Opinion: A climate skeptic calls for a carbon tax

Gas station-1154

Citgo gas station in Meriden, Connecticut. A tax on fuels could boost the economy and provide "climate insurance," says one climate skeptic. Photo courtesy Marcus Balcher/flickr.

March 25, 2016

As tax day approaches, one climate skeptic explains how a carbon tax could really benefit the economy.

By Warren Meyer
The Daily Climate

I am not deeply worried about man-made climate change. But I am appalled at all the absolutely stupid, counter-productive things our government has implemented in the name of climate change. The net effect is a costly distortion of the economy with extremely little effect on man-made greenhouse gas production. 

A very low cost, even negative cost, climate insurance policy.

For example:

  • Corn ethanol mandates and subsidies, which study after study have shown to have zero net effect on CO2 emissions. Even Koch Industries, one of the largest beneficiaries of this corporate welfare, has called for their abolition.
  • Electric car subsidies, 90 percent of which go to the wealthy to help subsidize their virtue.
  • Subsidies for wind power, so unpredictable that fossil fuel plants still have to be kept running on hot backup and whose blades are a serious threat to endangered birds.

For years I have opposed steps like a federal carbon tax or cap and trade system because they are unnecessary given the modest amount of man-made warming I expect over the next century.

But I am exhausted with all the stupid, costly, crony legislation that passes in the name of climate change action. I am convinced there is a better approach that will have more impact on man-made CO2 and simultaneously will benefit the economy vs. our current starting point. So here goes:

1. Impose a federal carbon tax on fuel.

I am open to a range of actual tax amounts, as long as my second point, below, is also included. Something that prices CO2 between $25 and $45 a ton seems to match the mainstream estimates out there of the social costs of CO2. I am even open to making biofuels tax exempt, given these fuels are recycling carbon from the atmosphere.

With a carbon tax, government doesn't have to figure out whether gas is better than coal or conservation is better than solar. Different approaches will be tested in the marketplace. Cap and trade could theoretically do the same thing, but it has too many opportunities for cronyism, too much weird accounting for things like offsets, and too much temptation to pick winners and losers.

2. Offset 100 percent of carbon tax proceeds against the payroll tax

Taxes-350Many politicians would love a big new pool of money they could use to send largess, from more health care spending to more aircraft carriers, to favored constituents. But we simply are not going to get conservatives (and libertarians) on board for a net tax increase, particularly one to address an issue many say is not an issue at all. So use carbon tax revenues to reduce other federal taxes.

The best choice: Reduce the payroll tax. First, the carbon tax will necessarily be regressive (as are most consumption taxes) and payroll taxes are the most regressive other major federal taxes. Offsetting income taxes would likely be a non-starter on the Left, as no matter how one structures the tax reduction, the rich would benefit most since they pay most income tax.

There is another benefit of reducing the payroll tax: We replace a consumption tax on labor with a consumption tax on fuel. This swap might even have net benefits for the economy – i.e. we might want to do it even if there was no such thing as greenhouse gas warming. For most people, the primary single metric of economic health is the unemployment rate. Replacing a disincentive to hire with a disincentive to use fuel could well be popular.

3. Eliminate all the stupid stuff

Obama Solyndra-550

This might be the hardest part politically. Every subsidy, no matter how idiotic, has a hard core of beneficiaries who will defend it to the death -- this the concentrated-benefits/dispersed-cost phenomena that makes government programs hard to trim. But let's be bold: Eliminate all current federal subsidies, mandates, and prohibitions that have been justified by climate change. Say farewell to ethanol mandates, solar subsidies, wind subsidies, EV subsidies, targeted technology investments, coal plant bans, pipeline bans, drilling bans. It all should go. The carbon tax does the work.

States can continue to do whatever they want – we don't need the Feds to step on states any more than they do already, and I continue to like the 50 state laboratory concept. If California wants to continue to subsidize wind generators, let them do it. That is between the state and its taxpayers (and for those who think the California legislature is crazy, that is what U-Haul is for).

4. Revamp our nuclear regulatory regime

As much as alternative energy enthusiasts would like to deny it, the world needs reliable, 24-hour baseload power – and wind and solar are not going to do it without a drastic change in storage technology. The only carbon-free baseload power technology viable today is nuclear.

