Market-based solution can be
GOP response to climate change
If Republicans find the President’s plan to regulate carbon emissions
unsuitable, they should consider a revenue-neutral carbon tax
In his State of the Union address, President Obama talked about the threat of climate change and promised, “If Congress won’t act soon to protect future generations, I will.” In a speech at Georgetown University earlier this summer, the President made good on his promise, laying out a plan to use executive authority on a number of fronts, the boldest step being to have the Environmental Protection Agency devise regulations to curtail greenhouse gas emissions from new and existing power plants.
Not surprisingly, Republicans in Congress are resisting attempts to have EPA regulate emissions from utilities. Before adjourning for the August recess, the GOP-controlled House voted for a bill that would give the Energy Department the authority to block EPA energy-related regulations if it thought those rules would hurt economic growth.
Fears that EPA regulations would stifle the economy are nothing new but have proven to be unfounded. When the Clean Air Act was passed in 1970, EPA was charged with regulating air and water pollution. An analysis shows that the benefits of implementing the Clean Air Act have outweighed the costs by a factor of 30 to 1. Drag on the economy? Gross Domestic Product in the U.S. has increased 207 percent over the last 40 years.
Efforts to block new EPA regulations are destined to be an exercise in futility amounting to little more than political grandstanding. Such legislation has no chance of moving in the Democrat-controlled Senate. Even if it passed in both chambers, the President would veto any such bill.
Equally futile would be attempts to block CO2 regulations through the court system. In 2007, the Supreme Court ruled that the EPA has the authority and the obligation to regulate greenhouse gases that contribute to global climate change. And just last year, a three-judge panel from the U.S. Court of Appeals for the District of Columbiaupheld a finding from EPA that greenhouse gas emissions endanger public health.
So, if Republicans in Congress want to do more than make ineffectual noise about climate-related EPA regulations, what’s the best course of action?
The President has said all along he would prefer to have Congress enact a “bi-partisan, market-based solution” on climate change. While Obama has started the clock running on EPA regulations, it will take a year or two for such regulations to be developed and implemented, enough time for Congress to deliver that “market-based solution.” A number of conservatives have one such proposal in mind: A revenue-neutral carbon tax that gives proceeds back to the public.
Why do conservatives like a carbon tax?
Economists like Art Laffer (Reagan advisor) and Greg Mankiw (Bush and Romney advisor) believe that the market, rather than the government, is the best vehicle for solving the climate problem. But the market fails when there’s a distortion in the price of something. Such a distortion, Laffer and Mankiw would argue, exists with fossil fuels, whose price does not reflect the cost of damage done to society – health costs related to air pollution, security costs related to imported oil, extreme weather damage made worse from climate change. Adjust the price to account for those costs, with a gradually-increasing carbon tax, and the market will work its magic. As renewable energy like solar and wind becomes competitive with and eventually cheaper than coal, oil and gas, the economy will transition to clean energy and greater fuel efficiency, lowering greenhouse gas emissions.
Laffer and Mankiw aren’t the only conservatives who back a carbon tax. In a New York Times oped supporting Obama’s call to regulate greenhouse gases, four former EPA chiefs, from Republican administrations going as far back as Nixon, said, “A market-based approach, like a carbon tax, would be the best path to reducing greenhouse-gas emissions.”
Citizens Climate Lobby suggests a tax that starts low — $15 per ton of CO2 – and ramps up aggressively, adding $10 per ton each year. For the sake of simplicity, the tax should be applied as far upstream as practical. Distributing the carbon tax revenue back to the public, preferably through equal payments to all households, would give consumers the additional income to deal with price increases associated with the carbon tax. It is that payback to households that enables an aggressive approach – needed to get the necessary greenhouse gas reductions – without being a drag on the still-fragile American economy.
Making the carbon tax revenue-neutral aligns with the Republican principle of keeping the federal government from growing larger.
Some would argue, rightfully so, that reducing U.S. emissions will have limited effect on global CO2 if China, India and other nations continue to pollute at accelerating rates. That’s why it is important for a carbon tax to include border adjustment tariffs on imports from nations that don’t have equivalent carbon pricing. Rather than enrich the U.S. Treasury, other nations will want to implement their own carbon tax and keep that revenue within their borders. Such tariffs should comply with WTO rules, as they would only be for the purpose of maintaining a level playing field.
In addition to avoiding the need for new EPA regulations, there is another reason Republicans may want to offer a market-based solution on climate change: Young voters. A recent bi-partisan poll from the League of Conservation Voters found that 80 percent of voters under the age of 35 support the President’s plan to deal with climate change. The poll also found that three quarters of those voters would oppose any member of Congress who stood in the way of Obama’s plan.
