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It’s now well-established that large-scale U.S. production of biofuels such as ethanol from corn has accomplished little or nothing (or even negative) in its stated goals of reducing oil dependence and cutting emissions of greenhouse gases, and has functioned instead as a full-employment program for agribusiness (and a political production racket for Iowa and other corn-growing states).

The most recent confirmation comes in Climate consequences of low-carbon fuels: The United States Renewable Fuel Standard, an article by researchers at the University of Minnesota in the Oct. 2016 peer-reviewed journal Energy Policy. As neatly summarized in Climate Central, they found that the Renewable Fuels Standard has cut U.S. oil demand only slightly since 2006 and has even caused a net increase in our total greenhouse gas emissions. The culprits: ethanol’s low Btu content, its high energy-production inputs, and the “rebound effect” of subsidized gasoline leading to higher consumption. And the researchers deliberately excluded CO2 emissions from burning the ethanol in car engines, making their findings of a net increase in GHG’s even more damning.

This is important context for the thorny question of whether, and how, carbon emissions from burning bioenergy — renewable energy made available from materials derived from biological sources (a category that includes both biofuels like ethanol and biomass like wood used to generate electricity) — should be included in prospective carbon taxes. It may help to break down the issue into a series of questions:

• Would carbon-taxing bioenergy act as a brake on monocrop agriculture for growing biofuels or large-scale forest-cutting for harvesting biomass?
• Should credits or offsets be offered for carbon sequestered by growing crops for biofuel or trees for biomass?
• Or should some or all bioenergy sources be exempted from carbon taxes because they are or might be roughly carbon-neutral?

The remains of an Indonesian rain forest that was cleared to make way for oil palms to supply biofuels for U.S. and European diesel vehicles. Credit: Ashley Gilbertson/VII, for The New York Times. The photo accompanied a NYT Magazine article referenced and linked further below.

The debate over biofuels and economics has tended to focus on mandates and subsidies rather than carbon taxes — unsurprisingly, given the absence of carbon-taxing in the U.S. and the prevalence of large biofuel subsidies, primarily via the Renewable Fuel Standard. Mandates and outright subsidies alike override market price signals in the face of strong evidence, such as the U of Minnesota study noted above, that biofuels’ lifecycle emissions often exceed those of fossil fuels they displace. Analysis of land use changes induced by biofuels mandates has raised additional doubts about net climate benefits as well as concerns that biofuel crops are displacing food crops.

Then there are regulatory or legislative pressures on EPA to categorize biomass burning as carbon-neutral in the regulations that comprise the Clean Power Plan. This prospect has spurred a pushback campaign over lifecycle emissions of biomass.

Let’s start with the fact that combusting biofuel or biomass into bioenergy releases carbon dioxide, just as combustion of fossil fuels does. Unlike fossil fuels, however, the plant sources of bioenergy sequester carbon, through photosynthesis. A “carbon neutral” bioenergy source would be one that sequestered as much carbon in its growth cycle as it released later when burned as fuel, with the sequestering occurring concurrently with the burning, or nearly so, rather than decades hence, when the negative emissions count for less in stabilizing atmospheric CO2 levels.

Even short of that ideal, burning biofuel or biomass that has sequestered a significant part of the CO2 emitted in combustion might seem preferable to burning fossil fuels. On the other hand, combustion of forest biomass emits up to 45% more CO2 than coal when used to generate electricity, according to some estimates, primarily because the fuel’s high moisture content results in poorer combustion efficiency. And given the diversity and complexity of our and other countries’ energy systems, it’s not at all clear that burning biomass or biofuels would substitute for fossil fuels in the first place.

Biofuels – Driven by Mandates and Subsidies

Buckling to pressure from agribusiness and farm-state senators and representatives, but also citing biofuels’ asserted climate and energy-security benefits, Congress included a “Renewable Fuel Standard” in the Energy Policy Act of 2005. The standard mandated annual production of 7.5 billion gallons of biofuel by 2012, a figure raised to 9 billion gallons for 2008 and 36 billion gallons by 2022. (For comparison, autos and light trucks, which account for just under half of U.S. consumption of petroleum products, burned 140 billion gallons of gasoline in 2015.)

In addition to mandates, biofuels are boosted by subsidies, most notably the “Production Tax Credit” for renewable energy. It amounts to a subsidy of roughly one dollar per gallon of ethanol, and an even larger subsidy for biodiesel of roughly two dollars per gallon.

While it takes anywhere from months to decades for plants to sequester carbon through photosynthesis at scale, the combustion and release of carbon’s combustion product, carbon dioxide, happens in seconds. And ramping up production of biofuels and biomass shifts land out of other carbon-sequestering uses, typically forests or food crops. Even under optimistic assumptions about timing and baseline scenarios, it’s clear that little if any large-scale production of biofuels or biomass anywhere in the world even approaches carbon-neutrality.

Cornell biology professor David Pimentel and U-C Berkeley engineering professor Tad W. Patzek concluded in a detailed analysis published in 2005 in Natural Resources Research that production of leading biofuels uses more fossil fuel inputs than they displace, i.e., that their lifecycle emissions exceed those of fossil fuels. While this finding has been challenged by subsequent analysis that assumed more efficient farming and production methods, it sparked much-needed scrutiny of the assumption that biofuels are carbon-neutral.

Sources: Calculated from EIA, Monthly Energy Review, August 2012, Ethanol Consumption, Table 10.3.

The predominant biofuel produced in the U.S. is ethanol derived from corn. Ethanol is now blended into almost all gasoline sold here and accounts for roughly 10% of total U.S. motor fuel. The modern industrial corn production cycle is extremely carbon-intensive; equipment for harvesting corn is fuel-powered, as are fermentation and distillation of corn into ethanol. In addition, corn plants deplete soil nitrogen, which must be replaced by constant doses of fertilizer. A principal fertilizer feedstock, hydrogen, is derived from natural gas. Indeed, the corn-to-ethanol production cycle is so carbon-intensive that a carbon tax applied to its fuel inputs (including natural gas) would internalize much of ethanol’s climate cost, obviating somewhat the need for a tax on the end-product.

Other bioenergy fuels such as wood chips, cellulosic ethanol, methanol, sugar cane and biodiesel have their own distinct lifecycle fuel inputs and carbon emissions, raising the thorny issue of assessing and taxing their lifecycle carbon emissions.

Debate Over Bioenergy’s Net Climate Impacts

Notwithstanding critiques of about biofuels’ net-energy value by Pimentel and a handful of other researchers, bioenergy was favorably viewed in energy circles until recently on account of its being domestic, abundant and non-fossil. That consensus was eventually undermined by Tim Searchinger at Princeton and Joseph Fargione of the Nature Conservancy. Their analyses, first published in 2008 and updated in a 2015 working paper from the World Resources Institute, underscored the importance of accounting for greenhouse gas emissions resulting from:

• converting land to biofuels production, e.g., burning tropical rainforest to clear land for sugarcane production;
• loss of existing carbon sequestration capacity of forests, grasslands and even food crops;
• land use changes to boost food production abroad to replace lost exports when U.S. land is shifted to biofuels.

Searchinger’s and Fargoine’s analyses sparked widespread criticism of biofuels mandates and subsidies. Biofuels interests countered that some crops can yield both food and biofuels and that increased yields can avoid or mitigate the need for additional acreage. The critics responded that removing all biomass from land reduces the carbon sequestration potential of soil; for example, harvesting corn for food and burning the residue (stalks, leaves and cobs) as fuel releases CO2 that would otherwise reside in soil for years or even decades.

Heated debate over biofuel mandates and subsidies continues. A recent controversy centered on EPA’s proposed rule to characterize biomass burning as a carbon-neutral replacement for fossil fuels under the Clean Power Plan — an issue covered in 2016 by the Washington Post and in the same year by New York Times economic columnist Eduardo Porter. In November 2018, the New York Times Magazine published a searing expose of biofuels by ProPublica investigative journalist Abrahm Lustgarten. The long-form story, Palm Oil Was Supposed to Help Save the Planet. Instead It Unleashed a Catastrophe, focused on “industrial-scale deforestation” in Borneo, Indonesia, to clear land for palm oil plantations incentivized by U.S. mandates for biodiesel fuel.

A similar finding about biofuels in general and biodiesel from palm oil in particular was reported by The Guardian in 2016, in EU green transport target ‘may have increased greenhouse gas emissions’:

European Union renewable energy targets may have increased greenhouse gas emissions because the dirtiest biofuels produce three times the emissions of diesel oil, according to the most complete EU analysis yet carried out. Biodiesel made from palm oil emits more than three times as much and soybean oil around twice as much, when the crops’ effects on land use are considered, the research by the Ecofys consultancy for the European commission found. Europe’s aim of sourcing 10% of its transport fuel to “renewables” by 2020 – mostly biodiesel – will foster crop cultivation on 6.7m hectares of forests and grasslands, the paper says. When the loss of trees is factored in, such ‘first generation biofuels’ would generate around nearly 1bn tonnes of CO2 equivalent.”

For comparison purposes, 6.7 million hectares is approximately 26,000 square miles, or an area slightly larger than West Virginia. A billion metric tons of CO2 is approximately 20% of annual U.S. CO2 emissions from fossil fuel combustion.

How Should a Carbon Tax Treat Biofuels and Biomass burning?

Mandates and subsidies for fossil-fuel intensive biofuels such as corn-derived ethanol are so large that eliminating or reducing them would almost certainly do more than a carbon tax to curb these fuels’ artificial price advantage. Similarly, classifying biomass fuels as “carbon neutral” in EPA’s Clean Power Plan regulations would boost that sector more than a well-designed and hefty carbon tax would shrink it.

Nevertheless, a carbon tax shouldn’t compound these perverse incentives by further incentivizing biofuels and biomass to replace fossil fuels. It also shouldn’t dilute the “pull” of a carbon tax toward truly renewable and low-carbon alternatives. Indeed, a carbon tax should, and likely would, encourage production of bioenegy only to the extent it reduces lifecycle CO2 emissions vis-à-vis alternatives that would likely be deployed in their absence.

