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NEW STUDY: THE CONSERVATIVE CASE FOR A CARBON TAX

NEW STUDY: THE CONSERVATIVE CASE FOR A CARBON TAX

From the study:

Today, the Niskanen Center released a study I wrote arguing that Congressional Republicans should put forward a carbon tax and conservatives should throw themselves into getting it passed. Better to let market actors decide (in response to price signals) where, when, and how greenhouse gas emissions are controlled than have government bureaucrats do the same via regulation. The carbon tax bill I have in mind would:

Levy the carbon taxes at the point of production;
Use tax proceeds to offset revenue losses from tax cuts so as to ensure revenue neutrality;
Impose charges on imported goods the equivalent of what they would have had to pay had the imported goods been produced in the United States;
Rebate some portion of the tax to poor households to mitigate against the regressively of the tax;
Eliminate EPA’s regulatory authority over greenhouse gas emissions;
Eliminate green energy subsidies and tax preferences;
Eliminate energy efficiency standards;
Repeal the Corporate Average Fuel Economy Standards (CAFE); and
Preempt state renewable energy portfolio standards.
Many conservatives, like my friend Jeffrey Miron, have argued that no matter how compelling the case for a carbon tax might be, it will be rendered intolerable by the time it emerges from the legislature. Politics, not economics, will dictate the tax rate. Exceptions and favors for politically popular industries will litter the code. And despite promises to the contrary, the inefficient regulations will never die.

Economist Tom Tietenberg of Colby College examined the literature pertaining to the 15 major pollution tax and fee programs instituted worldwide and found that while concerns about the translating of economic theory into political practice are not baseless, they are overstated.

The cost savings from moving to these market-based measures are considerable, but less than would have been achieved if the final outcome were fully cost-effective. In other words while both taxes and emissions trading are fully cost effective in principle, in practice they fall somewhat short of that ideal in part because actual designs, fashioned in the crucible of politics, deviate from the dictates of optimality.
Harvard economist Robert Stavins’ review of the literature tracks Tietenberg’s.

The performance to date of market-based instruments for environmental protection provides valuable evidence for environmentalists and others that market based instruments can achieve major cost savings while accomplishing their environmental objectives.
Conservatives fear that carbon taxes will prove irresistible to politicians in search of revenue and that they will rise far beyond what is merited by the science. But conservatives have less reason to fear runaway taxation than they have to fear runaway regulation. It is more difficult to increase taxes than to increase regulation because the former imposes politically visible costs while the latter imposes politically invisible costs. Public opposition to tax increases—and corresponding support for increased regulation—is well known.

Conservatives are right to fear that special interests will attempt to carve out exemptions to the tax. But those rent-seeking operations could be frustrated to a large extent if the carbon tax were imposed at the point of production. It would be quite difficult for political actors to provide exemptions to favored consumers from taxes already paid upstream.

In any event, regulatory rent seeking is an omnipresent phenomenon that is inescapable in a modern democracy. Preemptively saying “no” to policy reforms that might invite special interests to seek regulatory or tax favors is to preemptively say “no” to government. Given that conservatives are not anarchists, this objection should not deter reformers from exploring positive policy reforms.

Conservatives can support positive, well-executed policy reform and oppose poorly executed, counterproductive policy reform at the same time. The proposition that the former is impossible to imagine and the latter is inevitable is belied by experience. If an otherwise positive policy reform agenda were to degrade in the course of moving through the legislature, conservatives can withdrawal their support.

Perhaps the most often heard conservative objection to a carbon tax in lieu of command-and-control regulation—at least among Washington insiders—is that the entire political exercise is doomed to failure. Environmentalists, they say, would never agree to the sort of plan envisioned here. In the course of failing, conservatives will undermine legislative opposition to naked carbon taxes and other regulatory interventions to address climate change. The cost of a failed policy offensive will put conservative politicians on a slippery political slope that they will be unable to successfully navigate.

Although slippery slope concerns should be taken seriously, they are not compelling in this case. UCLA law professor Eugene Volokh offers three criteria for determining when one might be on the sort of slippery slope envisioned here. He finds that the slope will be most slippery when:

People think that they lack enough information to independently assess an issue;
People don’t already feel strongly about the topic; and
People take a pragmatic rather than ideological stance on the matter.
None of those characteristics describe congressional opponents of carbon taxes (or other consumption taxes). Nor do they describe the climate skeptics in the conservative movement. But those are the two groups that conservatives worry about losing in the advent of a failed attempt at policy reform. As long as anti-tax conservatives can rally a filibuster in the Senate, there is little chance that this nightmare scenario will come to pass. It is hard to imagine such a total collapse in the conservative position from a failed carbon tax deal.

