A Carbon Tax is the nudge the world needs

Column by Tim Harford, Financial Times

You can’t please everyone, it seems. Royal Dutch Shell has announced plans to plant trees in order to absorb some of the carbon dioxide produced when we burn the fossil fuels it sells. What’s more, it plans to invite motorists to chip in at the pump by buying “carbon offsets”: a clever way to help the planet, raise cash, and spread the blame around. Environmental campaigners are sceptical. So am I. 

I admit an interest here. I once worked for Shell (with the love-hate relationship that might imply), met my wife at Shell, and have occasionally been paid to return to Shell and dispense pearls of wisdom. Yet, despite a grudging affection for Big Oil that very few people share, I think climate change is far too important a challenge to entrust to oil companies. 

The issue is not whether they have benevolent intentions. (I assume Shell’s motives are mixed. Whose aren’t?) It’s that the dramatic reduction in carbon emissions we need isn’t something that is within an oil company’s gift. 

We’re all involved. If you drive a conventional car, use a gas cooker or boiler, or — green tariff or no — are plugged into a national electricity grid, then you, like me, are part of the problem. Our instinctive reaction is to guilt-trip each other and big companies into doing something. That is understandable, but falls short. Guilt is too feeble a tool and it is often applied in the wrong place. 

Our intuitions about how our daily activities warm the planet are unreliable. Which breakfast contributes most to greenhouse gas emissions: fresh berries flown in from Kenya, toast browned in a toaster powered by coal-fired electricity, or cereal drenched in milk from methane-belching cows? Even if you know the right answer, it’s absurd to expect many others to know — and even more absurd to expect enough of them to care. Voluntarism is not enough to solve climate change. 

One response, then, is to demand an ambitious programme of government investment and regulation — the most prominent of which is the Green New Deal, advanced in the US by Ed Markey and Alexandria Ocasio-Cortez, two prominent Democrats. The exciting thing about the Green New Deal is that it has serious political momentum focused at addressing climate change. 

Yet this momentum has come at a price. The details have deliberately been left vague, and grand aims often win more support than hard practicalities. (See also: Brexit.) The Green New Deal is also expansive. The resolution not only wants to act against climate change, but to “promote justice and equity . . . repairing historic oppression of indigenous peoples, communities of colour, migrant communities, deindustrialised communities” and many others. Worthy goals these may be, but in mobilising the US government to take action on every imaginable progressive goal, the whole project may become derailed by its own utopianism. 

The other risk of a huge centrally planned response to climate change is that of a huge centrally planned response to anything: clumsy megaprojects chosen for their political or bureaucratic acceptability rather than because they deliver the biggest results for the lowest cost. A planned response to climate change isn’t hopeless, because there are some obvious big wins — tightening rules on the energy efficiency of new buildings, and replacing coal-fired power with renewable alternatives. Yet the best case for the Green New Deal is that even a clumsy response may still be better than none at all. 

But there is a better way: a carbon tax (or its close sibling, a carbon permit auction). A broad-based tax on carbon dioxide and other greenhouse gases would be far less expensive than a Green New Deal is likely to be, yet it could motivate action on a scale that is both grander and more precise. Every part of the economy and each decision we make would be shaped by such a tax. 

A carbon tax would pull billions of different levers in an economy that is both complex and saturated in fossil fuels. Each one of the billions of different products on sale can be designed, produced, transported and consumed in a way that might increase or reduce carbon emissions. A carbon tax nudges the energy mix to shift in favour of renewables, but also pushes fossil fuels from coal towards gas. It encourages efficiency in the design of cars, homes, any light bulb or any motor, but it also rewards frugality. A lump-sum subsidy can encourage the uptake of electric cars — but a carbon tax will also reward those who cycle instead of driving. 

Our modern economy reflects countless choices, made by billions of people all over the world. A broad-based carbon price influences them all. Nothing else can. 

I fear that, like Buridan’s Ass, the American political system may continue to do nothing rather than choose between different plans for dealing with climate change. I would rather a Green New Deal than inaction, and a carbon tax alone is not the ideal response. But such a tax is the long-overdue, all-embracing response to climate change that America, and the world, badly needs. Everyone who cares about climate change should be advocating for it. 

Yes, We Need a Green New Deal. Just Not the One Alexandria Ocasio-Cortez Is Offering.

Op-Ed by Steven Rattner

The New York Times, March 20, 2019

Yes, of course, we need a Green New Deal to address the world’s most urgent crisis, global warming.