I will observe that nuclear power suffers under some of the same problems as commercial space flight – the government helped force the technology faster than it might have grown organically on its own, which paradoxically has slowed its long-term development. 

I am not an expert on nuclear regulation, but a regime similar to aircraft safety, where a few designs are approved and used over and over, makes sense. France followed this strategy. And today 80 percent of the French electric grid is fed by carbon-free nuclear energy.

China Mask-4505. Help clean up Chinese (and Asian) coal production

One of the hard parts about fighting CO2 emissions is that we simply don't know how to combust fossil fuels without creating CO2. But we do know how to burn coal without tons of particulates and smog and acid rain -- and we know how to do it economically enough to support a growing, prosperous modern economy.

In my mind it is utterly pointless to ask China to limit their CO2 growth. China has seen the miracle over the last 30 years of having almost a billion people exit poverty. This is an event unprecedented in human history, and they have achieved it in part by burning every molecule of fossil fuels they can get their hands on. For good reason they are unlikely to accept limitations on fossil fuel consumption that will derail this economic progress. 

But it is reasonable to help China stop making their air unbreathable, a goal entirely compatible with continued economic growth. In 20 years, when we have figured out and started to build some modern nuclear designs, I am sure the Chinese will happily copy these and start working on their CO2 output. But for now they should focus on breathable air.

As a bonus, this would pay one immediate climate change benefit that likely would dwarf the near-term effect of CO2 reduction. Right now, much of this soot from Asian coal plants lands on the ice in the Arctic and Greenland. This black carbon changes the albedo of the ice, causing it to reflect less sunlight and absorb more heat. The net effect is more melting ice and higher Arctic temperatures. We can help solve that by cleaning Asia's coal habit.

Final thoughts

I am exhausted with all the stupid, costly, crony legislation that passes in the name of climate change action. I am convinced there is a better approach.

At its core, this is a very low-cost, even negative-cost, climate insurance policy. The carbon tax combined with a market economy does the work of identifying the most efficient ways to reduce CO2 production. The economy benefits from the removal of a myriad of distortions and crony giveaways, while also potentially benefiting from the replacement of a consumption tax on labor with a consumption tax on fuel. The near-term effect on CO2 is small (since the US is only a small part of the global emissions picture), but actually larger than the near-term effect of all the haphazard current programs. It is almost certainly cheaper to obtain. As an added benefit, if you can help China with its soot problem, we could see immediate improvements in probably the most visible front of man-made climate change: In the Arctic.

Perhaps the hardest thing to overcome in reaching a compromise here is the tribalism of modern politics. This is a sensible plan that should be acceptable to those who believe man-made global warming is a total myth (a group to which I do not belong). But the winner-takes-all mentality of today's partisan politics prevents that. I consider myself pretty free of team politics, but my first reaction when thinking about this was, "What? We can't let those guys win."

Then I thought of a customer who called my company. She was livid, and I ended up giving her a full refund and a certificate to come back and visit us in the future. I suspected there was more to the story, but I didn't want a bad review. The customer was happy, but my manager was not. "That was a bad customer!" my manager said. "She was lying to you. How can you let her win like that?" Sound familiar? I think we fall into this trap all the time in modern politics, worried more about preventing the other team from winning than about doing the right thing.

And a revenue-neutral carbon tax is the right thing.

Warren Mayer writes and publishes the Coyote Blog, where a longer version of this piece originally appeared. Views expressed are those of the author and not DailyClimate.org or EHN.org.

Photos, from top: Tax form courtesy John Morgan/flickr. President Obama examining a solar panel with Solyndra Chief Executive Officer Chris Gronet (blue shirt) and Executive Vice President Ben Bierman in Fremont, California in 2010 courtesy Lawrence Jackson/White House. Woman in a mask, courtesy Nicolo Lazzati/flickr

The Daily Climate is an independent, foundation-funded news service covering energy, the environment and climate change. Find us on Twitter @TheDailyClimate or email editor Brian Bienkowski at bbienkowski [at] EHN.org

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