If the slippery slope argument employed by conservatives is taken at face value, any effort at finding compromise—in any policy arena—risks undermining the conservative position. This road, however, leads to legislative paralysis. Any attempt to pass legislation requires some degree of compromise with the opposition, and compromises demand concessions. There will never be enough conservative votes to steamroll the opposition.

Even if you don’t believe that climate change is a problem worth addressing, you should still embrace something like the plan I outlined in my study. As my friend and Niskanen Center advisory board member John Cochrane says to those who believe doing anything about climate change is a waste of money, “Look, if we’re going to waste money, let’s minimize the damage.”

Read the full study http://1uad6j1oqspx17mxgkjacp15.wpengine.netdna-cdn.com/wp-content/uploa... (warning PDF)

bigd | 31 mars 2015

SamO A few good ideas in the synopsis you have places before us. However, I have a few comments on the 3 out of the top 4. Please be so kinda on as to elaborate on my comments sir.

"Levy the carbon taxes at the point of production;" And as always the prices will go up. The producers will build the tax cost into the sells cost.

"Use tax proceeds to offset revenue losses from tax cuts so as to ensure revenue neutrality;" How about cutting spending rather then offsetting with another tax. As stated before, the price goes up so the middle class receives no benefits and hit hardest again. Thus, this is far from revenue neutral.

"Rebate some portion of the tax to poor households to mitigate against the regressively of the tax;" Just another form of transfer of wealth. Not to mention the middle class will be hit with higher energy bills and no refund as they are not "poor".

Dramsey | 31 mars 2015

Interesting proposal. I like most of it. However, one thing kinda jumped out at me:

Impose charges on imported goods the equivalent of what they would have had to pay had the imported goods been produced in the United States;

Can you say "retaliatory tariff war"? I knew you could.

Brian H | 1 avril 2015

Since CO2 production is tied directly to the economy's productivity, the carbon tax strikes at its base. Success = lowered productivity. Dumb.

Grinnin'.VA | 1 avril 2015

@ Brian H | April 1, 2015

Dumb.

= you.

7thGate | 1 avril 2015

I generally like this proposal, it does the best you can do to tie costs to the problem. I especially like the part about repealing energy efficiency standards, as while energy efficiency is a good thing, it does not always make engineering or economic sense. Blanket mandates end up forcing everyone to comply, even when they are a special case that gets no benefit. By adding a cost to the carbon source, someone can just pay more to get what is best for them if the cost is worth it.

The best example of this I can think of is the lightbulb efficiency standards. Personally, I love LEDs, and all future bulbs I buy will be LEDs due to the energy efficiency and lifetime benefits. However, in my current living situation, LEDs are no more energy efficient than incandescents for over half the year.

Why? I am in an apartment with electric heat, something I cannot change. The reason incandescent bulbs are not as energy efficient as CFLs or LEDs is that they are both tiny electric heaters and light sources (well, every lightbulb is, but incandescents have a much higher heater/light ratio). This makes them very inefficient if you just want the light output, but very efficient if you need both the heat and the light. If I had gas heat or another heating source that was cheaper and more efficient than electricity, I could capture the savings difference between the cost of heating with my lightbulbs and my heater, but I don't. Any excess heat "wasted" by the lightbulbs just drives down the amount of heat my radiator has to give off. It is actually probably more efficient because the lightbulbs are distributed around the room and the radiator is in one location. As a result, if its cold enough I need to run the heater, my energy "savings" from LEDs are 0.

Now, I already owned CFLs and LEDs coming into this living arrangement, so I'm not going to run out and buy a bunch of incandescents (not that I could easily do that, anymore). But there is no efficiency gain over incandescents for me for half the year, and there are plenty of people in that situation. Mandating lightbulb efficiency standards forces everyone to comply to something that might not make sense for them, where a carbon tax on the energy would allow someone to weigh the cost and do the smart thing for them in a given situation. One size rarely fits all, and a carbon tax would provide an incentive to reduce unnecessary emissions without forcing people to do things that don't necessarily make sense.

spacevertex | 1 avril 2015

It's a well thought of proposal, just like all well thought of proposals, it would find itself wanting for lack of political consensus.

This burden should be borne by the citizens of having the capacity to make sane choices, to purchase goods that are beneficial to the self and environment, that would be a bigger catalyst than any law or regulation.

Industry then would automatically converge to fulfil the consumer demand and the desired objectives would be met by market forces rather than by regulation.

Regulation and carbon tax is indeed welcome however citizens should not wait for its enablement and implementation to start making rational purchase decisions.

The success of Tesla & SolarCity is itself one such consumer driven example of citizens of the world making sane choices.

SamO | 1 avril 2015

@spacevertex,

+1. Just start to vote with your dollars.