With these considerations, we outline three options for carbon-taxing bioenergy:

1. We start with a minimal approach that would tax all fossil fuel inputs of bioenergy including those used to manufacture fertilizer for corn grown for ethanol.
2. We then consider adding a simple carbon tax on biofuels’ and biomass’ combustion emissions, regardless of upstream sequestration or emissions.
3. Finally, we sketch a proposal for a carbon tax that would account for lifecycle emissions of bioenergy by category.

1. Leave carbon content of biofuels and biomass untaxed, at least for now, while taxing fossil fuel inputs to biofuel production.

Criticisms of policies that encourage biofuels have appropriately focused on the perverse effects of mandates and subsidies, especially land-use shifts from carbon-sequestering forestry or food production to biofuel crops. These shifts generally cause significant releases of CO2 as forests are cleared (often burned) and their carbon sequestration potential reduced, and as food cropland is converted, necessitating conversion of other land to replace food production. Biofuels can provide net carbon reduction benefits only if they overcome these emissions, amortized over some reasonable time frame.

A meta-analysis in 2011 by World Bank economists concluded that even a global carbon tax of $100 per tonne of CO2 would raise the fraction of global fuel derived from biofuels only minimally, from 5.5% at present to 6.1%. This suggests that current biofuel mandates and subsidies overwhelm whatever effects even a strong carbon tax would have on biofuels in the near to medium term.

This option would emulate British Columbia, Sweden and Demark, which simply exclude biofuels from the realm of fuels whose carbon “content” is taxed. (This should not foreclose possible future taxing of biofuels’ carbon content, once a carbon tax has been enacted and been incremented upward. For example, British Columbia extended its carbon tax to include ethanol and biodiesel in 2010.)

This option also avoids or at least defers the politically-fraught battle over which biofuels are truly beneficial to climate and avoids the complexity of calibrating a carbon tax to fit the estimated lifecycle emissions of different biofuels, as discussed in option 3, below. Note, however, that the substantial fossil fuel inputs to biofuels would be taxed under this option, causing prices of fossil fuel-intensive biofuels to rise in proportion to a carbon tax.

For example, natural gas (methane) used to manufacture fertilizer accounts for roughly 40% of the fossil fuel energy used to produce ethanol from corn. Because using natural gas to make fertilizer results in the same CO2 emissions as combustion, it would be taxed, along with fuel used to process (primarily distill) ethanol.

Under this option, biomass burned for electricity would also remain outside the purview of a carbon tax, with the exception of inputs of fossil fuels used in harvesting and processing biomass for fuel. While this option does not attempt to assess or internalize the lifecycle or land use effects of biofuels and biomass burning, it does avoid the complexities of estimating carbon content and lifecycle emissions that would be required for a carbon tax to withstand WTO scrutiny.

2. Tax approximate CO2 emissions from final combustion of biofuels and biomass based strictly on product type without attempting to account for carbon sequestered during growth cycles or emitted during harvesting, distillation or other chemical processing or land-use impacts.

One obstacle to subjecting combustion and/or production of biofuels and biomass to carbon taxation is the complexity of estimating carbon emissions from each fuel stream. Tracking each fuel’s source and manufacturing process (not just the final commodity), and developing unimpeachable estimates for each, is obviously a daunting challenge — if not a fool’s errand altogether. Attempts to devise such a system would inevitably devolve into litigation and political struggle with differing results in various jurisdictions, impeding the important work of building broad, global political support for carbon taxes.

An alternative is to apply a simple surrogate for the carbon “content” of each biofuel and for each type of biomass. Rather than taking into account lifecycle carbon sequestration and emissions for the various fuel streams, this approach would simply tax them based on the CO2 emissions rates from their final combustion. Although this option would exclude land use and lifecycle emissions that Searchinger and others have suggested can predominate, it would at least preclude the perverse incentive of leaving bioenergy completely untaxed. On the other hand, this option would also exclude the sequestration benefits provided by plant photosynthesis in growing biofuel and biomass crops.

This option would require development of an agreed “schedule” of typical carbon content from various bioenergy products (independent of growing conditions or process). For example, oak pellets would be assigned a particular emissions factor and would be taxed accordingly, regardless of source. Similarly emissions factors would be developed for wood chips, cellulosic ethanol, methanol, sugar cane and biodiesel.

3. Develop a carbon tax framework that estimates net lifecycle CO2 emissions of each biofuel and biomass product while complying with WTO “non-discrimination” provisions.

In addition to taxing emissions from final combustion, this option would tax emissions from production and land use changes, minus credit for the biofuel crop’s estimated carbon sequestration. As in option 2, this would require development of a “schedule” of emissions to reflect typical net emissions from each category of bioenergy. This option would minimize the complexity of assessing the lifecycle carbon of each fuel by source and process by taxing identical biofuel and biomass products within each category at the same rate. It would thus qualify for WTO-sanctioned border tax adjustments because it would not discriminate between identical products based on process or source despite differences in lifecycle emissions.

Conclusion

In some cases, bioenergy appears to offer net climate benefits compared to fossil fuels because of carbon sequestration by plants grown for biofuel and biomass. Nevertheless, the net benefits are severely compromised by bioenergy’s lifecycle emissions from production, processing, land use changes and reduced soil sequestration.

Indeed, mandates and subsidies triggering shifts toward bioenergy have negative side-effects including diverting resources from truly renewable energy sources and efficiency-improvement efforts. Scheduled increases in the Renewable Fuel Standard mandating a tripling of U.S. biofuels production in the next decade would precipitate a massive shift of resources toward biofuels, devastating vast lands, disrupting food markets and jacking up CO2 emissions — as documented so searingly in the NY Times – ProPublica expose of rainforest destruction in Indonesia noted above. EPA currently treats biomass energy (direct combustion of plant material) as carbon-neutral, though the agency was be reconsidering that assumption — at least prior to the advent of the Trump administration. If EPA extends its presumption of carbon-neutrality to its Clean Power Plan rules, some coal burning may shift to biomass, with few or no climate benefits, greater emissions of conventional pollutants and damaging impacts on forests.

As noted earlier, eliminating biofuel mandates and subsidies while uprooting the false assumption of carbon-neutrality from EPA’s Clean Power Plan would do more to reduce the unfair advantages of bioenergy than even the most inclusively-designed carbon tax. Nevertheless, to avoid compounding these perverse incentives, carbon tax policy should attempt to at least roughly account for greenhouse gas emissions from production and combustion of bioenergy.

A minimal first step would be to ensure that all fossil fuel inputs to biofuels are carbon-taxed, including natural gas used as feedstock for ammonia-based fertilizers of corn grown for ethanol. A second, additive step would be to tax the carbon “content” of bioenergy products in the same way their fossil fuel counterparts would be taxed. This would exclude credit for carbon sequestered during plant growth while also excluding taxes on upstream production-related emissions.

A further step would be to develop a product-based approach that accounts for typical carbon sequestration during the growing phase, carbon emissions from processing, and implicit emissions from land use changes as well as combustion emissions for each biofuel and biomass type. This would require both a major analytical effort and a big political push, and it would have to be carefully tailored to meet WTO standards for non-discrimination and, thus, not impede global participation in carbon taxation.

We welcome reader comments and suggestions on this important, complex and politically-fraught topic.

Additional Resources

Climate Central: “Pulp Fiction, The European Accounting Error that’s Warming the Planet” (2015).

Congressional Budget Office: “The Renewable Fuel Standard, Issues for 2014 and Beyond” (2014).

Brookings: Ten years of the Renewable Fuel Standard: What’s been the impact on energy and the environment? (Video of panel discussion featuring Tim Searchinger, 10/16/15).