Just, please, not the one that a flotilla of liberal politicians, including seven of the top Democratic presidential hopefuls currently in the Senate, are signing up for in droves, like children following the pied piper in the old legend.

Our modern-day pied piper, Representative Alexandria Ocasio-Cortez, is trying to lure us into a set of policies that might help save the planet but at the cost of severely damaging the global economy.

To be sure, by the time the resolution was introduced into Congress, some of its most ludicrous provisions (like the deadline of 2030 for a full transition to renewable energy and the immediate halt to any investment in fossil fuels) had been eliminated or watered down.

But as important as continuing to prune the absurd or damaging provisions would be to add what is the most effective way to attack climate change: using taxes and market forces rather than government controls to reduce harmful emissions.

That has been a problem for decades, at least since Washington got seriously into the business of improving the environment, back in 1970 with the creation of the Environmental Protection Agency — under President Richard Nixon!

Politicians prefer that approach because using regulation hides the costs of reducing emissions. The decision, for example, to force improvements in automobile mileage by requiring each manufacturer to improve overall fleet efficiency has added thousands of dollars to the cost of cars.

Higher car prices have the countervailing impact of encouraging Americans to hang onto their older, less fuel-efficient cars for a longer time, offsetting at least some of the gains from newer cars. Nor have the regulations, with their many escape hatches, kept consumers from buying even more sport utility vehicles and pickup trucks as gas prices have remained historically low.

Fortunately, there is a better way to address the climate problem at far lower cost to the economy: a tax on greenhouse gas emissions. That can be imposed in any number of ways. The 18.4 cent federal gasoline tax, for example, hasn’t been increased since 1993 even as most other developed countries impose far higher levies.

A particularly thoughtful proposal has come from the Climate Leadership Council, a bipartisan organization that counts more than 3,300 economists among its signatories. Elegant in its simplicity, the key provision would be the imposition of an escalating tax on carbon. At an initial rate of $43 per ton, the levy would be roughly equivalent to 38.2 cents per gallon of gasoline.

To prevent polluters from fleeing overseas, the tax would be imposed on imports from countries lacking a similar provision while exports to those countries would not be taxed. While difficult to implement, that component is important to work out.

The entire proceeds from the tax would be rebated to consumers. The council suggests an equal amount for each American; my view would be to exclude the wealthy (who hardly need the estimated $2,000 a year in payments) and disproportionately favor those closer to the bottom.

Why are so many economists, even conservative ones, in favor of a massive new tax? Because markets do not always price in “externalities” like pollution. In addition to cutting consumption, raising the price of carbon would arguably do more to encourage development of alternative power sources than all the massive new government spending programs that advocates of the Green New Deal envision.

Some technical problems would need to be addressed, such as how the higher prices would filter through inflation calculations and create unintended cost of living adjustments to wages and Social Security payments.

But those are details; the key point is that a carbon tax has been judged by climate hawks like Resources for the Future to be far more effective in reaching the goals of the Paris agreement than the well-intended regulations put in place by President Barack Obama and his predecessors.

That’s at least part of why the plan enjoys support from an armada of organizations not often on the same page, like Exxon Mobil and Conservation International.

Historically, the politics of even small increases in the gasoline tax have been tough. A 2017 proposal in the House to increase tax by just one penny went nowhere. But recent polls suggest that perhaps sentiment is changing; a survey by the Energy Policy Institute at the University of Chicago found that 44 percent of Americans favor a carbon tax while only 29 percent oppose one.

Given how late we are to the climate battle, maintaining some sensible regulation will also be necessary. But a hefty carbon tax would go a long way toward winning the war.

Steven Rattner, a counselor to the Treasury secretary in the Obama administration, is a Wall Street executive and a contributing opinion writer. 

It’s time to act on climate change — responsibly

By U.S. Senators Lisa Murkowski (R-AK) and Joe Manchin (D-WV)

The Washington Post, March 8, 2019

The two of us have more in common than might meet the eye. We come from different parties, but we are both avid outdoorsmen and represent states that take great pride in the resources we provide to the nation and to friends and allies around the world. Alaska and West Virginia know that resource development and environmental stewardship must move in tandem, which is why we are committed to putting forward bipartisan solutions to help address climate change.

There is no question that climate change is real or that human activities are driving much of it. We are seeing the impacts in our home states. Scientists tell us that the Arctic is warming at twice the rate of the rest of the world. Rising temperatures and diminishing sea ice on Alaska’s shores are affecting our fisheries and forcing some remote communities to seek partial or total relocation. In summer 2016, West Virginia experienced unprecedented flooding that killed 23 residents and inflicted tremendous damage across the state.

