So the government collects money from the oil industry and the coal industry. What happens next?
You divvy it up. One person, one share. Equal dividends wired monthly like Social Security straight into your bank account. I would not make it part of the tax code. [Former Vice President Al] Gore has talked about a payroll tax rebate, and there are other proposals out there. That could work, but you'd only get it once a year, which, for many people who have monthly bills to pay, is not good enough. And also it tends to get lost. For political reasons, if nothing else, you want people to notice the fact that they're getting money back, because they're going to be mad as hell. They already are mad as hell with gas prices and everything going up. So if we're going to raise energy prices even more through a carbon policy, which we have to do, we need to remind people that we're also giving them back some of that money. The only way you can politically sustain higher energy prices is to recycle some of that revenue back to consumers. Would people still be motivated to use less energy?
It would be a virtuous incentive system. In other words, if you drive a Hummer, you're going to pay a lot more in higher prices, as you should. If you ride the bus, you won't pay so much more. Everybody gets back the same amount. If you're a conserver, you could come out ahead. If you're a guzzler, you lose. Which is appropriate. So you have kind of an income recycling system where the guzzlers are paying the conservers in effect, which is exactly the way it ought to be. You need to keep the incentive to conserve at the same time you need to sustain consumer buying power. The other thing is, we are in a recession now, and people don't have extra money lying around. If we are raising energy prices and not giving any money back, there goes the economy, too. But in this system, you give the money to consumers instead of investing it in research on energy from sources other than fossil fuels.
I'm a retired businessman, and I believe obviously we need huge amounts of investments in new technologies and conservation and energy efficiency. But that's mostly going to happen in the private sector. It's not so much that we need public investments. We need to send a signal to the market to make the right investments. The market makes plenty of investments now, but they're the wrong investments. There's $120 billion in the pipeline now for new coal-burning plants. But if you send the signal that coal is not the thing of the future, that wind and large-scale solar and all that stuff is where the future lies, then private capital will go there. So it's really a question of getting the market to understand what the real cost of carbon is when you include all the externalities. If you do that, I think you'll solve your investment problem that way. You don't especially like the energy incentives we have now, like wind and solar tax credits.
Right now, we need tax credits for wind and solar because we don't have the true cost of carbon [figured into coal electricity prices]. If you had a higher cost of carbon, you wouldn't need those subsidies. You should have a cap that really works, that doesn't leak, and have a level playing field. We shouldn't do things like throw huge amounts of money at carbon capture and sequestration. Let the market figure out what are the most cost effective alternatives to carbon; the market can do a fine job of figuring that out. The government trying to pick winners and losers—they're going to end up doing it wrong and waste a lot of our money. The fundamental problem with Lieberman-Warner and bills like this is that, because they don't recycle the revenue, they are a regressive sales tax on everybody. It's necessary to have a higher carbon price but not necessary to take that money out of the pockets of janitors and nurses and reporters. It will kill the whole thing, and that's the last thing we need. The politicians need to come up with a way of raising carbon prices without screwing the poor and the middle class. And this is, I think, the best way to do it.