• Environmental Taxation and the Double Dividend (Lawrence Goulder, Stanford, 1994).  Seminal articulation of the dual benefits of replacing taxes on income and work with taxes to discourage pollution.
• When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets (Ian Parry, Roberton Williams & Lawrence Goulder, Resources for the Future, 1998). General equilibrium modeling demonstrates economic efficiency benefits of pollution taxes with revenue “recycling” to reduce marginal rates of pre-existing distortionary taxes.
• Clean Energy And Jobs: A comprehensive approach to climate change and energy policy (James P. Barrett & J. Andrew Hoerner, Economic Policy Institute, 2002).
• A Proposal for a U.S. Carbon Tax Swap (Gilbert Metcalf, Brookings, 2007).
• Caps vs. Taxes (Kevin Hassett, Steven Hayward, Ken Green, AEI, 2007).
• U.S. Federal Climate Policy and Competitiveness Concerns: The Limits and Options of International Trade Law, Joost Pauwelyn, Duke U., 2007). WTO rules permit “border tax adjustments” (import tariffs) to harmonize domestic carbon taxation. [Updated, March 2012.]
• Smart Taxes: An Open Invitation to Join the Pigou Club (Greg Mankiw, Harvard, 2008).
• Policy Options for Reducing CO2 Emissions (Congressional Budget Office, 2008). “[T]he net benefits (benefits minus costs) of a [carbon] tax could be roughly five times greater than the net benefits of an inflexible cap.”
• CO2 Price Volatility: Consequences and Cures (Brattle Group, January 2009).
• On Modeling and Interpreting the Economics of Catastrophic Climate Change (Martin Weitzman, Harvard, 2009).
• Addressing Climate Change Without Impairing the US Economy (Robert Shapiro, US Climate Task Force, 2008).
• On The Merits of A Carbon Tax (Ted Gayer, Brookings, Testimony to Senate Env’t & Nat’l Res. Committee, 2009).
• The Design of a Carbon Tax (Gilbert Metcalf & David Weisbach, Harvard Envt’l Law Rev, 2009).
• Carbon taxation – a forgotten climate policy tool? (Global Utmaning [Sweden], 2009)
• Carbon Tax and Greenhouse Gas Control: Options for Congress, (Jonathan Ramseur & Larry Parker, Congressional Research Service, 2009).  Options for design and implementation of U.S. carbon tax to match emissions reductions from Lieberman-Warner (cap & trade) bill without price volatility, speculation and offsets.
• How Climate Policy Could Address Fiscal Shortfalls (Adele Morris & Ted Gayer, Brookings, 2010).
• A Balanced Plan to Stabilize Public Debt and Promote Economic Growth (William Galston, Brookings & Maya MacGuineas, Committee for a Responsible Federal Budget, 2010).  Recommendations include a broad-based carbon tax with proceeds to reduce payroll taxes and for deficit reduction.
• Carbon pricing in Washington (Yoram Bauman, Sightline Institute, 2010). Quantitative economic and climate policy “blueprint” for Carbon Washington revenue-neutral carbon tax proposal.
• Moving U.S. Climate Policy Forward: Are Carbon Taxes the Only Good Alternative? (Ian Parry & Roberton Williams, Resources for the Future, 2011).
• Revising the Social Cost of Carbon, (Frank Ackerman & Elizabeth Stanton, E3 Network, 2011).
• Carbon Taxes, An Opportunity for Conservatives (Irwin Stelzer, Hudson Institute, 2011).
• Fiscal Solutions: A Balanced Plan for Fiscal Stability and Economic Growth, Peterson Foundation & American Enterprise Institute, 2011). As part of comprehensive reform, recommends replacing ethanol subsidies and greenhouse gas regulations with a $26/tonne CO2 (and CO2-eq) tax, rising 5.6% annually. (p 25.)
• The Potential Role of a Carbon Tax in U.S. Fiscal Reform (Brookings, 2012)
• Offsetting a Carbon Tax’s Costs on Low-Income Households (CBO, 2012)
• Considering a U.S. Carbon Tax: Frequently Asked Questions (Resources for the Future, 2012)
• Carbon Tax Revenue and the Budget Deficit: A Win-Win-Win Solution? (MIT, August 2012)
• It’s Time for a Carbon Tax (Elizabeth Kolbert, The New Yorker, Dec. 10, 2012)
• Fiscal Policy to Mitigate Climate Change (IMF, 2012)
• The Many Benefits of A Carbon Tax (Adele Morris, Brookings, 2013)
• Carbon Taxes and Corporate Tax Reform (Donald Marron & Eric Toder, Urban-Brookings Tax Policy Center, 2013)
• Reaffirming the Case for a Briskly Rising Carbon Tax (James Handley, Carbon Tax Center, June 2013)
• Changing Climate for Carbon Taxes: Who’s Afraid of the WTO? (Jennifer Hillman, German Marshall Fund, Climate Advisors, American Action Forum, July 2013).
• Can Negotiating a Uniform Carbon Price Help to Internalize the Global Warming Externality? (Martin Weitzman, Harvard Project on Climate Agreements, January 2014).
• Design of Economic Instruments for Reducing U.S. Carbon Emissions, (Carbon Tax Center, submitted to Senate Finance Committee, January 2014).
• Tax Policy Issues in Designing a Carbon Tax (Donald B. Marron and Eric J. Toder, Urban-Brookings Tax Policy Center, May 2014).
• A Carbon Tax in Broader U.S. Fiscal Reform: Design and Distributional Issues, Adele Morris (Brookings) and Aparna Mathur (American Enterprise Institute), C2ES, May 2014.
• Temperature impacts on economic growth warrant stringent mitigation policy, Frances C. Moore, Delavane B. Diaz (Nature Climate Change, January 2015). When climate change is allowed to affect economic growth in the DICE Integrated Assessment Model, its estimate of the Social Cost of Carbon may exceed  $220/T CO2. 
• How to Adopt a Winning Carbon Price — Top Ten Takeaways from Interviews with the Architects of British Columbia’s Carbon Tax (Clean Energy Canada, 2015).
• Putting a Price on Carbon: A Handbook for U.S. Policymakers, Kevin Kennedy, Michael Obeiter, Noah Kaufman (World Resources Institute, April 2015).
• Energy Subsidy Reform, Lessons and Implications (International Monetary Fund, May 2015).
• Taxing Carbon: What, Why, and How, by Donald Marron, Eric Toder, and Lydia Austin, (Tax Policy Center, June 2015).
• Global Carbon Pricing: We Will If You Will (September 2015). E-book compilation of eight papers by David J. C. MacKay, Richard Cooper, Joseph Stiglitz, William Nordhaus, Martin L. Weitzman, Christian Gollier & Jean Tirole, Stéphane Dion & Éloi Laurent, Peter Cramton, Axel Ockenfels & Steven Stoft. The authors, from a variety of viewpoints and disciplines, conclude that negotiating an explicit global price on carbon pollution would help unlock global climate negotiations by aligning national self-interest with the global goal of rapidly reducing greenhouse gas emissions.
• After Paris: Fiscal, Macroeconomic, and Financial Implications of Climate Change (IMF discussion draft,  January 2016).

This page originally appeared as a category of “Supporters,” alongside other compendiums of carbon-tax supporters such as Public Officials, Thought Leaders, and Scientists & Economists. In 2019 we moved it to “Politics,” signaling the reality that the U.S. conservative movement today is almost completely devoid of supporters of meaningful climate action, much less robust carbon taxing.

Outspoken climate blogger David Roberts skewered the April 2024 Benji Becker essay noted in the text. Sadly, his critique is spot-on.

Confirmation of this sad fact appears almost daily in newspapers and other media. A particularly poignant instance was an April 2024 NY Times guest essay by one Benji Backer, founder and executive chair of the American Conservation Coalition.

The essay, grandiosely titled I’m a Young Conservative, and I Want My Party to Lead the Fight Against Climate Change, neither acknowledged conservatives’ sabotaging of climate action throughout the current century nor offered a single original or innovative policy solution — not even a revenue-neutral carbon pricing program such as fee-and-dividend, which is sometimes optimistically termed a carbon tax that “conservatives could love” for offering Pigovian taxation in a non-government-expanding form.

Somewhat similarly, a January 21, 2024 Washington Post story, N.H.’s primary pushed the GOP to fix acid rain. Climate change is another story., contrasted 1988 Republican presidential candidates vowing aggressive action against acid rain emissions from Midwestern power plants, with 2024 G.O.P. candidates disparaging or outright ignoring questions about combating climate change:

George H.W. Bush promised to restore his party’s conservation ethic and curtail pollution. His top competitor, Senate Republican leader Bob Dole, vowed to quickly pass an acid rain bill. The state’s voters and its Republican governor, Gov. John H. Sununu, had elevated the issue before the primary vote that helped propel Bush to the White House, where he followed through by signing legislation that has curtailed acidity in New Hampshire by 84 percent to date.

Now, however, as New Hampshire faces the much broader threat of climate change, Republican candidates in the state for Tuesday’s primary are barely mentioning the issue — and when they do, it is often to play it down.

Haley advocated pulling out of an international climate deal as President Donald Trump’s ambassador to the United Nations; she has said “man-made climate change is real, but liberal ideas would cost trillions and destroy our economy.” Trump calls climate change a “hoax.” Florida Gov. Ron DeSantis has said he supports efforts to address the impact of hurricanes and flooding, but he rejects “the politicization of the weather.”

Republican Gov. Chris Sununu, the son of the former governor, said in an interview that he sees no comparison between dealing with acid rain and climate change.

Climate change is a completely different story,” the younger Sununu said. “There’s a lot of politics behind that kind of socialistic approach, that green New Deal type stuff that costs trillions of dollars.”

Nevertheless, from time to time Republican and other conservative-identifying office-holders express support for some form of carbon pricing. Such expressions tend to be tentative and vague.

Opening 9 paragraphs, verbatim, from “Delay as the New Denial: The Latest Republican Tactic to Block Climate Action,” by Lisa Friedman & Jonathan Weisman, July 22, 2022. Emphasis added, link in text.

Tellingly, not one of the 50 Republican U.S. Senators supported even a single element of President Biden’s 2021-2022 Build Back Better climate-investment program, either at the outset or in any of its increasingly stripped-down versions. In July 2022, NY Times climate reporter Lisa Friedman and congressional correspondent Jonathan Weisman distilled this monolithic resistance in a front-page story, Delay as the New Denial: The Latest Republican Tactic to Block Climate Action, which we’ve excerpted in the text-box at right.

It paints a dismal picture, with Senators Lindsey Graham (R-SC) and Mike Crapo (R-ID) uttering counterfactual and nonsensical word salads, respectively.

Notably, and unfortunately, the Times story granted Capitol Hill Republicans a convenient out: saying “that they believe that … market forces would somehow develop solutions to the carbon dioxide that has been building in the atmosphere, trapping heat like a blanket around a sweltering Earth,” without challenging them to say how stiff a carbon tax they would support or why they won’t support one at all.

Expressions of support for carbon pricing by Republican / Conservative office-holders

Nineteen Republican members of the Utah legislature declared support for the carbon-fee-and-dividend approach to carbon taxing in a June 4, 2021 op-ed in Salt Lake City’s Deseret News, Republicans Need to Engage in Climate Politics. The op-ed is a classic expression of free-market ideology on climate and carbon pricing, most notably in this passage:

Emissions can be cut either with regulations, incentives or price signals. Regulations are heavy-handed and growth-inhibiting. They burden the economy, they cost American jobs, and they end up exporting our emissions to other countries. Incentives can work, but they let government choose the winners and losers, and too often end up becoming permanent entitlements. We believe the best way to cut emissions is with a price signal to the private sector, which lets competition and innovation find the solutions.

We support a carbon dividends approach that puts a fee on carbon emissions and returns all the money to the American people in dividend checks. This approach does not require heavy-handed government oversight. The fee gives the markets an incentive to move to cleaner technologies, while the dividend protects families from the effect of higher energy prices. Most families should come out financially ahead, and they will be rewarded for reducing emissions however they choose. All will benefit from the cleaner air that will result from these policies. (emphases added)

It should be said that those “heavy-handed, growth-inhibiting” regulations also improve air quality, even if less efficiently than carbon pricing. Moreover, even perfect pricing (full cost-internalization of climate and air pollution damage) won’t by itself overcome deep-seated market barriers such as split incentives and deficient infrastructure that holds back climate solutions such as electric vehicles (inadequate charging) and bicycling (danger from motorists). Carbon pricing on its own won’t eliminate climate pollution. Also missing from the op-ed was the size of the proposed carbon fee; clearly, a $20/ton carbon fee and a $15/ton fee that ramps up by $10/ton each year would be vastly different in impact.

Nevertheless, the statement wasn’t aimed at Salt Lake City — the signatories aren’t seeking a state carbon fee. Rather, it was aimed at Utah’s Republican senators, notably Sen. Mitt Romney, who from time to time has signaled openness to some form of carbon price. It’s a good start.