Grinnin'.VA | 1 avril 2015

Bah! Humbug! Or B.S. Take your pick.

Dwdnjck@ca | 1 avril 2015

As we have seen today in Arkansas, A Republican legislature will only do something rational when Walmart Tells them to.

Mike83 | 1 avril 2015

LOL

Red Sage ca us | 3 avril 2015

Laws and regulations are too often used as exemption delivery devices covering the interests of the very entities they are supposedly meant to regulate.

drax7 | 3 avril 2015

Vote with your dollars, burning 90 mln barrels of crude oil per day cannot be good
For the environment . 1 barrel produces 20 gallons of gasoline. That is a lot
Of burning, coupled with square miles of plastic flotsam on the ocean surface.

Focus on the destruction of the environment , much easier to relate to
Then climate change .

spacevertex | 3 avril 2015

It's a false choice you are recommending.

Just because the curtains & a section of carpet of one room in the house is on fire due to a leftover cigarette bud and simultaneously if water is overflowing from the clogged kitchen sink creating a mini-flood enough to reach the skirting level electrical socket does not mean one can avoid either of the two issues.

Both have to death with, both are critically important. The relief is that some members of the house will tend to douse the fire, while other will cut of the electricity and then unclog the drains.

spacevertex | 3 avril 2015

off

spacevertex | 3 avril 2015

others

SamO | 3 avril 2015

Climate Risks as Conclusive as Link between Smoking and Lung Cancer
U.S. scientists say the evidence linking rising levels of greenhouse gases and global warming is as strong as the link between smoking and lung cancer

http://www.scientificamerican.com/article/climate-risks-as-conclusive-as...

Brian H | 4 avril 2015

Except that cancer deaths are real, and unwanted and harmful warming is not. To the extent minor additions of GHGs have effects, they are beneficial.

Grinnin'.VA | 4 avril 2015

@ Brian H | April 4, 2015

To the extent minor additions of GHGs have effects, they are beneficial.

Try selling that to the 50 million people in the western U.S. who are now suffering through the worst drought in modern history. Or to the people in southern Florida who are now undertaking expensive projects to try to keep the Atlantic Ocean from routinely flooding their habitat.

Why do you keep trying to peddle this B.S.?

SamO | 4 avril 2015

Because he's a liar and a troll. And even though I can't prove it, likely an astroturfer as we'll.

Astroturfing is the attempt to create an impression of widespread grassroots support for a policy, individual, or product, where little such support exists. Multiple online identities and fake pressure groups are used to mislead the public into believing that the position of the astroturfer is the commonly held view.

Although usually associated with the internet, the practice has been widespread ever since newspaper editors first invented the letters page. Pick up any local paper around the time of an election and you will find multiple letters from "concerned residents of X" objecting to the disastrous policies of Y. Similarly, concerned residents often turn up on talk radio shows and even in campaign literature, although the latter can prove more dangerous, as Labour party activists posing as residents in Greenwich discovered a few years back.

To overcome these dangers, most astroturfing now takes place on the forums and comment sections of blogs and newspaper websites. Here, individual astroturfers can leave comments under numerous identities with little fear of discovery.

Brian H | 4 avril 2015

There are no connections between climate change and the little CA drought; that is historically the normal for the area. Stupid assertions of Alarmists to the contrary.

As for astroturfing, leftist-Alarmist pay-for-posting is documented; none for skeptics. Another prevarication SamO spreads to his fellow Suckers/Believers. Just like all the imaginary Koch funding.

bigd | 4 avril 2015

Grinnin'.VA "Try selling that to the 50 million people in the western U.S. who are now suffering through the worst drought in modern history" You are intelligent so trying not to get into an argument with you. However, even NASA and NOAA have said the drought is not an AGW event.

bigd | 4 avril 2015

Red Sage ca us | April 3, 2015

"Laws and regulations are too often used as exemption delivery devices covering the interests of the very entities they are supposedly meant to regulate" for 2016

SamO | 5 avril 2015

Causes of California drought linked to climate change, Stanford scientists say

The extreme atmospheric conditions associated with California's crippling drought are far more likely to occur under today's global warming conditions than in the climate that existed before humans emitted large amounts of greenhouse gases.

The research, published on Sept. 29 as a supplement to this month's issue of the Bulletin of the American Meteorological Society, is one of the most comprehensive studies to investigate the link between climate change and California's ongoing drought.

http://news.stanford.edu/news/2014/september/drought-climate-change-0929...

it took me less than five seconds to falsify another one of bigd(ipshit's) statements.

That's a new record.

Mike83 | 5 avril 2015

SamO here is a link with some amazing pictures of the California drought.

http://www.nytimes.com/2015/04/05/us/california-drought-tests-history-of...

