With its upcoming acquisition of Cinergy, Duke Energy will be among the nation's largest coal-fired utilities. It may be surprising then that Duke Energy's chair-apparent, Paul Anderson, has taken such a maverick stance on the reality of climate change and the need to limit emissions of carbon dioxide to the atmosphere.
Not only has Anderson embraced the consensus view of the worldwide scientific community that global warming is real and human-caused, but he also has urged us to pursue potentially the most effective means to improve our energy-use efficiency and reduce carbon dioxide emissions -- a tax on carbon emissions.
Anderson correctly recognizes that the emissions of carbon dioxide stem from many sectors of society -- from power plants and other industrial sources and from you and me, as we heat and light our houses and drive our cars on daily errands. No one sector can solve the global warming problem by itself.
A carbon tax would be paid whenever a molecule of carbon dioxide is emitted to the atmosphere by burning fossil fuels. Utilities would pay it based on their smokestack emissions and pass the cost to consumers in their monthly electric bill. Each of us would pay it when we fill up with gasoline, based on the content of fossil carbon in the fuel.
A carbon tax would provide the maximum incentive for bright engineers to improve the efficiency of fossil fuel use in all sectors of society. It also would maximize the potential for important "cross-sector" transfers of efficiency. For instance, if engineers find efficient ways to reduce CO2 emissions from the power plants that provide our electricity, the utilities' carbon tax savings could be passed along to consumers.
The same principle might make it cheaper to operate an electric car than a gas-powered one. More of us would be motivated to buy electric cars, especially given the price of gasoline these days.
A carbon tax does not necessarily mean a net increase in our cost of living. Carbon tax revenues could be directed to general government expenditures, so that income tax rates could be reduced for all Americans -- or perhaps those at the lower income levels. Importantly, our current income tax structure provides no personal choice to reduce our tax; indeed, the more we earn, the more we pay on April 15.
A tax on carbon, which would show up in higher costs for electricity or gasoline, would provide an incentive for each of us to use energy more efficiently if we wanted to pay lower taxes.
Still want an SUV? Buy it, but each year you'll pay more for gasoline than your neighbor who has a Toyota Prius. Want to live in the country? Fine, but remember it will cost you to drive the extra miles to work each day. Want to save some money at home and send less to the taxman? Put on a warm sweater and lower your thermostat.
Conservation and efficiency must both play a role in our attempt to reduce dependence on dwindling production of foreign oil. A carbon tax provides an equal incentive for both pathways to be part of the solution.
In the absence of a coherent federal energy policy, various efforts are emerging in individual states to limit carbon dioxide emissions. These are important first steps, but consider the simplicity of a national energy policy based on a carbon tax that would maintain a level playing field in the economic environment across this country. My suspicion is that a national carbon tax will be the easiest way for the United States to participate in international efforts to curb CO2 emissions.
Without any national energy policy, the United States is rapidly losing an important role in the development of solar, wind and other alternative energies, like integrated gasification combined cycle. Also known as IGCC, this technology will allow power plants to make electricity from coal while capturing the carbon dioxide emissions that might otherwise lead to global warming. A carbon tax will make such energy sources competitive across this country, and spur new high-tech industries to develop them.
We need to be the world's technology leader of the 21st century, not a stubborn follower of our old inefficient ways. Paul Anderson is right: keep it simple. A tax on fossil carbon emissions is the way to go.