The Washington Post editorial board calls a carbon tax “one of the best ideas in Washington almost no one in Congress will talk about.” It joins a very diverse group (including conservative economists, big oil companies, environmental advocates, and most Americans) that thinks pricing carbon pollution is smart policy. People are talking about it, if you know where to listen.
First, there is some activity in Congress. The Senate Finance Committee released a white paper last month which recommended a carbon tax as a way to reduce the estimated $16 billion of foregone energy tax expenditures in 2013. Back in February, Senators Bernie Sanders and Barbara Boxer introduced comprehensive climate legislation that would put a price on carbon pollution and invest in a renewable energy economy. Boxer, Chair of the Senate Environmental and Public Works Committee, said she would move the bill through her committee and hopefully to the Senate floor this summer. Rep. Henry Waxman, Rep. Earl Blumenauer, Sen. Sheldon Whitehouse, and Sen. Brian Schatz have also released a carbon price discussion draft for review.
However, given the last few years of congressional inaction, it would be surprising if the Senate passed legislation to put a price on carbon or the bill received bully pulpit support from the White House. Even more so if the House took it up. During the budget debate in March, the Senate rejected an amendment that would have made it more difficult to pass a carbon tax, though it did get majority support. The GOP House leadership, following the lead of Americans for Prosperity and the Tea Party, signed a “no climate tax” pledge along with nearly 100 other House members. And new Treasury Secretary Jack Lew said in a written statement prior to his confirmation that the administration is not planning to propose a carbon tax, though its hard to believe President Obama would veto a bill containing one if it actually arrived at his desk.
That is a lot of strikes against a proposal, even by the standards of the barely-functioning U.S. political system. 90 percent of Americans support background checks on gun sales but that could not make it out of the Senate. So is a price on carbon completely dead? Or mostly dead?
Putting a price on carbon pollution is something that finds support in across the globe, and in some very unexpected places.
Large areas of the world have already put a price on carbon:
- 33 countries and 18 sub-national jurisdictions will price carbon in 2013. This comprises 850 million people and nearly a third of the global economy.
- An official in the Chinese Ministry of Finance said that the country was considering a price on carbon along with a market-based cap-and-trade system. China’s emissions are the largest in the world and if the nation put a well-designed price on carbon it would have a significant impact.
Support for pricing carbon pollution is surprisingly widespread in the U.S.:
- 67 percent of Americans would rather reduce the deficit via a carbon tax than through cutting government programs, according to a poll conducted last December. A revenue neutral carbon tax that would provide dividends back to taxpayers and invest in renewable energy received 70 percent support in the poll.
- Another poll by YouGov found 56 percent of Americans would prefer a carbon tax to help reduce the deficit. The poll used an interesting tool that allowed participants to try to balance the budget themselves, which led to more than half concluding that a carbon tax would be a good idea. (Another poll found less support if the revenue would only be used to pay for renewable energy initiatives, so the fiscal component is key to gaining wider support.)
Many businesses prefer taxing carbon pollution:
- Microsoft founder Bill Gates said it was a matter of when, not if: “When we get a carbon tax we should put some of that into innovation.
- ExxonMobil nominally supports a carbon tax (largely because of its natural gas investments that would become more valuable compared to coal), though the corporation will not be lobbying for any kind of carbon regulation. It simply views the carbon tax as the most straightforward option if the country decides to do something about carbon pollution.
- Royal Dutch Shell, Swiss Re, Statoil, and Kodak signed on to a joint statement that called for a “clear, transparent and unambiguous price on carbon emissions.”
- BP and British electricity producer EDF Energy also signed on to the joint statement.
- Caterpillar said it preferred a carbon tax over other methods of regulating carbon.
- Duke Energy announced it would lobby for a carbon tax in 2005.
- FedEx CEO Fred Smith argued a carbon tax would help solve the “huge costs — externalities — of our national defense”:
“A predictable, graduated tax would have an impact on the role of the military overseas, improve the environment and be good for the economy, Smith argued…. ‘If people want to call me a socialist for recognizing these huge costs — externalities — of our national defense … we need to solve this problem,’ he said. ‘The failure to do it is not only going to create serious consequences in terms of our economy, but we’re going to make a big mistake and get into a big conflagration over this thing,’ he predicted.”
Conservatives and Republicans see the benefits of pricing carbon as well:
- Former Representative Bob Inglis (R-SC) continues to advocate for a carbon tax as a solution to our fiscal problems and an easy way to reduce carbon emissions. Inglis said supporting a carbon tax “really is a conservative position” that could unite the party and win over independents and progressives.
