How the US could lead a global climate compact
The COVID-19 pandemic and recent climate disasters have hammered home the reality that nations are powerless to confront today’s global challenges alone. These crises require unifying national leadership and global collaboration rooted in a recognition of the science.
Climate policy in America has stalled because of a misunderstanding of the threat, partisanship and disagreements on what to do. International climate agreements have failed because nations that do not reduce emissions are not penalized. Meanwhile, our climate is changing rapidly and as a result we are experiencing more intense natural disasters (or rather unnatural disasters because of our impact on the climate). But if the United States chooses to sit out climate policy, we not only risk careening into an irreversible climate crisis, we also yield enormous influence over the global policy agenda to other powers.
China is seizing that opportunity: President Xi Jinping recently announced that China intends to reach carbon neutrality by 2060. The United States can still step up. Our research shows that U.S. climate action could lead to global climate action even without an international climate agreement.
By combining domestic climate policy with climate-based foreign policy, the U.S. can mobilize coalitions toward climate action while rebuilding the global economy.
There are two key steps: First, pass a carbon tax and dividend bill that unifies national support around a common goal during a historically divisive time. Then, form a “global climate compact” of nations committed to reducing carbon emissions by penalizing inaction. This can be a new start where America brings nations together to collaboratively transition to a sustainable future.
Step one: The U.S. Congress would pass a carbon tax and dividend plan before the end of 2021, putting a price of $25 on every metric ton of CO2. The tax would be collected at the source (a petroleum well head or coal mine), causing the price of carbon-based products to increase slightly. Gasoline at the pump would cost about 25 cents more per gallon. The tax would increase each year until 2030.
The government would not spend the revenue, but return every cent, except tax collection costs, to adult citizens in equal amounts every quarter. For about two-thirds of Americans, the dividends would exceed the carbon taxes embedded in their purchases, providing them with a net cash bonus at a time when many are struggling. The poorest would receive close to three times more than what they pay in carbon taxes.
This plan pushes consumption away from fossil fuels, as consumers shift to lower- or zero-carbon substitutes. Rising demand for these products would unlock the creative power of inventors, researchers and industrialists to develop sustainable solutions for a livable climate.
This approach is equitable, would create jobs and protect the environment through a sustainable and inclusive economic recovery — all without new government expenditures or expansion. Its simplicity would ensure transparency and prevent revenue from being diverted. While other policies are also needed, the carbon tax is the single most effective action the U.S. can take to move toward net-zero emissions by 2050.
Step two: A global climate compact would ensure that countries act jointly and aggressively to reduce carbon emissions. This approach is proposed by professor William Nordhaus of Yale Universityin his recent article in Foreign Affairs, “The Club Approach.” He describes why the Kyoto protocol and Paris agreement have failed: Countries sign on, do little, incur few costs yet reap climate benefits from other countries’ emission reductions.
Nordhaus demonstrates an alternative through his analysis. Countries determined to fight climate change would band together by placing an agreed minimum price on carbon along with penalty tariffs on countries that fail to do so. Free riding is no longer free. The compact would grow. By leading the global climate compact, the U.S. will ensure its economic competitiveness and technological dynamism while restoring collaboration and stability in a dividing world.
In “The Strategic Case for U.S.
Climate Leadership,” George Shultz, James Baker and Ted Halstead argue that countries pioneering transformative carbon-replacing technology will become the world-leading technology powers and set the new rules of the game that will govern global trade. Carbon pricing mechanisms are emerging around the world and could end up penalizing U.S. inaction. If it does not lead, the U.S. may be compelled to follow the rules others make.
The window of opportunity for the U.S. to step up is rapidly narrowing. This plan calls for the U.S. to lead global climate policy and assist in uniting a divided world to protect our shared home.
Roy Wehrle is emeritus professor of economics at the University of Illinois at Springfield; Don Wuebbles is the Harry E. Preble professor of atmospheric science at the University of Illinois; Francine van den Brandeler leads research and policy analysis on climate and water at Greenleaf Communities. They are co-authors of the report, “Addressing Climate Change Using a Carbon Tax and Dividend Plan Within a Global Climate Compact.”