Congress is in the middle of a debate about the appropriate way to tackle climate change. This is often portrayed as an issue with just two sides — those who support drastic, unattainable measures to reduce greenhouse-gas emissions, and those who want to do nothing. We believe the time for sensationalism is over. And we are seeking ideas that will bring people together, rather than drive them apart.

On the Senate Energy and Natural Resources Committee, we are working together to find pragmatic policies that can draw strong and enduring support. In our hearings this year, we have heard from a range of experts who are helping us to gather facts that shape these efforts.

Just this week, we held a hearing focused on climate change and the electricity sector. We heard that utilities are pursuing cleaner energy technologies and integrating them into their networks. These changes to the generation mix reduced carbon dioxide emissions by 28 percent between 2005 and 2017 and lowered costs to consumers.

Yet, our witnesses also agreed that to effectively mitigate the impacts of climate change, we must do more to pursue low- and zero-carbon technologies that will continue to lower emissions.

The United States leads the world in research and development. Our national labs and universities are working toward the next scientific breakthrough, and private investors are pursuing the next game-changing technology. The United States is at the forefront of clean-energy efforts, including energy storage, advanced nuclear energy, and carbon capture, utilization and sequestration. We are committed to adopting reasonable policies that maintain that edge, build on and accelerate current efforts, and ensure a robust innovation ecosystem.

The impact of developing these new technologies will be felt by Americans from all walks of life, including residents of rural communities and other areas served by older technologies. Transitioning these communities to more efficient forms of energy will provide them with cleaner energy that is also more stable and has lower costs, which will bring about additional benefits.

American ingenuity has solved many of the great challenges of our time and is key to addressing climate change. If the United States is going to lead by example, we must continue to lead the world in the development of new and improved technologies. On the Energy and Natural Resources Committee, we agree it is time to act. And that is why we will work to find responsible solutions worthy of West Virginians, Alaskans and all Americans.

Lawmakers reintroduce bipartisan carbon fee bill

By Nick Sobczyk

GREENWIRE, Jan. 24, 2019

A group of House lawmakers today reintroduced a benchmark bipartisan carbon pricing bill, giving the legislation a few fresh faces for the new Congress.

The "Energy Innovation and Carbon Dividend Act" would put a $15-per-metric-ton fee on carbon, rising by $10 per year, with net revenue given back to households as a rebate.

Climate Solutions Caucus Chairman Ted Deutch (D-Fla.) is the lead sponsor of the bill, joined by his expected Republican co-chairman and fellow Floridian Rep. Francis Rooney.

The measure was the first bipartisan carbon pricing legislation in a decade when it was first introduced in November of last year, and it quickly got a companion in the upper chamber, led by Sen. Chris Coons (D-Del.) and then-Sen. Jeff Flake (R-Ariz.).

Supporters see it as a landmark, a sign the Republican Party is inching toward climate action after years of science denial driven by industry and conservative politics.

"Climate change is an urgent threat that demands urgent bipartisan action," Deutch said in a statement. "With this legislation, we are making clear to our colleagues that bipartisanship is possible — even necessary — to address climate change in this Congress."

Still, the bill currently has just one GOP co-sponsor — Rooney — and the Republican Senate still appears unlikely to take any major action to address climate change.

Rep. Brian Fitzpatrick of Pennsylvania, one of the House Republican leads on climate and environmental issues, told E&E News this morning he would likely hop on as a co-sponsor.

But Fitzpatrick is also taking the lead on reintroducing the "MARKET CHOICE Act," the carbon tax bill first floated by then-Rep. Carlos Curbelo (R-Fla.) last year.

The other co-sponsors on the "Energy Innovation and Carbon Dividend Act" are Reps. Charlie Crist (D-Fla.), Anna Eshoo (D-Calif.), Scott Peters (D-Calif.), Judy Chu (D-Calif.) and Dan Lipinski (D-Ill.).

The bill is largely the product of years of work by Citizens' Climate Lobby, the group behind the Climate Solutions Caucus, which has long lobbied for its vision of carbon fee and dividend legislation.

With Democrats in control of the House, the group thinks its bill actually has a shot at passing in this session, said CCL spokesman Steve Valk, though the Republican Senate remains a hurdle.

There have been a few technical changes to the measure since it was introduced just a few months ago (E&E Daily, Nov. 28, 2018).

