bread and butter of sound fiscal conservatism. The forum calculated economic savings for action now on climate change at roughly 100 times the initial cost, and it calculated an approximate 100-fold loss for inaction. Against all economic sense, inaction is the current fiscally conservative political posture.

I have submitted my membership in the F-150 club for public scrutiny.

Voters should have access to scrutinize the climate allegiances of all 535 of our representatives. In the face of legislative gridlock, and given the economic conclusions, we need the voter list, a personal accounting from each member of Congress: "Are you for or against the economic conclusions of the international forum?"

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Meyers' assessment of climate change is correct, but he underestimates the will of the U.S. Congress to take action.

In February, Florida Reps. Carlos Curbelo, a Republican, and Theodore Deutch, a Democrat, filed paperwork to create the "Climate Solutions Caucus." This bipartisan group in Congress will look at options to address climate change and will serve "to educate members on economically viable options to reduce climate risk and protect our nation's economy, security, infrastructure, agriculture, water supply, and public safety." There are currently six public members of this caucus.

One option they will study is a steadily increasing fee on carbon-based fuels with return of all revenue to U.S. households. This "carbon fee and dividend" approach is a step up from "cap and trade." It is easier to understand and implement, and provides a clearer signal to the market: Invest in renewables, because carbon-based fuels will only get more expensive.

Many governments are moving to price carbon, including those of Canada, China, Mexico, the European Union and South Africa. We look forward to bipartisan action from Congress on pricing carbon and joining the rest of the world to build a livable climate.

Meyers' commentary kicks off the real question with climate change: What policy solution will turn the real threat of climate change into an amazing American economic growth and job-creation opportunity?

Cap and trade is one form of pricing carbon that will work, but there is a lot of bureaucracy that goes with it. Thus, I advocate for a policy that has been proposed by President Ronald Reagan's secretary of state, George Schultz. It's called carbon fee and dividend.

The policy is super-simple and fits on the front and back of a single sheet of paper. First, place a steadily rising fee on fossil fuels (coal oil and gas). Second, give all of the revenue from the carbon fee back to households. Third, use border adjustments to discourage business relocation.

Regional Economic Modeling Inc. (REMI) did a nationwide economic study on the impact of this plan. It found that the plan would create 2.8 million jobs over the next 20 years; improve our air quality, avoiding 230,000 premature deaths, and reduce our carbon emissions by more than 50 percent from 1990 levels. All of this and zero growth in government.

There is not an economic argument against the Schultz policy, which makes the next steps easy. Republicans agree to vote in favor of it, and, in exchange, Democrats agree to repeal the EPA's Clean Power Plan. Congress passes it, and President Obama signs it into law.

British Columbia uses a carbon-fee-and-dividend model, not cap and trade, as was described. Cap and trade is an inferior model requiring substantial bureaucracy. It doesn't price carbon directly, but only attempts to limit supply. The offset credits can create a market rewarding perverse incentives where no real reduction in CO2 is achieved, but gives carbon traders and offset investors huge profits. Utilities and manufacturers pass on their increased costs to consumers, sticking them with the bill.

In contrast, a carbon fee is applied at the mine or well. In the U.S., there are only 1,200 to 1,500 mines, oil wells and gas wells. The bureaucracy would be minimal. It lets the market decide on the choice of technology. Then command-and-control efforts like Energy Department efficiency standards are not required, nor subsidies, nor regulations.

Wealthy Americans use three to four times as much carbon-based energy as poor Americans. A revenue-neutral carbon fee that returns all the money it raises to households in equal amounts would benefit poor Americans more than wealthy ones.

Here's one way it could work. Gas is the most price-inelastic commodity in our economy. A 1 percent to 2 percent change in demand can change the price by 50 to 70 cents gallon. Imagine a fee that raises the price by $1.25 a gallon, which reduces demand by 5 percent, where the market then reduces the price by $1.25. The final price has not changed, and the dividend of $ 1.25 a gallon is still paid!

In summary, cap and trade is a 1 percent idea. Carbon fee and dividend is a 99 percent idea.

Remember when Mitt Romney showed his returns indicating a 15 percent tax rate? He, like many executives, pays a high tax rate on any salary up to $1 million annually (which the politicians complain is too high), while paying barely half of that high rate on tens of millions in stock-award and stock-option gains through our capital-gains tax rules. Reasonable people can disagree about dealing with income inequality, but we all want a fair tax policy. Capital-gains tax rates on stock-market gains need to be raised to the same level as wages and salaries so everyone pays their fair share of taxes regardless of their income source.

The old theory that the capital-gains tax should spur investment has allowed the current inequity to continue. Of course, I won't hold my breath to see if a presidential candidate of either party takes on this inequity in our tax code.