Former Congressmember Bob Inglis (R-South Carolina): A 2023 update

Bob Inglis, a mild-mannered, plain-spoken but steely South Carolina Republican who served six terms in Congress in the late nineties and aughts, has earned his own section on this page (see further below) for his long-time advocacy of a U.S. carbon tax.

A new (January 2023) piece by Inglis in The Hill, Dancing around the obvious climate solution, merits pride of place here for its unambiguous call for a U.S. carbon tax, notwithstanding that its basic pitch — a federal carbon tax of unspecified magnitude, with the revenues recycled through reductions in federal payroll taxes on wages — is completely unchanged from 2008.

“[W]hat if we paired a carbon tax with a cut in payroll (F.I.C.A.) taxes, exercising the right of self-governing people to change what we tax?,” Inglis asks. “Such a tax swap requires trust, and that trust will come only if Republicans and Democrats work together.”

Inglis’s Hill post specifies two opportunities for the two parties to build trust. One is to negotiate and enact permitting reform to expedite construction of transmission lines and other clean-energy accoutrements from the 2022 Inflation Reduction Act. The other is to enact a U.S. version of the pending European Union carbon border adjustment mechanism (CBAM) that could incentivize other countries to enact carbon taxes to forestall other countries from taxing their exported products for above-average embodied carbon content.

Inglis’s faith in both free enterprise and the party whose primary he lost in the 2010 Tea Party season is boundless, as his Hill peroration shows:

Our ability to govern ourselves is at the heart of who we are as Americans. We can decide to untax some form of income, to put a tax on carbon dioxide instead and to apply that tax to imports. That would get the world “in” on solving climate change, and accountable free enterprise would deliver innovation at scale and fast.

Unfortunately, the post-Tea Party version of the Republican Party now in control of the House of Representatives is, by nearly all accounts, more interested in beating up on Democrats than in working with them, and more concerned with holding power than deploying it for the common good. We wish Inglis — a lovely man, from our meetings with him — well.

Sen. Mitt Romney (R-Utah)

Utah’s junior United States senator, Mitt Romney, was formerly governor of Massachusetts (2003-2007) and Republican candidate for president (2012), as well as a successful businessman. His generally moderate record as governor of Massachusetts, along with some striking departures from right-wing Republican orthodoxy, as in voting to convict President Donald Trump in both impeachment trails (2020 and 2021) and marching in a Black Lives Matter protest (2020), have led some observers to believe that Sen. Romney might someday support carbon-pricing legislation in Congress.

In America Is in Denial, an article published in The Atlantic in July 2022 — on Independence Day, in fact — Romney decried what he called “our national malady of denial, deceit, and distrust.” He also lamented President Biden’s inability to “break through” that malady. “Too many Americans,” he wrote, “are blithely dismissing threats that could prove cataclysmic.” In Romney’s telling, those dismissed threats included climate change.

Senators Mitt Romney & Joe Manchin, March 30, 2022, Washington Post photo by Jabin Botsford.

Of course, one way that Sen. Romney could have helped Pres. Biden break through that national malady of distrust was by offering his tie-breaking vote in favor of the administration’s ambitious, climate-oriented Build Back Better legislative package. Then again, Build Back Better, a classic “big government”-style program that Republicans habitually abjure, save for military, policing and fossil fuel-related measures, wasn’t the kind of measure a traditional Republican like Romney would readily support. Carbon pricing, however, is policy of a different stripe. Not only is it said to be “market-based” (here at CTC, we prefer to call carbon pricing a market corrective), it can also be rendered as a revenue-neutral policy that won’t expand government, either as a tax swap or via a carbon-dividend approach.

And from time to time, Romney has evinced interest in carbon pricing. In October 2021, Utah’s flagship paper, Deseret News, quoted him telling the libertarian-oriented Milken Institute that “There is only one change that dramatically affects the amount of global emissions and that is a price on carbon.” Romney went on to say that “They (Democrats) talk about like this is the holy grail. And they know it is the only thing that really makes a difference. But they are not planning on doing it in reconciliation and I do not understand why.” The same Deseret News article also had Romney telling the paper that, while he “said he is not a fan of the reconciliation measure, [he] said it at least ought to include a tax on carbon.”

Fine rhetoric, but readers should note two things before they get carried away. First, in his remarks Romney appeared to be primarily touting “border carbon adjustments” that would tax imports of commodities manufactured with high emissions, rather than economy-wide U.S. carbon pricing. Second, Romney never apparently tried to corral fellow Republican senators to join his putative pro-pricing position. He has never introduced carbon-pricing legislation, nor has he co-sponsored any of the raft of carbon pricing bills introduced by Democratic counterparts such as Sen. Sheldon Whitehouse.

While we don’t know the point of Romney’s game, it doesn’t seem wise to construe occasional professions of interest in carbon pricing as genuine support.

American Enterprise Institute staffer touts idea of carbon tax (January 2022)

The American Enterprise Institute is the corporate right’s avatar of the established economic order — a reliable, conventional source of policy analysis in support of expanding economic production, limiting taxation, and deregulating U.S. health, safety and environmental practices.

In the heady days of 2006-2008, AEI published a steady stream of papers backing carbon taxes as a way of reducing carbon emissions without the presumed heavy hand of government regulations, standards and subsidies. (Several of these are referenced at the end of this long entry.) Beginning in 2010, however, with the ascension of the Tea Party and the abandonment of the climate cause by the vast majority of Republican elected officials, AEI became less voluble in supporting meaningful climate policy including carbon pricing.

To be sure, some AEI staffers did post pieces expressing positive words about carbon taxing, as a CTC friend reminded us with this set of links: 2013, 2014, 2017, 2017, 2018, 2019, 2021 and 2021. But these were largely academic and apolitical, a pattern maintained in early January (2022) with Addressing climate change and reforming the tax code with a carbon tax, by AEI senior fellow Kyle Pomerleau. The post covers the usual bases: economists love carbon taxing’s efficiency; the tax’s “natural” regressive bent makes it a tough sell to the left; more than two dozen countries have some sort of carbon tax; like all taxation, a carbon tax would cut into economic output; but there are various workarounds, so who knows, a carbon tax might some day come into being.

Yet the piece is bloodless, context-less and, in our view, not worth much attention. It’s stunningly conventional and strikingly lacking in urgency. It does not mention the exploding economic (and human) costs of climate change here and abroad, the rising geopolitical stakes, the vast health co-benefits of reducing and retiring fossil fuels. Politics are not discussed, including the unanimous refusal of the Republican Senate conference to back any of President Biden’s climate agenda.

What’s the purpose of Pomerleau’s post? If we had to guess, we’d say that AEI, mindful of the American public’s demand for climate action (fully one-third of Americans declared themselves “alarmed” over climate, in the most recent Yale – George Mason U. poll, last September), figured that an anodyne post about the hypothetical merits of carbon taxing was a good way to position themselves to the left of 2022 G.O.P. neanderthalism. We’ll happily revise our opinion, the minute the Institute comes out swinging for a specific bill embodying a non-trivial carbon tax.

NY Times: A growing number of Republicans are working to address climate change (June 2021)

The above-titled article, by Times national climate reporter Lisa Friedman, reads almost as a parody, especially its headline, variants of which have been appearing like clockwork in American newspapers for a decade or more. Its peg: a “clandestine” meeting organized by Rep. John Curtis (R-UT) at which “24 Republicans gathered in a ballroom of the Grand America Hotel in Salt Lake City where they brainstormed ways to get their party to engage on a planetary problem it has ignored for decades.”

The story’s barely newsworthy element was Rep. Curtis’s announcement of a “Conservative Climate Caucus” aimed at educating other Republicans about climate change and “developing policies to counter ‘radical progressive climate proposals.’” Thirty-eight Republican House members have reportedly joined.

The proposed solutions, which Friedman reported in a companion story, Some Republicans call for a coherent climate strategy, were the usual Republican mishmash: tree planting, promotion of nuclear power, investment in nascent technologies to capture CO2 emissions from power plants,” which individually and in combination will do little to actually draw down greenhouse gases from the atmosphere,” she noted. Friedman also pointed out that neither the new caucus nor the Republicans assembled in Salt Lake City offered any specific targets for cutting emissions.

NY Times: G.O.P. Shifts on Climate, but Not on Fossil Fuels (August 2021)

Judging from the headline, this story, from Aug. 13, 2021, may have been an attempt by the Times to fix the one above from June, by clarifying that the dawning public acknowledgment of the reality of climate change by some Senate, House and statehouse Republicans isn’t accompanied by support of meaningful policies to forestall or mitigate it. Here are the lede grafs:

David Roberts: “Climate change is intrinsically insulting to conservative values.” (April 2019)

A catalyst for this change was David Roberts’ April 2019 post, Don’t bother waiting for conservatives to come around on climate change. (Emily Atkins posted a briefer but similarly pitched piece on May 8 at The New Republic, The Republicans Are Dead to Planet Earth.) Roberts grouped right-wing / Republican expressions of climate policy interest into three approaches: associations, libertarian and innovation. Each was found wanting:

The “associations approach” attempts to identify existing conservative identities, subgroups like veterans or Catholics, that might be persuadable on climate. None of these efforts have succeeded on any appreciable scale.

The “libertarian approach” pitches climate solutions amenable to fiscal conservatives, like carbon “tax and dividend” systems that don’t grow the size of government. Despite the boundless faith many have invested in this approach, it hasn’t yielded much either.

The “innovation” approach seeks to narrow in on climate policies that overlap with existing conservative interests, which amount, as I wrote in this post, to subsidies for fossil fuel companies, for their research on how we can keep burning fossil fuels. Oh, and nuclear.

In his post Roberts also drew on a range of research, including demographic analysis of America’s “big sorting” into urban vs. rural, and Jonathan Haidt’s “moral foundations” theory, to argue that “climate change is intrinsically insulting to conservative values.” His diagnosis: “The populace needs to be made less conservative.”

FiveThirtyEight: “Why The Republican Party Isn’t Rebranding” (April 2021)

In an April 2021 post, Why The Republican Party Isn’t Rebranding After 2020, FiveThirtyEight political analyst Perry Bacon Jr. listed five dynamics that he believes are keeping the G.O.P. from altering course, despite losing the House, Senate and White House in 2020 and being implicated in the violent Jan. 6 insurrection:

1. The party’s core activists don’t want to shift gears.
2. Trump is still a force in the party.
3. Republicans almost won in 2020.
4. Republican voters aren’t clamoring for changes.
5. There aren’t real forces within the GOP leading change.

