Most of us bemoan the lack of civility, negotiation, and compromise in politics. We’re so polarized that government does almost nothing to solve our most critical problems.
What’s particularly frustrating to those of us who see climate change as a major threat to the future of human civilization is that the clock is ticking. Global temperatures have risen about 1.5° Celsius since the beginning of the industrial age and are continuing to rise. Science tells us that humans are the primary cause.
The impacts will accelerate with each uptick in temperature: rising seas and coastal flooding, longer and more damaging wildfire seasons, more extreme and destructive weather, more frequent and intense heat waves, widespread forest death, costly and growing health impacts, severe drought, stress on clean water systems, disruption of food supplies, and much more.
And yet government does little or nothing to reduce carbon emissions, leaving our children to suffer the consequences.
Bipartisan solutions exist
What makes this so frustrating is that simple and elegant bipartisan solutions to this problem exist.
Just last week a group of conservative Republicans proposed such a solution. The proposers aren’t ideologues or hacks, they’re Republicans with impeccable credentials, including, among others:
- James Baker, who served in the cabinets of Presidents Reagan and George HW Bush
- Henry Paulsen, the Secretary of the Treasury under President George W Bush
- George Schultz, who served in the cabinets of Presidents Nixon and Reagan
- Martin Feldstein, the Chairman of President Reagan’s Council of Economic Advisors
- Gregory Mankiw, Chairman of President George W. Bush’s Council of Economic Advisors
The solution they propose is one on which many people on the left and right could find common ground if they were willing to sit down and debate it. The final outcome may not be exactly what the group proposes, but it could be the general framework for a solution to the climate change problem.
The group proposes a “carbon dividends plan,” which has four key components:
- A gradually increasing carbon tax. This is a tax on carbon dioxide emissions, to be implemented at the refinery or the first point where fossil fuels enter the economy, meaning the mine, well or port. They propose that a sensible carbon tax might begin at $40 a ton and increase steadily over time, sending a powerful signal to businesses and consumers, while generating revenue to reward Americans for decreasing their collective carbon footprint.
- Carbon dividends for all Americans. All the proceeds from the tax would be returned to the American people on an equal and quarterly basis. A family of four would receive approximately $2,000 in carbon dividend payments in the first year. This amount would grow over time as the carbon tax rate increases, creating a positive feedback loop: the more the climate is protected, the greater the individual dividend payments to all Americans.
- Border carbon adjustments. Price adjustments for the carbon content of imports and exports would protect American competitiveness and punish free-riding by other nations, encouraging them to adopt carbon pricing of their own. Exports to countries without comparable carbon pricing systems would receive rebates for carbon taxes paid, while imports from such countries would face fees on the carbon content of their products.
- Significant regulatory rollback. The plan assumes that a rising carbon tax would change behavior, and allow for the elimination of regulations that are no longer necessary. For example, much of the EPA’s regulatory authority over carbon dioxide emissions would be phased out, including an outright repeal of the Clean Power Plan.
Why a carbon tax?
The price of energy from fossil fuels (coal, oil, gas) is determined by market forces. Oil prices, for example, are set by commodities traders, who bid on oil futures contracts in the commodities market. These contracts are agreements to buy or sell oil at a specific date in the future for an agreed-upon price.
Very simplistically, the primary factors that commodities traders use to develop their bids are:
- The current supply of oil, based on OPEC quotes, and, increasingly, US shale oil production.
- The amount of oil reserves held in refineries, in the US strategic oil reserve, or in Saudi Arabia.
- Oil demand from markets around the world.
However, there is an additional cost of fossil fuels that is not factored into the price. It is the societal cost of releasing carbon into the atmosphere as a byproduct of fossil fuel production. This contributes to global warming, which has significant societal cost (extreme weather, drought, agricultural disruption, sea level rise, and so on).
In economic terms, this cost is called a “negative externality,” a cost that is suffered by a third party as a result of an economic transaction. Society suffers because of the purchase of fossil fuels.
A carbon tax is one mechanism that would price the externality of carbon emissions to make the price of fossil fuels an accurate reflection of all costs. If set correctly, a carbon tax will decrease fossil fuel usage and cause consumers to seek other sources of energy.
A tax of $40 per ton on carbon is substantial. According to Kevin Drum of Mother Jones, who did an analysis of a study by the Energy Information Administration, it is the equivalent of 40 cents per gallon of gas, and 10 cents per kilowatt-hour of coal-fired power. Such a tax would just about put coal out of business, accelerating existing market forces. It would set natural gas at just about the same price as clean energy sources such as wind and solar, but those prices are coming down. A 40 cent tax on gas would not have as significant an impact, since gas prices are volatile anyway.
Drum estimates that such a tax would enable the United States to meet it 2025 commitments under the Paris Climate Agreement. The US has pledged to cut emissions between 26 and 28 percent compared with 2005 levels by 2025.
Whether behavior would be changed enough to justify the elimination of regulations such as President Obama’s Clean Power Plan and the EPA’s Corporate Average Fuel Economy (CAFE) standards is more difficult to calculate. Drum calculates that the $40 carbon tax would be similar in impact to power plant regulation, but not sufficient to justify removal of CAFE standards.
Areas for debate
There are many areas of the Republican plan that I would debate. A carbon tax is not the only way to approach climate change, but it is a rational place to begin the debate.
- I would push for a tax greater than $40 to accelerate the impact, or corresponding incentives to businesses for energy research and development or to consumers for the purchase of electric cars or solar energy. This would accelerate the changeover of our energy infrastructure and the increase in global termperatures.
- A carbon tax would be a regressive tax because it would impact those who spend a greater proportion of their incomes on energy. For that reason I would suggest that the rebate program offer more to people with lower incomes to make it progressive.
- I would argue that some regulations be saved. An example is a tax on methane leakage or oversight for oil and gas activities. I would also want the removal of regulation to be slow — after economic benefits have been clearly proven.
- If you’re going to accelerate the demise of fossil fuels, you need to invest in helping individuals and communities deal with the transition. In Montana, there has been a great deal of consternation over the demise of the Colstrip coal facility. This is an inevitability as coal continues its death throes. A plan that takes jobs needs to help people find new ones — training, subsidies and so on.
So here you have a proposal made by conservative Republicans that Democrats would be willing to debate and compromise on to find a solution to a critical problem.
But it can’t happen. It can’t happen because Republicans in Congress refuse to accept climate change and would never consider such a tax, reasonable as it may be.
And why do Congressional Republicans deny climate change? Well, in large part it’s because they are owned by contributions from the oil and gas industry. The US government provides huge subsidies to Big Oil, and they reciprocate by showering members of Congress with big contributions. Montana Senator Steve Daines, a climate denier, is one of the worst offenders.
Science denial is killing us, and one party is responsible for it. Bipartisan solutions that serve the interests of liberals, conservatives, and all people exist. Reasonable people could agree on them.
And liberals and environmentalists need to get on board with this solution as well, even if it did come from a group of Republicans. A coalition of Democrats and traditional conservative Republicans could tip the scale for action away from the deniers.
It’s time for all of us to take our heads out of the sand, recognize science, and get to work saving the planet.