For one thing, the emissions targets have been updated, in part to reflect projected enactment in 2020, and the annual increase in the carbon fee will now be adjusted for inflation.

Supporters say the current version of the bill would reduce carbon pollution by up to 45 percent by 2030 and more than 90 percent by 2050, all compared with 2016 levels.

The current measure, as it did last year, would also exempt agricultural fuels and toss out certain EPA greenhouse gas regulations for stationary sources. But vehicle fuel efficiency standards and methane regulations would stay in place, and regulatory authority would be restored if cumulative emissions targets aren't met after 10 years.

EPA regulatory authority has been a sticking point for conservative climate change groups such as the Climate Leadership Council, which argues for a market-based approach to climate change.

Those organizations have coalesced around the "Energy Innovation and Carbon Dividend Act," though they're expecting a handful of other carbon pricing bills to be introduced in this Congress.

Regulatory reform has been a sticking point for Rooney, too, as he looks to take the Republican reins on climate change.

"I am supportive of a carbon fee as a non-regulatory, revenue-neutral and market-driven incentive to move toward natural gas and away from coal, and to support emerging alternate sources of energy," Rooney said in a statement.

"There are many proposals being suggested as to utilizing monies a carbon tax might generate, each with its own strengths and weaknesses — there are several favorable options, and this bill provides a method of ensuring that any fees are rebated back to the public."

Are Electric Cars Worth the Taxpayer Charge?

Letter to editor of The Wall Street Journal (published Jan. 7) in response to editorial (“The Electric Kool-Aid Subsidy Test,” Dec. 31) :

It is fine to suggest that the tax credit for electric vehicles should be given an end date, but let’s remember that the purpose behind it was to invest in innovation to speed the transition to a cleaner economy. In that sense it has been a big success: Last August EV manufacturer Tesla passed General Motors to become America’s most valuable carmaker, and finished 2018 with a market capitalization of $57 billion compared with $47 billion for GM. Tesla’s recent growth has been driven by sales of its Model 3 vehicle, which is America’s top-selling car by revenue.

Why should we cut off the incentive to buy Teslas and other EVs while we continue to subsidize fossil fuels so massively? Oil Change International estimates that the U.S. spends more than $20 billion annually to support oil and gas exploration and production. As long as the price of fossil fuels fails to cover their external costs to society—such as higher rates of lung cancer, heart disease and asthma, in addition to the costs of climate change—we will be subsidizing the energy system of the past.

We need incentives that will enable our country to lead the world in producing the cars of the future. That means continuing to invest in EVs.

William C. Eacho

Partnership for Responsible Growth

More Republicans Than You Think Support Action on Climate Change

New polls suggest Republicans’ views on global warming may be at a tipping point.

By Arlie Hochschild and David Hochschild

Arlie Hochschild is a sociologist. David Hochschild is a member of the California Energy Commission.

The New York Times, Dec. 29, 2018

Democrats and Republicans have clashed fiercely on many issues — the Mueller investigation, immigration, gun control — but can the two parties come together on climate change, the biggest issue of all?

Most analysts say no. After all, since President Trump took office, the terms “global warming” and “climate change” have been expunged from some government websites. Mr. Trump says his “very high level of intelligence” has led him to reject the findings of 13 federal agencies, the Intergovernmental Panel on Climate Change and the World Meteorological Organization.

But how many of his fellow Republicans agree? If we compare the extremes in each party — liberal Democrats and conservative Republicans — as the media often does, the split is clear. But if we compare all Republicans with all Democrats, we see a new and encouraging overlap.

In March, well before the most destructive wildfires in California history, the Yale Program on Climate Change Communication and the George Mason University Center for Climate Change Communication polled 1,067 registered voters on climate change. The study found that while they disagree on the cause, majorities in both parties agree that the world is experiencing global warming and call for government action to address it.

The poll asked whether the United States should “set strict carbon dioxide emission limits on existing coal-fired power plants to reduce global warming and improve public heath,” even if “the cost of electricity to consumers and companies would likely increase.” Eighty-seven percent of Democrats and 56 percent of Republicans said yes.

Should the United States require fossil fuel companies to pay a carbon tax and use the money to reduce other taxes (such as income tax) by an equal amount? Eighty-four percent of Democrats and 56 percent of Republicans said yes.

Asked, “When there’s a conflict between environmental protection and economic growth, which do you think is more important?” 85 percent of Democrats and 52 percent of Republicans said that environmental protection should come first.

