Democrats, please talk about carbon taxes
Or at least think about how you will talk about them in January . . .
It now seems likely that Joe Biden will win the presidency, and there is a reasonable chance that Democrats will capture the Senate as well. If they do get unified control of the government, climate policy will high on their legislative agenda. What is unclear is whether their approach will include a carbon tax. This is troubling, because carbon taxes have very substantial economic and political advantages over other approaches to climate policy.
No doubt many Congressional Democrats understand the arguments for carbon taxes, although some progressives seem to be skeptical of using prices to reduce emissions. Joe Biden’s climate plan says that “polluters must bear the full cost of the carbon pollution they are emitting”, which seems like an oblique reference to a carbon tax. But so far Democrats have been avoiding the “t word” and instead emphasizing subsidies, direct job creation, and social justice, and this will make it difficult to switch gears after the election and implement a carbon tax. The Democrats may be painting themselves into a rhetorical corner.
Any strong climate bill will face real challenges getting through Congress and maintaining political support. Getting a carbon tax through Congress and preventing a public backlash will clearly require an effort to familiarize the public with the idea. I believe this is possible, but Democrats (and Republicans) who support carbon taxation need to think about how and when this conversation will unfold.
Since 1980 the Democrats have had unified government for four years, from 1993 t0 1995 and from 2009 to 2011. They have very little experience with this, so articles like this are important. They used the first period, under Bill Clinton, to change taxes, leading to a projected $5.6 trillion surplus when Clinton left office in 2001. In the second period, they passed a Republican health care plan, Obamacare, and little else. They really didn’t have unified control during the entire two years because of the death of Ted Kennedy.
Besides climate issues, I would put voting reforms and union card check provisions high on their list for first 100 day legislation.
Carbon taxes are a no brainer if and only if you redistribute the funds as a national dividend. Then you will be combating the two biggest problems our society faces (ignoring corona for the moment), global warming and inequality. Otherwise the solution to one, will make the other one worse.
Ignore climate change.
Strive for clean air, water, and land.
Doing so will take care of the climate change issue.
Unless this recession is to be reversed in a moment, the economic harm done to large numbers of households will be severe. I would think that suggesting there will be a meaningful tax increase on energy would be highly harmful politically and actually if implemented.
Also, looking to the results abroad, I know of no reason an energy tax should be more effective than direct regulation.
Since a carbon or energy tax would be regressive and since we are so economically unequal a country, a meaningful energy tax would seem likely to be a serious problem in many households. At the least, there would be serious concern about rising energy costs in many households.
Anne, most proposals for a carbon tax (across the political spectrum) call for a rebate of carbon tax revenue, and a tax with a per capita rebate is actually quite progressive, as Reason notes. Although some carbon tax proposals call for using the revenue for green investments of various kinds, most of the revenue from a significant tax would have to be rebated, for the reasons you highlight. But a carbon tax with a dividend or rebate is a way of achieving two Democratic goals.
Reason:
Carbon taxes are a no brainer if and only if you redistribute the funds as a national dividend.
Eric Kramer:
But a carbon tax with a dividend or rebate is a way of achieving two Democratic goals.
[ Promising proposal, seemingly designed for this time. Agreed. ]
http://www.nytimes.com/2009/12/07/opinion/07hansen.html
December 7, 2009
Cap and Fade
By JAMES HANSEN
http://www.nytimes.com/2009/12/07/opinion/07krugman.html
December 7, 2009
An Affordable Truth
By PAUL KRUGMAN
http://krugman.blogs.nytimes.com/2009/12/07/unhelpful-hansen/
December 7, 2009
Unhelpful Hansen
By Paul Krugman
James Hansen is a great climate scientist. He was the first to warn about the climate crisis; I take what he says about coal, in particular, very seriously.
Unfortunately, while I defer to him on all matters climate, today’s article * suggests that he really hasn’t made any effort to understand the economics of emissions control. And that’s not a small matter, because he’s now engaged in a misguided crusade against cap and trade, which is — let’s face it — the only form of action against greenhouse gas emissions we have any chance of taking before catastrophe becomes inevitable.
What the basic economic analysis says is that an emissions tax of the form Hansen wants and a system of tradable emission permits, aka cap and trade, are essentially equivalent in their effects. The picture looks like this:
[ https://www.princeton.edu/~pkrugman/captrade.png
Price, quantity, and demand for emissions ]
A tax puts a price on emissions, leading to less pollution. Cap and trade puts a quantitative limit on emissions, but from the point of view of any individual, emitting requires that you buy more permits (or forgo the sale of permits, if you have an excess), so the incentives are the same as if you faced a tax. Contrary to what Hansen seems to believe, the incentives for individual action to reduce emissions are the same under the two systems.
This is true even if some emitters are “grandfathered” with free allocations of permits, as will surely be the case. They still have an incentive to cut their emissions, so that they can sell their excess permits to others.
The only difference is the nature of uncertainty over the aggregate outcome….
* http://www.nytimes.com/2009/12/07/opinion/07hansen.html
If the Dems come out of the gate with a lot of tax increases, they will lose the House two years after. Make sense? Forget about logic.
Suggestion: roll the tax code back to the pre-Trump code immediately, and then phase in business taxes starting the second year.
Just saying.