- Former GOP Reps. Sherwood Boehlert and Wayne Gilchrest wrote in a Washington Post op-ed that a carbon price “should be a no-brainer.”
- Ronald Reagan’s Secretary of State George Schultz pushed for a carbon tax in Washington DC in March, arguing that all types of energy should compete “on a level playing field” but only after externalities such as the cost of carbon pollution are integrated.
- Gregory Mankiw, economic advisor to Mitt Romney and a chairman of former President Bush’s Council of Economic Advisers, writes that “The economics here is straightforward: emitting carbon into the atmosphere entails a negative externality. In absence of any policy, people will emit too much…. The case for a carbon tax looks even stronger after examining the other options on the table.” He then advocates for a price on carbon much wider in scope: “A global carbon tax would be much easier to negotiate.”
- Bush and McCain adviser Douglas Holz-Eakin made the case for a revenue-neutral carbon tax in 2011.
- The Financial Times editorial board calls a carbon the “least regrettable” option that “deserves much wider enthusiasm.” Though the paper is often skeptical of government action and taxation, it makes an extremely compelling case for pricing carbon:
“The prospect that extra revenues will be needed to stabilise the public finances in the long term suggests that some taxes are likely to rise, and a carbon tax would be one of the least painful ways to do it. Shifting the tax burden off incomes and on to carbon would be a good idea at any time. Right now, the case is overwhelming.”
- Conservative economist Art Laffer, inventor of the Laffer Curve, says he is “officially neutral” on climate change but thinks it is strange that “the U.S. allows something we want less of — carbon dioxide pollution — to be emitted without penalty.” He argued that it is fiscally conservative to match a carbon tax with tax cuts in other areas.
- Cato Institute’s Peter van Doren argues, “So if fossil fuel combustion produces byproducts that cause negative health effects on third parties as well as changes in the temperature of the atmosphere, the obvious lesson from economics is to increase fossil fuel prices enough through taxation to account for these effects.”
- The American Enterprise Institute released a budget plan in 2011 that would have instituted a relatively high price on carbon.
- AEI’s Aparna Mathur explained that a tax on carbon could correct pollution externalities “as part of a broader fiscal reform.” She said that “carbon tax revenues could be fairly substantial” and though revenues would decrease over time, the decrease in emissions is “what we would like to see.”
- AEI’s Kevin Hassett has also argued for a carbon tax.
- The Hudson Institute’s Irving Steltzer argued that a fiscally-neutral carbon tax was an “opportunity for conservatives” that would make America more energy independent.
Other moderate and progressive voices also see the imperative of taking the externality of carbon pollution into account:
- The Economic Policy Institute (EPI) budget blueprint uses carbon pricing to meet the Waxman-Markey targets with “half of the revenue from proposed carbon pricing earmarked for energy rebates and tax credits for low-and moderate-income populations” to “fully offset the higher cost of energy for the lowest 60% of earners.”
- A Brookings Institute paper finds that a carbon tax’s “effects on investment and GDP are more moderate than the capital tax increase, and it also significantly reduces CO2 emissions.” In the end, it says, “A carbon tax thus offers a way to help reduce the deficit and improve the environment, and do so with minimal disturbance to overall economic activity.”
- Key environmental figures like Al Gore, Bill McKibben have long favored a price on carbon.
- The Washington Post editorial board supports a carbon tax as the “smartest hedge” against the massive, uncertain threats presented by climate change.
In addition to proposing a price on carbon in 2011, the Center for American Progress issued a report last year explaining how a well-constructed carbon tax would rein in climate change and actually stimulate the economy (much like current environmental regulations already do). So how would this win-win legislation get passed?
Rep. Inglis recently said said conservatives need to get over themselves when it comes to climate change and energy:
We apparently think we are no good at energy and climate, therefore it leads to us just sort of pooh-poohing the science, throwing rocks at other people’s houses, Al Gore’s house, rather than stepping forward with a solution. But the interesting thing is, we have the solution that is going to work, which is a true-cost comparison between competing fuels. That is bedrock conservatism.
Pricing carbon pollution is critical and has popular support, a conservative fiscal justification, many climate science imperatives, and a savvy business rationale. It once enjoyed much broader bipartisan support. It will take a concerted effort to connect those dots, but it will have to happen eventually.