A Note to Energy Secretary Steven Chu

David Gordon Wilson

This is a note from an academic colleague with something in common with you: we are both fascinated by what science and engineering could do to improve the world, while also realizing that environmental/energy policy has a vital role. Reviews of your distinguished career have stated that you believe that a tax on gasoline or fossil fuels in general or on carbon emissions could be necessary. My students and I at MIT have been working on these aspects for many years, and we want to steer you in a slightly different direction – but one with dramatically better consequences.

The problem is that taxes of this type have at least three major disadvantages. They are regressive, hurting poor people more than the rich; they are inflationary, because they increase the price of almost everything that makes up the cost-of-living index; and they put huge sums at the disposal of Congress and the administration to squander on "bridges to nowhere" and similar boondoggles.

Please consider a way to achieve the same objectives with no government interference, with the minimum of government expenditure, and with huge benefits elsewhere. We need to give everyone strong incentives to reduce consumption of fossil fuels and emissions of pollutants. All three of the disadvantages cited above can be avoided by the following. Appropriate fees that increase quarterly should be charged for measurable emissions and for purchasing fossil fuels.

For instance, gas could be increased by 25 cents per gallon every three months. The fee monies should be immediately deposited in an impregnable trust fund. At the end of every month the fund should be reduced to zero by dividing the total sum by the number of legal adult citizens (perhaps age 17 and over) in the country, and by depositing the resulting precisely equal amounts in the bank accounts of every such citizen, rich and poor.

(Everyone would be required to have a bank account. The banking industry would be delighted.) Thus the poor would get back more than their additional spending even if they did not change their way of life because consumption of almost everything, and the associated fees, increase with income, whereas the amount rebated is the same for all.

Everyone, rich and poor, and businesses of every size, would have increasingly strong incentives to reduce emissions and the use of fossil fuels, and to develop alternatives. As the purchase price of oil and coal gradually rose, other technologies would become attractive for industry to produce and for consumers to purchase. The calculation of the cost-of-living (COL) index should be required to include (as reductions in the COL) the amounts returned to consumers in addition to the increased costs of anything involving emissions and the use of fossil fuel.

We would thus have a policy that is fair to rich and poor (that in fact would serve to ameliorate the appalling disparity in tax treatment of the past years); that would give strong incentives to the formation of new enterprises and to increasing employment; that would reduce emissions and the use of fossil fuels in an optimum, speedy, way; that does not involve taxes (because the government would receive no funds from the fees), and in addition would have strong disincentives to illegal immigration (because “illegals” would have to pay the higher prices but would not get the rebate). It would cost the government very little to introduce and manage (the prevention of cheating and the prosecution of violators would be the principal requirements). A "white paper" on the steps needed is included on the Website: lessgovletsgo.org.

We know that despite FDR’s valiant efforts to stop the Great Depression, it was in fact ended precipitously by the Japanese attack on Pearl Harbor and the resulting declarations of war. If you put into place the policies recommended above, you would be declaring war on global warming, and could stop our present depression. And the U.S. would again emerge victorious, as the green leader among nations.

Please give it your blessing and campaign to get it adopted by your colleagues in the Obama administration. Point out that otherwise we are condemned to repeat the experience of the 1970s when the price of oil first rose, and all kinds of green enterprises were started, and then the price collapsed. All these innovative companies went out of business and their employees were dumped. We cannot let that happen again.

We are looking forward to your role in the country’s future.

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