The revenue-neutral carbon tax provides an economy-wide, market-based approach to lowering greenhouse gas emissions before we reach the tipping point on runaway climate change. Instead of throwing up roadblocks to the President’s climate action plan, Republicans can be part of the solution by supporting a tax on carbon that returns revenue to households.
EXTREME WEATHER AND CLIMATE EVENTS IN 2013
The effects of climate change continue to be felt throughout the world with drought, record heat, flooding and wildfires. The World Resources Institute offers a timeline of extreme weather and climate events that have happened this year. Click the graphic at left to go to the timeline.
WHO THINKS A CARBON TAX IS ACTUALLY POSSIBLE?
The solution of a carbon tax is gaining traction, and you’ll never guess who thinks it’s a real possibility. How about the fossil fuel industry? That’s right, and they’re not exactly bullish on the idea. Amidst talk in conservative circles and other places about a carbon tax, the American Energy Alliance decided to spend between $120,000 and $150,000 on anti-carbon tax radio ads in five congressional districts – upstate New York, central New Jersey, east coast of Florida, southern Illinois and Arizona. AEA spokesman Benjamin Cole said, “We’re hoping to put the final nail in the coffin on the carbon tax. The proposal should be dead on arrival by the time lawmakers come back from August recess.”
For a policy proposal generally dismissed as going nowhere, the carbon tax is attracting considerable concern from the special interests that would benefit from maintaining the status quo. The ads, which claim a carbon tax will cost families thousands of dollars and kill jobs, are clearly not referring to a revenue-neutral tax that refunds proceeds to households.
The strategy, of course, is to scare the public and intimidate lawmakers from stepping up on a solution that’s supported by people like former Secretary of State George Shultz. Along with conservative economist and Nobel laureate Gary Becker, Shultz wrote an oped, “Why We Support a Revenue-Neutral Carbon Tax,” that appeared in the Wall Street Journal:
A carbon tax would encourage producers and consumers to shift toward energy sources that emit less carbon…and generate greater demand for electric and flex-fuel cars and lesser demand for conventional gasoline-powered cars. We argue for revenue neutrality on the grounds that this tax should be exclusively for the purpose of leveling the playing field, not for financing some other government programs or for expanding the government sector. And revenue neutrality means that it will not have fiscal drag on economic growth.
CARBON DIOXIDE LEVEL PASSES DANGEROUS THRESHOLD
In May this year, the concentration of carbon dioxide in the atmosphere reached 400 parts per million for the first time. For hundreds of thousands of years, prior to the industrial revolution, CO2 – the principle greenhouse gas that holds heat in our atmosphere – never rose above 300 ppm. The last time Earth’s CO2 was 400 ppm was during the Pliocene Era, some 3 million years ago, when sea levels were 49 to 82 feet higher than they are today. The last time Earth saw this level of CO2, humans did not exist.
Because of the higher level of greenhouse gases, average global temperatures have risen 1.4 degrees Fahrenheit over the past century. That seemingly small increase in temperature is already showing up in the form of more prolonged droughts that reduce crop yields, wildfires intensified by drier conditions, and storms like Sandy becoming more frequent and destructive.
The effects we’re seeing now are a small taste of what’s in store if we let the Keeling Curve, as it is known, continue along its current trajectory and allow temperatures to climb 7F degrees or more by the end of the century. Such a scenario would cause food shortages on a scale resulting in mass starvation, raise the seas to levels that displace hundreds of millions of people living in coastal areas, and make large swaths of populated areas too hot, literally, for humans to tolerate.
DO THE MATH ON GLOBAL WARMING
In his Rolling Stone article, “Global Warming’s Terrifying New Math,” climate activist Bill McKibben points to three numbers that sum up the urgency of the situation we find ourselves in:
- Two degrees Celsius: the amount, according to international consensus, that we can raise the global average temperature above preindustrial levels and still maintain a so-called “safe” climate, beyond which all bets are off. “Safe,” of course, depends on where you live. We’ve already raised it almost one degree, with disastrous results; if you live in Africa, or Kiribati, one degree is too much.
- 565 gigatons: the amount of CO2 scientists agree we can still pump into the atmosphere and hope to remain below the two-degree threshold.
- 2795 gigatons: the amount of CO2 contained in the world’s proven fossil-fuel reserves, which the fossil-fuel industry shows every intention of extracting and burning.
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