Bacon writes that “The collective decision of conservative activists and Republican elected officials to stay on the anti-democratic, racist trajectory that the GOP had been on before Trump — but that he accelerated — is perhaps the most important story in American politics right now.”

His essay is an attempt to understand why. We recommend it highly for anyone looking for a break from Republicans’ virtually monolithic anti-climate stance, anytime soon.

The Last House Republican to Back a Carbon Fee

In Nov 2018, House Republican Francis Rooney (FL-19) joined six Democratic Congressmembers including Rep. Ted Deutch, co-founder of the Climate Solutions Caucus, in co-sponsoring the Energy Innovation and Carbon Dividend Act. EICDA would impose an initial “upstream” charge of $15 per ton of CO2 from combustion of fossil fuels, with the charge increasing annually by $10 per ton. All of the revenues would be placed in a trust fund whose proceeds would be returned as “dividends” to U.S. households.

The EICDA embodied the fee-and-dividend approach espoused by Citizens’ Climate Lobby and long supported by the Carbon Tax Center, climate scientist-advocate James Hansen and others. The carbon charge embodied in the EICDA is aggressive, taking just nine years to surpass $100/ton (though it could be said that onrushing climate events such as ice caps melting and Australian and western U.S. wildfires, warrant a steeper trajectory). In this sense, the bill’s co-sponsorship by Rep. Rooney, a Republican, was a major positive step.

But not a breakthrough. Rep. Rooney never actively fought for his bill. EICDA was barely visible on his Web site; it appeared perfunctorily on a hard-to-find page for co-sponsored bills, in contrast to Rep. Deutch’s site, which included both a press release for the bill and a YouTube video forcefully outlining its rationale for his constituents and the nation as a whole. Based on a Google search and his Web site, Rep. Rooney generally refrained from touting the bill and instead limited his climate advocacy to broad generalities.

Rooney’s reticence about championing his fee-and-dividend bill was in stark contrast to GOP Rep. Justin Amash’s willingness to buck Republican orthodoxy in calling for impeachment of President Trump. In any event, as of Jan. 2021 Rooney is no longer in the House. He retired from politics in 2020.

George P. Shultz

Stalwart Republican and conservative elder statesman George P. Shultz championed revenue-neutral carbon-taxing in the decade leading up to his death on Feb. 7, 2021 at age 100. In op-eds, in public presentations, and in his service on the advisory boards of Citizens Climate Lobby (CCL) and the Niskanen Center, Shultz advocated for U.S. adoption of the “fee-and-dividend” form of carbon taxing that distributes all carbon tax revenues equally (“pro rata”) to U.S. households. The idea is to instill the price incentive of a carbon tax throughout the economy without increasing the size and reach of government.

Shultz’s conservative pedigree and illustrious bio — he served Republican presidents Nixon and Bush (41) in four Cabinet-level positions: budget director, labor, treasury and state — lent gravitas to his support for carbon taxing, as the Niskanen Institute’s Joseph Majkut intimated in his affectionate Feb. 10 (2021) tribute, Shultz, Conservatism and Carbon Pricing:

On February 7, we lost one of our most revered and beloved statesmen, George Shultz. His absence is a loss for both the country and the world, and his legacy of service and diligence will be remembered. Shultz’s lifetime of service was an example of patriotic and conservative leadership, not least in his support for immediate and forceful action against climate change.

Shultz was no progressive green. He was a life-long Republican and a conservative. After military service and graduate studies, he joined the faculty at the University of Chicago, and was influenced by renowned free-market economists Milton Friedman and George Stigler. Steeped in free-market thinking, he served in the Nixon Administration, returned to the private sector, and then served in the Reagan Administration as Secretary of State, helping the President forge a relationship with the Soviet Union and free half a continent from communist rule. Decades later, he would embrace a carbon tax as a prudent, even a conservative, response to climate change. (emphases added)

For a sampling of Shultz’s opinions on carbon taxing, see Stanford’s George Shultz on energy: It’s personal, published in the Stanford Report, July 2012. Following is an excerpt from Shultz’s op-ed, How to Gain a Climate Consensus, in the Washington Post, Sept. 5, 2007:

The use of economic incentives (caps and trading rights, and carbon taxes) is essential to avoid disastrously high costs of control. The cap-and-trade system has been highly successful in reducing sulfur dioxide emissions by electricity utilities in the United States. That system relies on a scientifically valid and accepted emission-measurement system used by a clearly identified and homogeneous set of utilities. Fortunately, such a careful system of measurement exists for a viable greenhouse gas regimen. The product of collaboration between the World Resources Institute and the World Business Council for Sustainable Development, these standards for accounting and reporting greenhouse gases should be duly understood and adopted. Even with clear units of account, however, large problems arise as the coverage and heterogeneity of the system grow. And for trading across borders, the system needs to be accepted among the trading partners. Scams are easy to imagine. No nation should be allowed to trade without a verifiable, transparent system of measuring and monitoring of reductions, and holding emitters accountable. In many respects, a straight-out carbon tax is simpler and likelier to produce the desired result. If the tax were offset by cuts elsewhere to make it revenue-neutral, acceptability would be enhanced.

Unfortunately, Shultz left few disciples. His death leaves his fellow fee-and-dividend proponent (and fellow former Republican Secretary of State) James Baker, who serves on the board of the Climate Leadership Council, as the lone prominent Republican voice for climate action via carbon taxing.

To our knowledge, none of the 20-odd sitting Republicans currently listed as members of the Climate Solutions Caucus has made a single public utterance in support of carbon taxing since at least the 2018 midterm elections. Only two Republican caucus members voted in Jan. 2021 to impeach then-President Trump for inciting the Jan. 6 Capitol invasion: Rep. Fred Upton (R-MI-06) and Rep. Adam Kinzinger (R-IL-16). Indeed, among the caucus members are some House Republicans who voted against certifying Joe Biden’s electoral college win on Jan. 6, including Rep. Lee Zeldin (R-NY-01), Rep. Elise Stefanik (R-NY-21), and the especially unhinged Rep. Matt Gaetz (R-FL-01).

Conservatives’ fragility on climate action

There may be no more compelling climate apostate than Jerry Taylor, an adamant climate denier during his two decades’ tenure at the Cato Institute but, since 2014, a vigorous proponent of climate action at the Niskanen Center, the think tank he founded that year.

What Changed My Mind About Climate Change?, Taylor’s May 2019 post at a new center-right opinion site, The Bulwark, tellingly recounts his conversion from denier to advocate. What is perhaps most striking about it, however, is this passage from Taylor’s email blast announcing the post:

[M]y experience is that the risk management argument resonates more powerfully with conservative audiences than does grabbing them by the lapels and screaming about the science (as warranted as that may be). Accordingly, please forgive me as I suggested more agnosticism [in my Bulwark post] than I truly feel about the strength of the scientific case for action. We need to give conservatives an out to embrace climate action without also forcing them to publicly confess that Al Gore was right all along (even though he was). (emphasis added)

The sad truth is that Taylor is probably right.

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

(The remainder of this page, written and posted between 2014 and early 2017, is retained for historical value.)

Some conservatives have been willing to discuss and even endorse carbon taxes as the cornerstone of climate policy that fits within their principles of free markets and individual choice, though in many instances this support comes heavily hedged. At this writing (May 2017), there are three prominent loci of support for — or, at least, openness to — carbon taxing among U.S. conservatives:

1. A March 2017 resolution “expressing the commitment of the House of Representatives to conservative environmental stewardship,” signed by 20 House Republicans.
2. The Climate Leadership Council, which in Feb. 2017 issued “The Conservative Case for Carbon Dividends,” a policy brief signed by Republican senior statesmen George Shultz and James Baker, among others.
3. The Niskanen Center, a libertarian think-tank headed by one-time climate denier Jerry Taylor that has become a beehive of thoughtful, analytical carbon tax advocacy rooted in free-market ideology.

This page summarizes recent activity by these groups, which flies in the face of the climate science denialism that has become a hallmark of the Republican Party, prior to and during the Trump Administration.. It also compiles statements from conservative commentators and other right-leaning public personages supporting carbon taxing — often but not exclusively as a potential revenue source to reduce the U.S. budget deficit or to finance reductions in other taxes such as the Corporate Income Tax.

Before we dive in, we have three survey articles to recommend.

One is Ben Adler’s 2015 post in Grist dissecting three contrasting streams of thought on climate policy among so-called conservative policy intellectuals. Adler’s thumbnails of positions on climate policy and economics voiced by prominent conservatives including Ross Douthat, Charles Krauthammer, Reihan Salam, Greg Mankiw and 11 others make for a fascinating and informative read.

Another is Ted Halstead’s Nov. 2015 Atlantic article, The Republican Solution for Climate Change. Subtitled “Republicans have the ability to offer a market-based solution to climate change, so why aren’t they doing it?,” the article is more an exploration of why the GOP should support carbon taxing than an explanation of why they don’t. Halstead founded the Climate Leadership Council a year later.

The third is a penetrating March 2017 story in Yale Environment 360 (published at the college’s School of Forestry & Environmental Studies), Climate Converts: The Conservatives Who Are Switching Sides on Warming.

1. 2017 House G.O.P. Climate Resolution

In March 2017, 17 House Republican members re-issued a 2015 resolution “expressing the commitment of the House of Representatives to conservative environmental stewardship.” (Three more signed on in May.) In a blog post in March, we called the resolution “a positive if halting step in the possible emergence of a critical mass of Republican officeholders to endorse and eventually vote for a carbon tax to combat climate change.”

Map shows the 17 GOP House members who signed the March 2017 resolution discussed in text. Their ranks grew to 20 in May.

The resolution doesn’t call for a carbon tax or any specific climate action; it doesn’t even mention “climate change,” though it does refer to “a changing climate.” In fact, the resolution is word-for-word identical to one issued eighteen months ago, in September 2015, also by 17 House Republicans, a group that included 10 of the signatories of the new resolution. (The other seven signers from 2015 are out of office — five declined to run, and two lost their seats to Democrats last November; none were “primaried” out. Of the ten new signers — counting the three who signed the resolution in May 2017 — four were newly elected to the House in 2016.)

