Why Can’t Republicans Support a Carbon Tax?

Environmental, business, and international groups have long complained that, particularly given Republicans’ concerns about the health of the economy, their lack of any position on climate change is fiscally irresponsible. Environmental, business, and international groups have long complained that, particularly given Republicans’ concerns about the health of the economy, their lack of any position on climate change is fiscally irresponsible. Credit Photograph by Andrew Harrer / Bloomberg via Getty

In June of this year, the Democratic senators Sheldon Whitehouse, of Rhode Island, and Brian Schatz, of Hawaii, went to the conservative American Enterprises Institute to introduce the American Opportunity Carbon Fee Act, their proposal for a revenue-neutral carbon tax. “The basic idea is simple,” Whitehouse said, in introductory remarks. “You levy a price on a thing you don’t want—carbon pollution—and you use the revenue to help with things you do want.” According to Whitehouse, a U.S. carbon fee of forty-five dollars per metric ton in 2016 would reduce American CO2 emissions by more than forty per cent by 2025. It would also generate more than two trillion dollars in revenue over ten years, which, according to the plan, would be returned to the American public as a reduction in the marginal corporate income tax rate—totalling six hundred billion dollars over the first decade—among other uses designed expressly to appeal to conservatives.

Because Whitehouse and Schatz’s bill is, in essence, a tax proposal, it falls under the purview of the Senate Finance Committee, chaired by Orrin Hatch, a Republican. It has yet to be given a hearing. Meanwhile, since the third Republican debate, much ink has been spilled over the candidates’ proposals to aggressively cut taxes—Jordan Weissmann, an economics correspondent for Slate, went so far as to call them “delusional”—and slash debt. On both counts, the Whitehouse-Schatz carbon-fee plan could be part of a pragmatic approach (the two trillion dollars of revenue could also, in theory, be used to reduce the national debt by more than ten per cent). Environmental, business, and international groups have long complained that, particularly given Republicans’ concerns about the health of the economy, their lack of any position on climate change is fiscally irresponsible. Could a tax-reform proposal like Whitehouse-Schatz finally lead to a Republican climate-change policy?

“It’s fascinating to me to look at the partisan evolution of this issue over the past decade,” Joseph Aldy, a professor at Harvard’s Kennedy School of Government, who previously worked on carbon pricing for the Obama Administration, told me. “In 2003, the leader in the Senate on climate change was John McCain. And if you fast-forward to 2008, there wasn’t much debate on climate change, because then-Senator McCain and then-Senator Obama had almost identical ambitious cap-and-trade proposals to tackle the problem.” Ryan Lizza has written in the magazine about what happened next. In short, a confluence of the Great Recession, garden-variety partisanship, and, finally, the Deepwater Horizon oil spill served to kill whatever momentum had built on the issue.

In 2009, Bob Inglis, then a Republican representative from South Carolina, introduced H.R. 2380, or the “Raise Wages, Cut Carbon Act,” an upstream carbon tax that would have used all revenue to reduce payroll taxes. In the 2010 primary he was challenged by a Tea Party candidate and defeated. (McCain was also challenged from the right that year, and subsequently backed away from climate policy.) Inglis now heads up RepublicEn, a group that “supports an online community of energy optimists and climate realists” who are working on “free-enterprise solutions to climate change,” including revenue-neutral carbon pricing. “The science is clear, and the economics are even clearer, that a price on carbon dioxide would drive innovation faster than anything else we could envision,” he told me. “It will become very clear to conservatives that this is what we deeply believe once the vocabulary fits with the conservative language.”

In recent Republican debates, the “I’m not a scientist” talking point—implying that there is a scientific debate about the existence of climate change—has evolved into “One nation, acting alone, can make no difference at all,” as Carly Fiorina put it recently. But as other countries institute carbon-pricing mechanisms, the U.S. risks isolating itself from the rest of the global economy. According to the World Bank, forty countries and twenty-three municipalities and regions, which account for twelve per cent of global emissions, already price carbon. The E.U., New Zealand, Quebec, Tokyo, and parts of China (which plans to nationalize its carbon-pricing markets in 2017), along with others, use a cap-and-trade system. British Columbia, Costa Rica, France, Japan, and the U.K., among other countries and regions, charge a fee or tax based on a unit of use, like that in the Whitehouse-Schatz pricing proposal. And a number of high-profile coalitions, including investment banks, oil companies, and heads of state, have formally requested that the international community price carbon. “In the context of international negotiations, there will be more and more pressure on the U.S. not to lead [on climate change policy] but just to catch up,” Aldy told me.

In the U.S.—perhaps surprisingly, given G.O.P. resistance to even talking about climate change—California and a coalition of nine Eastern states (under the umbrella of the United States Regional Greenhouse Gas Initiative) already run regional cap-and-trade markets. When Obama’s Clean Power Plan, which compels states to reduce their carbon-dioxide emissions, in aggregate, by thirty-two per cent by 2030, takes effect, economists expect some states to institute carbon markets to meet their targets. In other words, a significant percentage of carbon emitted here (as well as in Canada, which exports some of its power to us) is already priced, or will be in the future. But the markets are not harmonized, and the cost of doing business can be difficult to predict. Add to this the regulatory burden of the state-by-state approach to carbon pricing, along with concerns that polluters will simply export their emissions across borders (what economists call “leakage”), and you have a recipe for exactly the kind of regulatory and trade morass that free-market adherents abhor.

Why hasn’t the G.O.P. proposed its own market-based alternative? “The solutions appear to be anathema,” Inglis told me. “It’s sort of like me telling you, ‘Here’s a plan for the surgery for that back problem you’re having—first, we’re gonna remove your head, and work on your ears, spine, and then we’ll put your head back on, and you’ll be all better.’ ‘Thanks, Doc, I don’t think I have a back problem anymore.’ ”

The depth of Republican resistance was clear from the questions fielded by Senators Whitehouse and Schatz after their American Enterprises Institute presentation. In a prepared response, Benjamin Zycher, a resident scholar at the A.E.I. who works on energy and environment, questioned the efficacy of any carbon tax or fee on future average temperatures. He poked holes in the historical temperature data, and wondered aloud whether it was “really an accident that the dominant effect of climate policy is an increase in energy costs in red states relative to blue ones.” (“Do not underestimate the power of wealth redistribution as a force driving policymaking in the Beltway,” he has written elsewhere, about the Obama Administration’s approach to climate-change policy.) Back in 2014, Tim Phillips, the president of Americans for Prosperity, told the Times that any Republican Presidential candidate who supported a carbon tax or regulations “would be at a severe disadvantage in the Republican nomination process.” Based on their current positions (or lack thereof), the candidates seem to have received the message. One is left with the feeling that, by the time the Republicans are willing to price carbon, the cost of what we’ve lost will be beyond accounting.

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