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A Conservative Answer to Climate Change

George P. Shultz and James A. Baker III in a WSJ editorial (paywall) yesterday: 

The risks associated with future warming are so severe that they should be hedged.

The responsible and conservative response should be to take out an insurance policy. Doing so need not rely on heavy-handed, growth-inhibiting government regulations. Instead, a climate solution should be based on a sound economic analysis that embodies the conservative principles of free markets and limited government.

We suggest a solution that rests on four pillars. First, creating a gradually increasing carbon tax. Second, returning the tax proceeds to the American people in the form of dividends. Third, establishing border carbon adjustments that protect American competitiveness and encourage other countries to follow suit. And fourth, rolling back government regulations once such a system is in place. [...]

A carbon dividends policy could spur larger reductions in greenhouse-gas emissions than all of President Obama’s climate policies. At the same time, our plan would strengthen the economy, help working-class Americans, and promote national security, all while reducing regulations and shrinking the size of government. [...]

Perhaps most important, the carbon-dividends plan speaks to the increasing frustration and economic insecurity experienced by many working-class Americans. The plan would elevate the fortunes of the nation’s less-advantaged while strengthening the economy. A Treasury Department report published last month predicts that carbon dividends would mean income gains for about 70% of Americans. [...]

Controlling the White House and Congress means that Republicans bear the responsibility of exercising wise leadership on the defining challenges of our era. Climate change is one of these issues. It is time for the Grand Old Party to once again lead the way.

This is exactly what the United States, and the world, needs right now — a sound market-based solution to attach a cost to the damage caused by carbon emissions. The plan isn't new or uniqiue, but it is the first time, that I'm aware of, that prominent members (Schultz and Baker were joined by Martin Feldstein, Henry Paulson Jr., Gregory Nakiew, Ted Halstead, Tom Stephenson, and Rob Walton) of the Republican Party have advocated for it.

We suspect that the plan will receive the cold shoulder from the Trump Administration, given Trump's denial of climate change and his promise to bring back coal jobs, but it is a significant start. The sooner plans like this one are adopted globally, the lower the magnitude of damage we will cause to our long-term economic growth and prosperity.