To address the current economic crisis, governments around the world are taking some drastic measures. Many are looking for the magic "stimulus package" that will help right the economy. I previously suggested that green infrastructure spending would be a good idea and the U.S. stimulus package looks like it will include this component. How are we going to finance this green infrastructure? I would argue that now is a good time for a carbon tax to fund infrastructure building and to bring in a market mechanism that sends clear economic signals about the real cost of carbon emissions to our atmospheric commons.

There are many ways to design a carbon tax. My preference is for a carbon tax that is simple, transparent, and sends the right market signals. My proposal would involve levying varying amounts of tax on carbon from coal, oil, deisel, and gas. Revenues collected from these carbon taxes would be split in half. One half would go back to taxpayer in the form of a monthly dividend where each person gets their equal share of whatever is in the carbon tax revenue pool. If you do not shell out for much carbon, then you would stand to make some money from this deal. If you shell out alot of money for carbon, then this dividend would offset some of your carbon tax payments but would not cover the amount of carbon tax you paid in. As it should be, we are living in an atmospheric commons and you are consuming more than your fair share. The overburden we are putting on the commons would no longer be hidden.

The other half of the revenue pool collected from the carbon tax would be used to pay for green infrastructure (infrastructure fund) and market leadership in new green products and services (technology fund).

I think that if we brough in a carbon tax now to 1) pay down green infrastructure investment, and 2) to start regulating carbon emissions through market mechanisms, that this would be the "economic stimulus" that would turn the U.S economy around AND make it more sustainable.

To get out of this mess we need to embrace Joseph Schumpeter's idea of creative destruction as the key to ecomonic growth. You can't grow in the context of the status quo, you need to destroy and replace one way of doing things with a new way. A carbon tax is the butterfly that could unleash the creative destruction required to stimulate the ecomony out of recession.