Nevertheless, the resolution stands as a positive if halting step in the possible emergence of a critical mass of Republican officeholders to endorse and eventually vote for a carbon tax to combat climate change.

The resolution was by and for Republicans only, a not unreasonable way to strike a small flame that would not be overshadowed by solid Democratic support for climate action. The 20 Republican House signers hail almost evenly from Trump states (nine signatories) and Clinton states (eleven), with six from New York, three each from Pennsylvania and Florida, and the other eight from eight other states. Only one represents a heartland state — Don Bacon, who just won election to the House from Nebraska — though three others are from the mountain West: Mark Amodei of Nevada, Mia Love of Utah and Mike Coffman of Colorado. (See map.)

2. Climate Leadership Council

Editorial endorsements of the CLC’s carbon tax proposal span a broad ideological range.

Far and away the greatest attention-getting development in carbon taxes this year (2017) was the emergence of the Climate Leadership Council and its Feb. 2017 brief, The Conservative Case for Carbon Dividends. The paper was issued under the signatures of Republican icons James Baker and George Shultz, both of whom had served Republican presidents as secretaries of state and treasury and who personify an erstwhile (pre-Bush 43 as well as pre-Trump) Republican establishment.

The carbon tax outlined in the council’s brief begins with a $40/ton CO2 fee, which would rise over time at an as-yet unspecified rate. One hundred percent of the carbon revenues would be returned to households as dividends, making the proposal the first Republican-branded carbon tax employing the dividend approach championed by the Citizens Climate Lobby, rather than dedicating the revenues to cutting corporate income taxes.

CO2 reductions from CLC proposal will turn on escalation rate from initial $40/ton.

CTC endorsed the proposal on the date it was issued, including the council’s proposed swap” rescinding the Obama administration’s Clean Power Plan in favor of the carbon tax. “The important work of the Clean Power Plan was largely completed anyway,” we said, pointing out that roughly 80 percent of the plan’s targeted reduction in electricity-sector emissions for 2030 had already been achieved by the end of 2016. “The proposed carbon tax is the logical and necessary next step,” we said, “instilling incentives throughout the U.S. economy to replace fossil fuels with clean energy.”

Details about CLC’s proposal may be found on their site.

CLC renewed its call for a $40/ton carbon fee “in exchange for a rollback of Obama-era climate rules” in a May 9 New York Times op-ed, The Business Care for the Paris Climate Accord, co-authored by Shultz and Halstead.

3. Niskanen Center

A signal development since 2014 has been the emergence of the Niskanen Center as a leader in conservatives’ (and especially libertarians’) interest in carbon taxing.

The center’s founder-director, Jerry Taylor, was an energy policy analyst at the Cato Institute, where he helped forge Cato’s unflinching climate denialism (“I used to write skeptic talking points for a living,” he said in an April 2017 interview) until an immersion in climate science led him to a change of heart and a 180-degree turnaround on climate.

In March 2015, the Niskanen Center launched a full-scale assault on conservative obstruction of climate policy with a provocative paper by Taylor, The Conservative Case for a Carbon Tax. The paper argued that if conservative denial of climate science is grounded in ideological aversion to command-and-control regulation, as proposed in EPA’s proposed Clean Power Plan, conservatives should embrace and promote a revenue-neutral carbon tax as a more efficient, less burdensome, “free market” alternative and do so soon, because once established, EPA regulations will be almost impossible to uproot.

Taylor followed that paper with a series of bold blog posts further articulating his proposal, including these two in March 2015, Could Carbon Taxes Deliver a Double Dividend? and Debating the Carbon Tax, writing in the latter:

[C]onservatives ought to abandon their “just say no” policy towards addressing climate change. Global warming is real, industrial emissions are the main cause, and warming imposes risk that warrant a policy response… [C]arbon taxes are a far more efficient means of controlling greenhouse gas emissions than command-and-control regulation.  [A] carbon tax at the levels presently discussed in Washington would not unduly burden the economy, and that’s particularly true once we consider the (non-climate) environmental benefits that would follow from the tax as well as the benefits of any offsetting tax cuts.

Taylor’s most recent (April 2017) paper, Debating Carbon Taxes With Oren Cass (And Bill Gates), is a lively and thoughtful survey of energy developments worldwide, particularly in the developing nations. In the lengthy (5,000 words) paper he tackles various precepts of conservative opposition to climate policy, e.g., unilateral U.S. action on climate is futile and self-defeating, and intentional abandonment of fossil fuels will consign poor nations and people to perpetual poverty. The paper is factual and filled with encouraging data on economic and technical progress in the solar and wind industries, and the clean-air co-benefits of phasing out coal, oil and gas.

Politicians

(Former Rep.) Bob Inglis, republicEn

During the fifth of his six terms as a member of Congress from South Carolina (Republican, 4th CD), in 2008, Bob Inglis introduced a bill proposing a revenue-neutral carbon tax whose revenue would reduce payroll taxes. Since leaving office in 2010 — he was primaried out by Tea Party favorite Trey Gowdy — Inglis has become a vocal advocate of carbon taxes as a free-market conservative alternative to regulations, subsidies and cap-and-trade systems. His organization republicEn unabashedly calls on “Conservatives [to] unify America to thwart climate warming.”

Inglis sounded a strongly optimistic — some might say naive — note in a March 2017 interview with Ensia.com, when asked whether the Trump administration might warm to the Baker-Shultz carbon tax proposal enunciated in Feb. 2017 by the Climate Leadership Council (see description above):

I think we could see Donald Trump embracing this if he could think of saying it this way at one of his rallies: “America is going to act first. We’re going to lead the world to a solution on climate change. We’re going to put a tax on carbon dioxide. We’re going to offset it with a dividend to the people or by other tax cuts and then we’re going to impose it on Chinese goods and everybody else’s goods unless they’ve got the same tax on carbon dioxide. If they want to sue us in the [World Trade Organization], well, I’m used to being in court. So, we’ll meet you there and beat you there. And as we beat you, you make your own decision to whether you want to put the same price on carbon dioxide at home or whether you want to keep on paying our tax on entry. Either way it’s fine with us.”

I know [passage of a carbon tax] seems improbable or even impossible. It looks impossible, but I think it’s going to go to the inevitable without ever passing through the probable.

Inglis consistently points to efficient markets as a bedrock conservative principle, arguing that for markets to work, fossil fuel prices must reflect true costs. In a January 2016 piece in the Daily Caller advocating a revenue-neutral carbon tax, he wrote:

Conservatives need a solution which doesn’t grow government, which trusts in the power of accountable marketplaces to deliver innovation and which empowers individuals in the liberty of enlightened self-interest to make their own decisions. Eureka!

Inglis also unabashedly praises climate science as a window into “the intricacies of this glorious creation.” That quote and these that follow are from an interview w/ Inglis published in the Dallas Morning News on August 29, 2014 under the headline, “Q&A: Bob Inglis on the conservative case for a carbon tax.”

Q: Isn’t a tax government intervention? Make a conservative case for a tax.

A: There is a role for government. It is simply being the honest cop on the beat that says to all fuels that you have to “own your own costs” so that the market can judge your product. We should eliminate all the subsidies. No more Solyndras. No more production tax credits for wind. No more credits for electric vehicles. No more special tax provisions for oil and gas. Level the playing field. The big challenge is reaching fellow conservatives and convincing them that the biggest subsidy of all may be to belch and burn into the trash dump in the sky — for free. That lack of accountability may be the biggest subsidy of them all.

Q: A lot of conservatives don’t accept climate change. Why do you?

A: I do because there is every reason to celebrate the science. Science is the process of discovery of the intricacies of this glorious creation. Is science settled? No. Science is never settled and we will never know all of the glories of the creation. But what we are discovering in climate science is that there is a risk that we can avoid from the creative innovation that comes from free enterprise. We have a danger and an opportunity. As a conservative, I say what a great opportunity to create wealth, innovate and sell innovation around the world.

Q: So why have conservatives rejected the science?

A: It has been presented as doom-and-gloom, this apocalyptic vision. Denial is a pretty good coping mechanism. The second reason is the assumed solution is a bigger government that taxes more, regulates more and decreases liberty. Given that, conservatives doubt whether we have a problem.

The Dallas Morning News piece has other revealing quotes as well. For more about Inglis, see The conservative case for a carbon tax (Houston Business Journal, 2/20/14), and Could Republicans ever support a carbon tax? Bob Inglis thinks so (Washington Post, 3/14/13).

Former U.S. Secretary of State George Shultz

(Material in this sub-section should be viewed as precursors to Shultz’s co-sponsorship of the Climate Leadership Council’s 2017 issue brief discussed in detail above. Note that Shultz was one of the 32 signatories to the Carbon Tax Center’s November 2015 Call to Paris Climate Negotiators to Tax Carbon.)

Secretary Shultz, who served Pres. Nixon as Secretary of Labor and Treasury and OMB Director, and Pres. Reagan as Secretary of State, is a vocal supporter of the fee-and-dividend approach to carbon taxing.

In 2013, he and Nobel economics laureate Gary S. Becker published Why We Support a Carbon Tax in the Wall Street Journal. Their op-ed is a compelling and elegant articulation of the case for a revenue-neutral and steadily rising carbon tax.

Tom Friedman writing in the New York Times, Oct 7, 2015

In October 2015, New York Times columnist Thomas Friedman contrasted Shultz’s climate concern to the denialism of leading GOP presidential hopefuls. An excerpt appears to the right.

In July 2014, Shultz participated in an M.I.T. Climate Lab hour-long Webinar on carbon pricing and taxing, alongside former Reps. Bob Inglis (see above) and Phil Sharp (D-IN), president of Resources for the Future. In a bravura performance, Shultz articulated the rationales for a carbon tax (and against cap/trade), including cap/trade’s price volatility and vulnerability to market manipulation, a carbon tax’s straightforwardness, and the success (and revenue-neutrality) of British Columbia’s carbon tax, as well as the general power of pricing and the insurance value of a carbon tax.  Audio of the Webinar is available via this link.