Grinnin'.VA | 5 avril 2015

@ bigd | April 4, 2015

Grinnin'.VA "Try selling that to the 50 million people in the western U.S. who are now suffering through the worst drought in modern history" ... However, even NASA and NOAA have said the drought is not an AGW event.

Please provide a link or reference to a scientific source for this claim.

SamO | 5 avril 2015

@Mike83,

thanks. Living in California, I've seen first hand the destruction being wrought by the loss of snow pack,

@grinnin'

You can ask, but these trolls are all sizzle and no steak.

bigd | 5 avril 2015

Grinnin "The ongoing drought in California is caused by natural factors and not global warming, according to a study sponsored by the National Oceanic and Atmospheric Administration (NOAA) of the United States Department of Commerce."

"It's important to note that California's drought, while extreme, is not an uncommon occurrence for the state. In fact, multi-year droughts appear regularly in the state's climate record, and it's a safe bet that a similar event will happen again," said lead author of the study Richard Seager, who is also a professor at the Lamont Doherty Earth Observatory at Columbia University."

http://www.techtimes.com/articles/21779/20141209/california-drought-due-...

Brian H | 5 avril 2015

This makes me laugh. The very act of citing a drought as evidence of GW betrays total climate science ignorance, in the first place. Droughts result from dry air mass, produced by cooling, not warming. All the above who don't know this are disqualified from any discussion of climate, as numpties and neophytes.

Grinnin'.VA | 6 avril 2015

@ bigd | April 5, 2015

Grinnin "The ongoing drought in California is caused by natural factors and not global warming, according to a study sponsored by the ... NOAA ...."

You're cherry picking. Other climate scientists have said that global warming increases the likelihood of such droughts.

"..., while extreme, is not an uncommon occurrence for the state. In fact, multi-year droughts appear regularly in the state's climate record, ..."

The current California drought is NOT a common "occurrence for the state". It's the worst ever recorded. So bad that farmers are pumping enough ground water to irrigate their crops that the ground is sinking. And of course, they regularly need to drill down deeper to find the water to pump out. Bottom Line: What's happening in prime California farmland is NOT sustainable!

FREE ENERGY | 6 avril 2015

Its not about the climate, its about capitalism (Naomi Klein)

MitchP85D | 6 avril 2015

If California would sell their water at market price instead of the government controlled price, then the state would have a much more efficient use of the ever so important resource. But due to their government controlled price, their precious resource got wasted, and now they are "up the creek" when they encounter a bad drought.

By the way, AGW theory predicted floods and mudslides for California, figuring the El Ninos would be much stronger. However, the opposite is happening. Maybe government officials would do well not to put so much stock into AGW predictions.

7thGate | 6 avril 2015

I think the AGW prediction is generally that california and the southwest will become increasingly drier, while the rest of the country will become wetter during winter and be about the same or slightly drier in the summer. At least, that's what the 2007 IPCC precipitation response prediction map looks like to me. Perhaps we just need to build a pipeline to sell all the snow Buffalo doesn't want to californian farmers (only kind of kidding...I mean, transportation costs probably make that unworkable, but maybe you could pull water from somewhere a little closer that is projected to see increases due to AGW). Or California could desalinate, which I think they're starting to slowly do; desalinated water is much more expensive that pulling it out of a river, but it would still barely cost anything to maintain even an extravagant American water use lifestyle off it.

bigd | 6 avril 2015

Grinnin "worst drought in modern history" --- "Using a tree-ring-based drought record from the years 1000 to 2005 and modern records, scientists from NASA and Lamont-Doherty Earth Observatory found the 1934 drought was 30 percent more severe than the runner-up drought (in 1580) and extended across 71.6 percent of western North America. For comparison, the average extent of the 2012 drought was 59.7 percent. "The abnormal high-pressure system is one lesson from the past that informs scientists' understanding of the current severe drought in California and the western United States."

"What you saw during this last winter and during 1934, because of this high pressure in the atmosphere, is that all the wintertime storms that would normally come into places like California instead got steered much, much farther north,” Cook said. “It's these wintertime storms that provide most of the moisture in California. So without getting that rainfall it led to a pretty severe drought.""

http://www.nasa.gov/content/goddard/1934-had-worst-drought-of-last-thous...

Grinnin'.VA | 6 avril 2015

@ bigd | April 6, 2015

You're cherry picking from the report.

It also says that AGW is likely to increase the severity of droughts in California. Which just happens to be what California's farmers are experiencing.

Brian H | 6 avril 2015

Droughts are characteristic of cooling periods and La Ninas. Get educated. BTW, the longest recorded drought in the area is two centuries long, long before SUVs.

gdubcobra1 | 6 avril 2015

I told you guys. The gov is broke, so they are creating more taxes