I have a two-year-old daughter named Naya who is under the mistaken impression that this conference is named in honor of her father. Who am I to contradict my baby girl?
As many of you know, there's something about becoming a parent that concentrates the mind on long-term problems like climate change. It was the birth of my daughter that inspired me to launch this climate organization, in order to counteract the excessive polarization of this issue in the United States, and to find a conservative pathway forward. Yes, folks, a Republican climate solution is possible, and you know what? It may even be better. Let me try to prove that to you.
What we really need is a killer app to climate policy. In the technology world, a killer app is an application so transformative that it creates its own market, like Uber. In the climate world, a killer app is a new solution so promising that it can break through the seemingly insurmountable barriers to progress. These include the psychological barrier. Climate advocates have long been encouraging their fellow citizens to make short-term sacrifices now for benefits that accrue to other people in other countries 30 or 40 years in the future. It just doesn't fly because it runs contrary to basic human nature.
Next is the geopolitical barrier. Under the current rules of global trade, countries have a strong incentive to free ride off the emissions reductions of other nations, instead of strengthening their own programs. This has been the curse of every international climate negotiations, including Paris. Finally, we have the partisan barrier. Even the most committed countries—Germany, the United Kingdom, Canada—are nowhere near reducing emissions at the required scale and speed. Not even close. And the partisan climate divide is far more acute here in the United States. We are fundamentally stuck, and that is why we need a killer app of climate policy to break through each of these barriers.
I'm convinced that the road to climate progress in the United States runs through the Republican Party and the business community. So in launching the Climate Leadership Council, I started by reaching out to a who's who of Republican elder statesmen and business leaders, including James Baker and George Schultz, the two most respected Republican elder statesmen in America; Martin Feldstein and Greg Mankiw, the two most respected conservative economists in the country; and Henry Paulson and Rob Walton, two of the most successful and admired business leaders. Together, we co-authored "The Conservative Case For Carbon Dividends." This represents the first time that Republican leaders put forth a concrete market-based climate solution.
We presented our plan at the White House two weeks after President Trump moved in. Almost every leading editorial board in the country has since endorsed our plan, and Fortune 100 companies from a wide range of industries are now getting behind it. So by now you're probably wondering, what exactly is this plan?
Well, our carbon dividends solution is based on four pillars. The first is a gradually rising carbon tax. Although capitalism is a wonderful system, like many operating systems, it's prone to bugs, which, in this case, are called "market failures." By far the largest is that market prices fail to take social and environmental costs into account. That means every market transaction is based on incorrect information. This fundamental bug of capitalism, more than any other single factor, is to blame for our climate predicament.
Now in theory, this should be an easy problem to fix. Economists agree that the best solution is to put a price on the carbon content of fossil fuels, otherwise known as a carbon tax. This would discourage carbon emissions in every single economic transaction, every day of the year. However, a carbon tax by itself has proven to be unpopular and a political dead end. The answer is to return all the money raised directly to citizens, in the form of equal monthly dividends. This would transform an unpopular carbon tax into a popular and populist solution, and it would also solve the underlying psychological barrier that we discussed, by giving everyone a concrete benefit in the here and now.
And these benefits would be significant. Assuming a carbon tax rate that starts at 40 dollars per ton, a family of four would receive 2,000 dollars per year from the get-go. According to the US Treasury Department, the bottom 70 percent of Americans would receive more in dividends than they would pay in increased energy prices. That means 223 million Americans would win economically from solving climate change. And that—is revolutionary, and could fundamentally alter climate politics.
But there's another revolutionary element here. The amount of the dividend would grow as the carbon tax rate increases. The more we protect our climate, the more our citizens benefit. This creates a positive feedback loop, which is crucial, because the only way we will reach our long-term emission-reduction goals is if the carbon tax rate goes up every year.
