Get Ready to Collect Carbon Dividends

I live in the sometimes-beautiful city of Baltimore, Maryland.

We’re the city that brought you Billie Holiday, Thurgood Marshall, Babe Ruth, and Frederick Douglass. We’re known for our crab cakes, our football and baseball teams, and our charming Inner Harbor.

But another thing we were known for is fading into the past — thankfully.

You see, up until last year, even with the Ravens and Orioles calling Charm City their home, our mascot was the rat.

They were everywhere. You couldn’t walk down a street in the evening without stumbling over one. I even had one particularly cheeky little bugger run right across my foot one night.

But the city is finally making moves to get rid of its furry residents.

Last year, every household in the city was given a shiny new trash can. I’m sure our property taxes went to pay for them, but hey, at least they’re paying for something we’ll use for once.

Anyway, these trash cans have an ingenious device on them, and it’s helping Baltimore get rid of our rats. It’s called a lid. And it’s keeping the trash under wraps.

Seems simple, right? And it is. But the main reason we’ve had such a big rat population is because we took such good care of them. The alleys the night before trash day were a veritable smorgasbord for the little devils.

But that’s started to change. You see, along with the new trash cans, the city stepped up fines for residents who put out their trash uncovered.

They gave us a carrot with the trash cans and a little stick with the increased fines.

And it’s working. I see less litter blowing around on windy days, and, most importantly, I haven’t seen one rat in my alley yet this summer.

I’m sure I just jinxed myself there, but still, it’s nearly July, and not one rat? That’s got to be a record.

My point is, the city gave us a solution in the trash cans, and it gave us a reason to take part by doling out more fines if we don’t.

And it’s working.

Dealing with the Rats of Climate Change

Earlier this year, several prominent Republican statesmen came up with a plan to fight climate change.

The group includes former Secretaries of State James Baker and George Shultz and ex-Treasury Secretary Hank Paulson. It also has support from renowned scientist Stephen Hawking and former New York City mayor Michael Bloomberg.

The group refers to itself as the Climate Leadership Council. And it’s calling for a carbon tax to encourage heavy greenhouse gas emitters to switch to renewable sources of energy.

A Plausible Solution

The group proposes a $40 tax on each ton of carbon dioxide emitted and suggests that the proceeds of the tax be redistributed to individual taxpayers on a quarterly basis.

They figure a family of four will get back about $2,000 in the first year of the tax alone. And the tax would rise over time. So, that figure would grow until companies bite the bullet and clean up their act.

If this proposal were to become law, the U.S. would join a list of 40 other countries that either have or will soon have a price on carbon.

We’re not just talking about Western countries here, either. Yes, most of Europe is on that list. But it also includes South Africa and China.

China! One of the most notorious polluters in the world beat us to the punch.

That’s a little embarrassing. Especially when some politicians have blamed lenient restrictions on China as reasons for backing away from international climate accords like in Kyoto and Paris.

Major Support

Former ExxonMobil CEO (and current Secretary of State) Rex Tillerson is a fan. He said back in 2009 that he felt a carbon tax was the way to go if we want to get companies to help fight climate change.

And this Tuesday, the plan got some more serious backing. Executives at Royal Dutch Shell, BP, Total, and even the new head honcho at Exxon are onboard, too.

That adds them to the growing list of companies supporting this “free-market, limited-government” solution to climate change. It already included such behemoths as Unilever, PepsiCo, General Motors, and Johnson & Johnson, plus several green groups such as Conservation International and The Nature Conservancy.

Suicide by Conservation

But the reaction to their support has been pretty mixed.

I, for one, commend them. I mean, if you want a company to change, you’ve got to find a way to hurt its bottom line. If you can make it more expensive to pollute, then you can get it to stop polluting. Or at least get it to slow it down some.

It’s like I said about the rat problem here in Baltimore. The city gave residents a way to fight it and a penalty for adding to the problem. Now there are no rats in my alley.

The same thing can work with a company. Show the company it’s more expensive for it to burn fossil fuels and pump out CO2. You’ll find it’s probably going to make some changes to the way it operates.

And if we really want to stem climate change, we need big companies to get with the program, too. It’s not going to be a bunch of people walking to work or using more efficient lighting that makes the big difference.

It’s going to be massive operations changing the way they do business. It’s going to have to be led by the biggest companies (and biggest greenhouse gas emitters).

But some people are calling the oil companies “suicidal” for supporting this tax. They’re saying the companies that must pay the tax will pass it on down the line to consumers.

That’s probably going to be the case. It’s pretty much what happens whenever we add more taxes to corporations. They increase the price of their products to offset the extra costs they’ll face from the tax.

These opponents are also saying there’s no way consumers are going to stand for a new tax being passed on to them. But I disagree there.

For one, when you talk about taxing companies, a lot of people forget the tax rolls downhill. And two, the tax refunds expected to come from the plan should offset any increases in price we have to pay.

In fact, the proponents of this tax idea have a report that shows the additional cost will be more than covered by these “tax dividends” we’ll get each quarter from the proceeds of the fines.

The report states that these “carbon dividends will increase the disposable income of the majority of Americans while disproportionately helping those struggling to make ends meet.”

And before you call them handouts, the dividends aren’t just going to be given away willy-nilly. They’re going to be earned by minimizing our carbon footprints. The more you reduce, the more you get paid.

And the more you reduce, the fewer products you’re buying with that extra carbon tax rolled into the price.

The only issue I’ve got is that it would also roll back any carbon controls the government already has. That doesn’t sound so great.

But when you consider that the Clean Power Plan is slated for repeal already with no alternative being proposed, at least it’s something.

And it’s something that seems like it could actually work to get the biggest carbon emitters to cut back and find green solutions to their energy needs.

Who knows? With a bunch of senior Republican backers, it might even make some headway in D.C.

I’d like to hear your thoughts. So, make use of the comments section or send me an email at customerservice@angelpub.com.

The Future is Coming

Whether you support the proposed carbon tax or not, you’ve got to admit that the future of energy is going to be green.

Fossil fuels are a limited resource. The sun is not. Wind is not. The motion of the ocean is not.

As my colleague Jeff Siegel pointed out earlier this week, there’s a lot of money to be made for investors who see the writing on the wall.

You can start getting yourself and your portfolio ready with some of our premium newsletters. Jeff has some great recommendations for socially responsible investing.

Me and my co-editor Briton Ryle have a trifecta of picks for our readers. Now they’re set up to profit from the rise of green energy and the fall of the current utility industry at the same time.

However you choose to base your investments (and however this carbon tax proposal pans out), you won’t regret getting some solid green energy companies in your portfolio.

And you haven’t missed out on even half of the gains this industry’s going to see in the coming years.

To investing with integrity (and an eye toward the future),

Jason Williams
Energy and Capital

Follow me on Twitter @AllBeingsEqual