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21st of October 2018

Economy



Is there a conservative case for a carbon tax?

When Florida Congressman Carlos Curbelo proposed a federal tax on carbon emissions, he broke ranks with many Republicans who reject taxation on principle and who assert that human activity is not warming the planet. But his proposal reflected an older conservative ethos, one that aims to put a price on negative externalities like pollution and to create market-based incentives to reduce them. Even though political polarization makes it unlikely that his proposal will get off the ground, Representative Curbelo, a co-creator of the bipartisan Climate Solutions Caucus, predicts that more Republicans will begin moving away from what he calls a “reflexive, knee-jerk reaction” against carbon taxes. “Pollution pricing has actually been a conservative idea,” says Lynn Scarlett, a conservationist who helped guide Interior Department policy under Republican President George W. Bush.

Washington

This week in Washington, Rep. Carlos Curbelo of Florida stepped forward with a proposal that hasn’t been voiced in Republican circles for a decade: a national tax on carbon emissions.

Moments after Mr. Curbelo finished pitching his idea at the National Press Club, a handful of conservative influencers rushed to shoot it down by holding a press briefing of their own in an adjacent room. “If you support this bill you cannot be a conservative,” said Phil Kerpen, president of the group American Commitment. “[When] we act like us, we win. When we act like them [liberals], we lose.”

The outcry reveals what may be the great conundrum surrounding climate change: The challenge, for now at least, appears to be less about science or technology than about human mind-sets – in this case, tribal politics.

Climate scientists agree that global warming is occurring and that policies are needed in response. Technologies increasingly exist to reduce the greenhouse-gas emissions driving the warming. And economists widely agree that the most efficient way to transition toward those technologies (including solar and wind power) is to put a price on fossil-fuel emissions, creating a market-based incentive to reduce them.

“Pollution pricing has actually been a conservative idea,” says Lynn Scarlett, a conservationist who helped guide Interior Department policy under Republican President George W. Bush.

The stumbling block for climate policy, not just in the US in other nations as well, is mustering and maintaining political commitment. The most feasible path toward crafting an enduring policy is to make it a bipartisan plan. Can that be done in an era when America’s two major parties seek to draw increasingly impassable lines between each other?

Mr. Curbelo’s bill is an act of faith that the answer on at least some issues – this one specifically – is yes.  And although the rival press conference tried to cast him as a legislative loner and loser, he’s not alone.

He leads a Climate Solutions Caucus in the House that includes 43 Republicans alongside 43 Democrats. Just 10 years ago, his party had a presidential nominee, John McCain, backing action on climate change. Polls find that most Republican voters care about the issue. 

And Ms. Scarlett notes that businesses – including corporations that often donate more to Republican candidates than to Democratic ones – increasingly view global warming as an issue that affects their bottom lines, and which needs to be addressed in their own planning and in public policy.

“Many of them are feeling the impacts,” says Scarlett, now at The Nature Conservancy. “They want solutions. They want [regulatory] certainty.”

'Trump digs coal'

For now, Curbelo’s idea for a national carbon tax looks politically like a non-starter. It runs against sentiment among Republicans and against the pledges of a president whose campaign slogans included “Trump digs coal.”

The real question is whether his pitch signals a shift by conservatives toward accepting that pricing carbon emissions can be an effective and politically viable climate policy.

“You’re going to see more movement away from that reflexive, knee-jerk reaction” against carbon taxes, Curbelo predicted Monday. There are “many others [among Republicans in Congress] who are reconsidering their position.”

Use the word “tax,” and a policy idea has an inherent hurdle with voters from the get-go.

In Canada, populist Doug Ford was recently elected to be the premier of Ontario, partly based on his promise to repeal the province’s price on greenhouse emissions. In 2016, voters in Washington State rejected a measure to levy a carbon tax there.

In part, the cause of carbon pricing has fallen victim to two tendencies: for politics to be polarized and for humans often to think short-term rather than long-term.

Opponents argue that carbon taxes hurt economic growth, that the threats of global warming are uncertain and exaggerated, and that enacting such a tax leads to a bigger government. 

“A carbon tax is political poison for the conservative movement,” said Marlo Lewis of the Competitive Enterprise Institute, at the event opposing Curbelo.

Then there’s the issue of asking people to pay something now to help future generations. Still, in a March Gallup survey, 53 percent of respondents supported the idea of "passing a carbon tax to encourage reductions in carbon dioxide emissions," compared with 45 percent opposed.

Where the tax money goes

Curbelo’s proposal is to repeal the national gasoline tax while placing a $24 per metric ton tax on carbon dioxide emissions – a fee that would rise annually by 2 percent plus the rate of inflation. The revenues would go toward transportation infrastructure, including highways; offsetting the tax’s effect on energy prices for lower-income Americans; and research on clean energy, improved batteries for storing that energy, and capturing carbon emissions for storage or industrial use. 

Outside groups, in an analysis of his proposal, say the effects on economic growth would be modest, with the size of the economy a scant 0.2 percentage points smaller than in baseline forecasts.

“Pretty much all independent studies that have looked at this question have found that if you implement a carbon tax, and then you take the revenue and you recycle that into the economy in a productive way, then the effects on macroeconomic outcomes are small,” says Noah Kaufman, a Columbia University economist who worked on forecasting the effects of Curbelo’s and other carbon taxes.

Such estimates generally don’t factor in the negative economic effects of warming temperatures, from worse droughts and storms to coastal flooding and climate-related migration. 

So some analysts say GDP will be helped, not hurt, by steps to reduce carbon emissions in accord with the 2015 Paris Agreement goal of holding human-caused warming to 2 degrees Celsius or less above preindustrial levels. And while acknowledging uncertainties in such long-term forecasting, they say the risks of inaction outweigh the costs of action.

“It really is false choices,” to say that a carbon tax hurts the economy, says Christina DeConcini, a climate policy expert at the World Resources Institute in Washington. “What's really bad for the economy is unmitigated, unaddressed climate change.”

Polling suggests the popularity of a carbon tax can grow depending on how the revenues are used. One conservative approach is to return revenues to taxpayers so as to offset any rise in fossil-fuel costs. Another is to invest more in infrastructure or research, as Curbelo proposes. 

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The question for Curbelo and other proponents is how to change the political conversation. Curbelo, on Monday, framed the case for action in terms of the risks his constituents in Florida face along their coastline – and in a faith-based perspective that resonates with many conservatives.

“We have a moral obligation to protect God’s greatest gift to humanity, which is planet Earth.”

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