And in March 2015, Shultz penned “A Reagan approach to climate change” (Washington Post), reminding readers of President Reagan’s bold response to scientific alarm about thinning of the Earth’s ozone layer which led to the Montreal Protocol, a treaty phasing out ozone-depleting chemicals. Shultz urged leaders to follow Reagan’s example by setting aside doubts and taking out a climate insurance policy before we get “mugged by reality.” Shultz concluded that robust funding of clean energy research and development, plus a revenue-neutral carbon tax, “starting small and escalating to a significant level on a legislated schedule” would “do the trick” and are the kinds of policies Reagan would advocate to avert climate disaster.

Writers and Pundits

David Brooks, New York Times and Weekly Standard:

On the PBS New Hour (February 20, 2015), Brooks critiqued President Obama’s State of the Union address as a missed opportunity to take a bold step by proposing a carbon tax.  Pointing to bipartisan support from economists, Brooks observed that a carbon tax would “raise revenue, help the environment, and is an economic plus.”

Peter Van Doren, Cato Institute:

The one concept that all students, even those sleeping in the back of the lecture hall, learn from an introductory economics class is that prices matter… As prices increase, the quantity consumed goes down. So if fossil fuel combustion produces byproducts that cause negative health effects on third parties as well as changes in the temperature of the atmosphere, the obvious lesson from economics is to increase fossil fuel prices enough through taxation to account for these effects. Then firms and consumers will react to these prices in thousands of different ways, the net result of which is less aggregate fossil fuel combustion… [Yet] voters and their elected officials resist this simple insight and instead prefer to impose only energy efficiency standards on manufacturers of consumer appliances and automobiles. A singular emphasis on energy efficiency rather than prices has two important drawbacks. First, more efficient appliances and automobiles cost much more to achieve equivalent energy savings than a tax on fossil fuel consumption. This occurs because higher prices encourage all possible avenues of reducing energy consumption — which efficiency standards do not.

Excerpted from “When Prices Are Wrong, Markets Don’t Work,” in NY Times, “Room for Debate,” The Siren Song of Energy Efficiency, March 19, 2012.

Andrew Moylan, R Street Institute:

A conservative carbon tax has three key components: revenue neutrality, elimination of existing taxes, and regulatory reform. When combined, these policies would yield a smaller, less powerful government; a tax code more conducive to investment and growth; and the emissions reductions the law says we must achieve … [R]eform must devote every dime of carbon-tax revenue to reducing other tax rates or abolishing other taxes altogether. Turning on one revenue stream while turning off others is how we prevent growth in government… [A] $20 per ton tax on carbon dioxide emissions could generate roughly $1.5 trillion in revenue over ten years. That’s enough to allow for the complete elimination of several levies that conservatives rightly regard as structurally deficient or duplicative: capital gains and dividends taxes, the death tax and tariffs.

From How to Tax Carbon: Conservatives can fight climate change without growing government (American Conservative, 10/2/13).

Holman W. Jenkins, Jr., Wall Street Journal:

A straight-up, revenue-neutral carbon tax clearly is our first-best policy, rewarding an infinite and unpredictable variety of innovations by which humans would satisfy their energy needs while releasing less carbon into the atmosphere.

Excerpted from “Birth of a Climate Mafia,” July 2, 2014 (which, apart from this excerpt, is unrelievedly anti-climate reform).

Economists

Gregory Mankiw (Harvard): Perhaps the most widely-published advocate for higher fuel taxes in the economics profession is Gregory Mankiw, Harvard professor and former chair of the President’s Council of Economic Advisers (2003-2005), and former senior adviser to Republican presidential candidate Mitt Romney. Mankiw was one of the 32 signatories to the Carbon Tax Center’s November 2015 Call to Paris Climate Negotiators to Tax Carbon., as well as a signatory to the Climate Leadership Council’s Feb. 2017 brief, The Conservative Case for Carbon Dividends.

Mankiw made the case for a carbon tax in a forceful NY Times op-ed, One Answer to Global Warming (Sept. 16, 2007) which we discussed on our blog. His 2006 Wall Street Journal op-ed pieces (Jan. 3 and Oct. 20) are among the many lively pieces available on Mankiw’s pro-fuel-tax blog, The Pigou Club Manifesto. (Economist Arthur Pigou, 1877-1959, articulated the concept of economic externalities along with corrective “Pigovian” taxes.) On Dec. 31, 2006 Mankiw reiterated his 2006 New Year’s Resolutions from his Jan. 3, 2006 WSJ piece, including:

I will tell the American people that a higher tax on gasoline is better at encouraging conservation than are heavy-handed CAFE regulations. It would not only encourage people to buy more fuel-efficient cars, but it would encourage them to drive less, such as by living closer to where they work. I will tell people that tolls are a good way to reduce traffic congestion — and with new technologies they are getting easier to collect. I will advocate a carbon tax as the best way to control global warming.

In a Sept. 16, 2006 post to his blog, Rogoff Joins the Pigou Club, Mankiw listed some three dozen other economists and pundits who have publicly advocated higher Pigovian taxes, such as gasoline taxes or carbon taxes. The list includes, in addition to several individuals mentioned here, such notables from economics, finance and journalism as Alan Greenspan, Gary Becker, William Nordhaus, Richard Posner, Anthony Lake, Martin Feldstein, Gregg Easterbrook and Lawrence Summers. (Links are included.)

Mankiw publishes a column every six weeks in the NY Times Sunday business section. In his June 1, 2008 column, The Problem With the Corporate Tax, Mankiw wrote:

I have a back-up plan for [Sen. McCain]: increase the gasoline tax. With Americans consuming about 140 billion gallons of gasoline a year, a gas-tax increase of about 40 cents a gallon could fund a corporate rate cut, fostering economic growth and reducing a variety of driving-related problems. Indeed, if we increased the tax on gasoline to the level that many experts consider optimal, we could raise enough revenue to eliminate the corporate income tax. And the price at the pump would still be far lower in the United States than in much of Europe.

In his Jan. 22, 2012 column, A Better Tax System (Instructions Included), Mankiw wrote:

Tax Bads Rather Than Goods: A good rule of thumb is that when you tax something, you get less of it. That means that taxes on hard work, saving and entrepreneurial risk-taking impede these fundamental drivers of economic growth. The alternative is to tax those things we would like to get less of. Consider the tax on gasoline. Driving your car is associated with various adverse side effects, which economists call externalities. These include traffic congestion, accidents, local pollution and global climate change. If the tax on gasoline were higher, people would alter their behavior to drive less. They would be more likely to take public transportation, use car pools or live closer to work. The incentives they face when deciding how much to drive would more closely match the true social costs and benefits. Economists who have added up all the externalities associated with driving conclude that a tax exceeding $2 a gallon makes sense. That would provide substantial revenue that could be used to reduce other taxes. By taxing bad things more, we could tax good things less.

Although this and some other pronouncements by Mankiw concern gasoline taxes rather than carbon taxes, they could be considered bold by a close adviser to the Romney for President campaign.

Arthur Laffer (prominent economic adviser to President Reagan): In a New Hampshire Public Radio interview (10/19/11), and in “Economist Arthur Laffer proposes taxing pollution instead of income” (Vanderbilt Univ., 2/20/12), Laffer recommended a carbon tax with revenue used to cut income taxes, a swap that he argued would create jobs, improve economic output and reduce pollution. As Laffer and (then) Rep. Bob Inglis (R-SC) wrote in the New York Times (12/27/08):

Conservatives do not have to agree that humans are causing climate change to recognize a sensible energy solution. All we need to assume is that burning less fossil fuels would be a good thing. Based on the current scientific consensus and the potential environmental benefits, it’s prudent to do what we can to reduce global carbon emissions. When you add the national security concerns, reducing our reliance on fossil fuels becomes a no-brainer.

Yet the costs of reducing carbon emissions are not trivial. Climate change may be a serious problem, but a higher overall tax rate would devastate the long-term growth of America and the world.

It is essential, therefore, that any taxes on carbon emissions be accompanied by equal, pro-growth tax cuts. A carbon tax that isn’t accompanied by a reduction in other taxes is a nonstarter. Fiscal conservatives would gladly trade a carbon tax for a reduction in payroll or income taxes, but we can’t go along with an overall tax increase.

Laffer has said little about carbon taxes since around 2012, however, so it’s not clear if he currently (2017) qualifies as a carbon tax supporter.

Douglas Holtz-Eakin (American Action Forum): Holtz-Eakin, a senior policy adviser to the 2008 McCain campaign, is now president of the American Action Forum. In “Make a carbon tax part of reform effort” (Concord Monitor, 9/19/11), Holtz-Eakin argues for comprehensive tax reform to include a carbon tax so that more of the “true cost of burning a fossil fuel… in the form of air pollution, a negative impact on human health, harm to the environment or climate change [is a] component in economic decisions [such as] include whether to invest in a coal-fired power plant or a wind farm.” He suggests that carbon tax revenue be used to reduce the payroll tax, income tax and corporate tax rate. His organization, AAF, criticizes EPA regulation of greenhouse gases as costly and largely ineffective.

Irwin Stelzer (Hudson Institute): In “Carbon Taxes, An Opportunity For Conservatives” (2011) Irwin Stelzer, Senior Fellow and Director of the Hudson Institute’s economic policy studies group, wrote:

A tax on carbon… would reduce the security threat posed by the increasing possibility that crude oil reserves will fall under the control of those who would do us harm, either by cutting off supplies, as happened when American policy towards Israel displeased the Arab world, or by using the proceeds of their oil sales to fund the spread of radical Islam and attacks by jihadists.

A tax on carbon…  need not swell the government’s coffers — if we pursue a second, long-held conservative objective: reducing the tax on work. It would be a relatively simple matter to arrange a dollar-for-dollar, simultaneous reduction in payroll taxes… Anyone interested in jobs, jobs, jobs should find this an attractive proposition, with growth-minded conservatives leading the applause.

In The Carbon Tax Has Something for Everyone (National Review, Dec. 29, 2014), Stelzer observed,

We have a unique opportunity to end the rancorous debate about climate change, a debate that is poisoning the air — the political air, that is — and inhibiting progress on two fronts: progress on addressing the possibility that we are on the road to a catastrophic warming of the globe, and progress on reforming our anti-growth tax structure, which is so inequitable that it is straining the public’s belief in the fairness of capitalism and what we like to call “the American Dream.” All we need do is stop pretending that the cost of carbon emissions is certainly zero, and that regulation provides a more efficient solution than the market.