The survey also found that majorities in both parties think the government should fund research into solar and wind energy, offer tax rebates to those buying energy-efficient vehicles and solar panels, and encourage schools to teach children about the causes and consequences of global warming, and potential solutions. A majority of Democrats and Republicans believe the United States should participate in the Paris climate accord and reduce greenhouse gas emissions regardless of what other countries do.

A study conducted in June by Stanford, ABC News and Resources for the Future uncovered a similar trend. It found that 66 percent of Republicans believe the increase in temperature is “mostly or partly caused by humans.” Another poll, released last month by Monmouth University in New Jersey, found that most Republicans now support action on climate change.

To be sure, not every poll shows the same thing. An NBC News/Wall Street Journal poll recently asked people if they believed climate change is “serious” and requires “immediate action.” Only around 15 percent of Republicans said yes compared with 71 percent of Democrats. It’s notable that the poll did not ask, as the Yale study did, for views on specific remedies — which is where the two parties seem to find more common ground.

On a trip to rural Louisiana in 2016, we visited Mike Schaff, a Trump and Tea Party supporter who recently retired from a career in the oil industry. He had lost his beloved home to an enormous sinkhole caused by a reckless drilling company and become an active board member of Louisiana’s GreenArmy, a small but remarkable environmental group. But about climate change, Mr. Schaff shook his head. “I’ll worry about global warming in 50 years,” he said.

Out fishing on the bayou in the late-afternoon mist, he told us: “We’re running out of oil anyway, so I’d love to rely on clean energy. Wouldn’t have to drill. And as soon as it’s as cheap as fossil fuel, and feasible, I think we should switch. It would make us independent.” He continued, “It’s time for a modern-day Manhattan Project to effect a major change in the way humans use and produce energy.”

Climate change activists would do well to embrace Americans like Mike Schaff, even if they don’t agree on everything.

Many conservative Republicans feel that frightening news of climate change usually comes from alarmist liberals who belittle their religious faith, elitists who condescend to them and a federal government that, until Mr. Trump, had forgotten them. Curiously, Americans who live near extreme flooding and fires are no more likely to worry about climate change than those far from the threat of such disasters. But that doesn’t mean they can’t change their minds.

Studies by a University of Colorado psychologist, Leaf Van Boven, and two colleagues points to a “party over policy” effect, in which people’s views on a carbon tax depend less on the content of the proposal than on the party they believe proposed it. This is true for both Democrats and Republicans. So maybe Republicans just need to hear from messengers they trust.

A talk by an evangelical climate scientist, one study shows, altered the views of climate skeptics studying at evangelical colleges. Similarly, we need to find ways of showing science-doubting Republican oil workers that the leaders of Exxon Mobil, Chevron, ConocoPhillips and BP have acknowledged the risk of climate change and that steps must be taken to address it. Republicans who greatly admire the military could learn about the ways the Pentagon has already acknowledged the risk of climate change as a security issue and has quietly set about installing renewable energy projects on bases across the country.

Democrats should celebrate Republicans who are out front on climate change. The Republican mayor of San Diego, Kevin Faulconer, recently announced, as a “nonpartisan issue,” his city’s commitment to achieve 100 percent renewable energy by 2035 — a goal that is 10 years sooner than the one that California’s Democratic governor, Jerry Brown, set for the state. Twenty-nine states have renewable energy mandates in place; 13 were signed into law by Republican governors.

Two Republican former secretaries of state, George Shultz and James Baker, have called for a gradually increasing carbon tax, with all revenue rebated directly to the American people. A family of four would get about $2,000 a year in “carbon dividends.” The idea is similar to one backed by the nonpartisan Citizens’ Climate Lobby, which has more than 100,000 members and chapters throughout the country. It helped form the bipartisan House Climate Solutions Caucus and has supported the bipartisan Energy Innovation and Carbon Dividend Act now before Congress.

So while Americans have been focusing on the split between Democrats and Republicans, the more important gap may now be between Republican voters and the leaders they elected.

Unpredictable weather is not new, of course, but recent events are making climate change harder than ever to ignore, let alone deny. Over the past two years, wildfires have burned nearly three million acres in California, while hurricanes have battered the Southeast with increasing intensity.

The smoking ruins of Paradise, Calif., and Houston’s flooded homes, are as shocking and devastating, in their own ways, as the tragedy of Sept. 11. Climate change is a different kind of emergency. It does not occur on a single day, and no one person gave the order. But in the long run its impact will be greater. It’s time for us to join hands across party lines to address it.