The third pillar of our program is eliminating regulations that are no longer needed once a carbon dividends plan is enacted. This is a key selling point to Republicans and business leaders. So why should we trade climate regulations for a price on carbon? Well, let me show you. Our plan would achieve nearly twice the emissions reductions of all Obama-era climate regulations combined, and nearly three times the new baseline after President Trump repeals all of those regulations. That assumes a carbon tax starting at 40 dollars per ton, which translates into roughly an extra 36 cents per gallon of gas. Our plan by itself would meet the high end of America's commitment under the Paris Climate Agreement, and as you can see, the emissions reductions would continue over time. This illustrates the power of a conservative climate solution based on free markets and limited government. We would end up with less regulation and far less pollution at the same time, while helping working-class Americans get ahead. Doesn't that sound like something we could all support?
The fourth and final pillar of our program is a new climate domino effect, based on border carbon adjustments. Now that may sound complicated, but it, too, is revolutionary, because it provides us a whole new strategy to reach a global price on carbon, which is ultimately what we need. Let me show you an example. Suppose Country A adopts a carbon dividends plan, and Country B does not. Well, to level the playing field and protect the competitiveness of its industries, Country A would tax imports from Country B based on their carbon content. Fair enough. But here's where it gets really interesting, because the money raised at the border would increase the dividends going to the citizens of Country A. Well, how long do you think it would take the public in Country B to realize that that money should be going to them, and to push for a carbon dividends plan in their own land? Add a few more countries, and we get a new climate domino effect.
Once one major country or region adopts carbon dividends with border carbon adjustments, other countries are compelled to follow suit. One by one the dominoes fall. And this domino effect could start anywhere. My preference, strongly, is the United States, but it could also start in the United Kingdom, in Germany or another European country, or even in China.
Let's take China as an example. China is committed to reducing greenhouse gas emissions, but what its leaders care even more about is transitioning their economy to consumer-led economic development. Well, nothing could do more to hasten that transition than giving every Chinese citizen a monthly dividend. In fact, this is the only policy solution that would enable China to meet its environmental and economic goals at the same time.
That's why this is the killer app of climate policy, because it would enable us to overcome each of the barriers we discussed earlier: the psychological barrier, the partisan barrier, and, as we've just seen, the geopolitical barrier. All we need is a country to lead the way. And one method of finding what you're looking for is to take out an ad. So let's read this one together.
Wanted: country to pioneer carbon dividends plan. Cost to country: zero. Starting date: as soon as possible. Advantages: most effective climate solution, popular and populist, pro-growth and pro-business, shrinks government and helps the working class. Additional compensation: gratitude of current and future generations, including my daughter.
Just one question for you, Ted. I'm actually not sure I've seen a conservative get a standing O at TED before that. That's pretty cool. The logic seems really powerful, but some people you talk to in politics say it's hard to imagine this still getting through Congress. How are you feeling about momentum behind this?
So I understand that many are very pessimistic about what's happening in the United States with President Trump. I'm less pessimistic; here's why. The actions of this White House, the early actions on climate, are just the first move in a complex game of climate chess. So far it's been a repeal-only strategy; the pressure is going to mount for a replacement program, which is where we come in. And there are three reasons why, which I'll go through real quickly.
One, the business community is fundamentally parting ways with the White House on climate change. In fact, we're finding a number of Fortune 100 companies supporting our program. Within two months, we're going to be announcing some really surprising names coming out in favor of this program. Two, there is no issue in American politics where there's a more fundamental gap between the Republican base and the Republican leadership than climate change. And three, thinking of this analogy of chess, the big decision up ahead is: Does the administration stay in Paris? Well, let's pan it out both ways. If it stays in Paris, as many are pushing for in the administration, well then that begs a question: What's the plan? We have the plan. But if they don't stay in Paris, the international pressure will be overwhelming. Our Secretary of State will be asking other countries for NATO contributions, and they'll be saying, "No, give us our Paris commitment. Come through on your commitments, we'll come through on ours."
So, international, business and even the Republican base will all be calling for a Republican replacement plan. And, hopefully, we've provided one.
Thank you so much, Ted.
Thank you, Chris.