Stelzer urged the Republican leadership in Congress to integrate a carbon tax into broader tax reform.  He also pointed out that World Trade Organization rules enable a U.S. carbon tax to form the template for an effective global carbon tax structure, thereby breaking the UN climate policy gridlock.

In April 2015, writing in the conservative Weekly Standard, Stelzer reviewed and endorsed the new IMF book, “Implementing a U.S. Carbon Tax: Challenges and Debates” by Ian Parry, Adele Morris and Roberton C. Williams III.  Stelzer remarked:

This collection of 13 essays finally provides empirical data—numbers, if you are an ordinary reader rather than a policy wonk—and analyses to help us to some reasoned conclusions. The broad conclusions to be drawn are that a carbon tax would: reduce emissions, raise revenues more efficiently than the taxes it might replace, and be relatively easy to implement, “a straightforward application of basic tax principles,” in the words of the volume’s sponsors, the International Monetary Fund, the Brookings Institution, and Resources for the Future.

Most recently, in A Deal Over Climate Change, also in the Weekly Standard, Stelzer opined that the Supreme Court’s 5-4 stay of the EPA Clean Power Plan could catalyze a bipartisan agreement to substitute a carbon tax for G.O.P. denialism and Democratic regulation. The Feb 2016 post’s subhead, “Why not a carbon tax? Both sides could do a lot worse,” encapsulated Stelzer’s belief that political forces would push the two sides toward such an accommodation.

Alan Viard, Resident Scholar, American Enterprise Institute:  Former Dallas Federal Reserve economist (1998-2006) and former senior economist on the President’s Council of Economic Advisers (2003-04), Alan Viard is a regular contributor to the tax policy journal “Tax Notes.” In testimony to the Senate Finance Committee (2009), Viard explained the perverse effects of giving free allowances to polluters under cap-and-trade. When Senator Kerry asserted that “caps” are necessary to reduce emissions because polluters would “just pay” a carbon tax, Viard patiently and eloquently explained the bedrock principles of price elasticity that undergird both carbon taxes and cap-and-trade systems. Viard concluded by recommending a carbon tax with revenue used to reduce marginal tax rates.

Kevin Hassett, Director of Economic Policy Studies at the American Enterprise Institute: Conservative economist Kevin Hassett has long advocated a carbon tax as vastly preferable to costly regulations, subsidies or cap-and-trade schemes that induce energy price volatility and provide opportunities for manipulation and gaming by emissions traders. In early 2017, Hassett was named chair of President Trump’s Council of Economic Advisors.

Along with AEI colleagues Steven Hayward and Kenneth P. Green, Hassett authored “Climate Change: Caps vs. Taxes” (2007), a short and very readable article that deftly and systematically demolished the myths surrounding cap-and-trade with offsets while sketching the structure of a simple, effective carbon tax “shift.”  The authors pointed out that many of the supposed advantages of emissions caps were based on assumptions about the success of EPA’s SO2 emissions trading program for power plants which was orders of magnitude smaller and simpler than the market that would need to be established for CO2 emissions. They argued that much of the EPA program’s apparent success in reducing SO2 emissions from power plants was due to simultaneous railroad deregulation which reduced the cost of delivering low sulfur coal strip-mined in the west. And they cautioned that a CO2 cap-and-trade program would induce price volatility, feeding speculators while starving legitimate investors in alternative energy.

The article neatly described the potential for a “double dividend” obtained by tax shifting:  imposing taxes on CO2 pollution while using the revenue to reduce other distortionary taxes such as payroll, individual and corporate income taxes that dampen desirable economic activity. Hassett and colleagues suggested that such a carbon tax “shift” could improve the overall output of the economy even without considering climate benefits and thus represented a “no regrets” policy for conservatives who aren’t convinced of the danger of global warming. The article cited authoritative works by a range of leading economists including Yale’s William Nordhaus and Stanford’s Lawrence Goulder who also support carbon taxes.

This page features editorial positions by newspapers, magazines, etc. (rather than merely opinions expressed by columnists or reporters). Half a dozen other pages with different “supporter” categories may be accessed via the “Progress” tab in our menu bar.

The New York Times

Editorials at the Times carry the imprimatur of the editorial board. In years past, the Times repeatedly urged only that nations “put a price” on carbon emissions — a vague formulation that has often connoted support for cap-and-trade. In 2015, the board finally began calling for an explicit carbon tax, and opened 2016 citing British Columbia’s successful carbon tax:

Proof That a Price on Carbon Works (January 19, 2016):

British Columbia started taxing emissions in 2008. One big appeal of its system is that it is essentially revenue-neutral. People pay more for energy (the price of gasoline is up by about 17 cents a gallon) but pay less in personal income and corporate taxes. And low-income and rural residents get special tax credits. The tax has raised about $4.3 billion while other taxes have been cut by about $5 billion. Researchers have found that the tax helped cut emissions but has had no negative impact on the province’s growth rate, which has been about the same or slightly faster than the country as a whole in recent years.

The Paris Climate Pact Will Need Strong Follow-Up  (December 14, 2015):

Much was said about how the agreement sent a strong “signal” to investors, and indeed, Paris was swarming with corporate chieftains and Silicon Valley heavyweights. But the strength of that signal will depend heavily on whether governments are willing to promote such investments while removing the tax subsidies that favor dirtier fossil fuels — perhaps to the point of embracing carbon taxes.

The Case for a Carbon Tax (June 6, 2015):

A carbon tax would raise the price of fossil fuels, with more taxes collected on fuels that generate more emissions, like coal. This tax would reduce demand for high-carbon emission fuels and increase demand for lower-emisson fuels like natural gas. Renewable sources like solar, wind, nuclear and hydroelectric would face lower taxes or no taxes. To be effective, the tax should also be applied to imported goods from countries that do not assess a similar levy on the use of fossil fuels.

Revenue generated by carbon taxes could be used for a variety of purposes. A lot of the money should surely be given to households, especially the poorest, through tax credits or direct payments to offset the higher prices they would have to pay for gasoline, electricity and other goods and services because of the tax. Some of the money could be used to invest in renewable energy and public transportation, or to lower other taxes.

Global Warming and Your Wallet (July 6, 2007): “When the market, on its own, fails to arrive at the proper price for goods and services, it’s the job of government to correct the failure… We are now using the atmosphere as a free dumping ground for carbon emissions. Unless we — industry and consumers — are made to pay a significant price for doing so, we will never get anywhere.”

Warming Up on Capitol Hill (March 25, 2007): “Forcing polluters to, in effect, pay a fee for every ton of carbon dioxide they emit will create powerful incentives for developing and deploying cleaner technologies.”

The Truth About Coal (Feb. 25, 2007): “There is a need to put a price on carbon to force companies to abandon older, dirtier technologies for newer, cleaner ones. Right now, everyone is using the atmosphere like a municipal dump, depositing carbon dioxide free. Start charging for the privilege and people will find smarter ways to do business. A carbon tax is one approach. Another is to impose a steadily decreasing cap on emissions and let individual companies figure out ways to stay below the cap.”

Avoiding Calamity on the Cheap (Nov. 3, 2006): “Since the dawn of the industrial revolution, the atmosphere has served as a free dumping ground for carbon gases. If people and industries are made to pay heavily for the privilege, they will inevitably be driven to develop cleaner fuels, cars and factories.”

The Washington Post

Carbon tax is best option Congress has (May 7, 2013):

Sen. Max Baucus (D-Mont.), chairman of the Finance Committee, announced last month that he wants to spend the rest of his final term in office reforming the tax code , and there are signs that Republicans want an overhaul this year, too…

No honest tax reform paper, for example, would be complete without discussion of a carbon tax, an elegant policy Congress could immediately take off the shelf. It would make polluters pay for their own pollution, which is the best way to encourage greener thinking. It would cut emissions without overspending national wealth on grandiose central planning or command-and-control regulation. And it would raise revenue, which lawmakers could use for debt reduction, lowering other taxes, improving the social safety net or some combination. The carbon tax is one of the best ideas in Washington almost no one in Congress will talk about.

Those still worried about the economic effects need only consider how it could fit into a bigger tax-reform package such as the one Mr. Baucus wants to produce. Surely, Republicans should want to replace economy-sapping taxes on labor or business in return for a much more efficient tax on pollution. Democrats should be pushing for some of the revenue to pump up programs such as the Earned Income Tax Credit to ensure the carbon tax doesn’t sting consumers, particularly those least able to afford it.

Lawmakers should read the Finance Committee staff’s work and then consult a recent analysis by the Brookings Institution’s Adele Morris , who found that even a relatively modest carbon tax could produce nearly a trillion dollars in debt reduction over two decades, significantly drop other tax rates and enhance anti-poverty programs.

The carbon tax (November 10, 2012):

EARLY WEDNESDAY, delivering his victory speech in Chicago, President Obama elevated an issue that had hardly come up during the campaign. “We want our children to live in an America,” he said, “that isn’t threatened by the destructive power of a warming planet.”

Later that day, Senate Majority Leader Harry M. Reid (D-Nev.) told reporters that climate change is an important issue and that he wants to “address it reasonably” — particularly following big storms in the Northeast that have highlighted rising sea levels and other dangers associated with global warming.

House Speaker John R. Boehner (R-Ohio), meanwhile, spoke about cooperating with Democrats on urgently needed budget reform

Now if there were just some policy that would reduce carbon emissions and raise federal ­revenue . . .

A tax on carbon, of course, is that policy, and lawmakers and the president should be discussing it. The idea is to put a simple price on emissions of carbon dioxide and other greenhouse gases — some dollar amount per ton of CO² — that steadily increases at a pre-set rate.

This is the best plan lawmakers can take off the shelf to fight global warming. As an added benefit, it would reduce dependence on imported oil. If businesses and consumers had to pay something for the otherwise invisible costs of their actions — in this case, pollution — they would be more careful. Their combined preferences, not those of Congress or bureaucrats, would determine how to wring carbon out of the economy.
Homeowners might turn down their thermostats or weatherize their windows. Power companies would devise the cheapest ways to reduce the carbon dioxide they emit, without the government ordering them to build this or to refrain from that. At first, they would probably burn more natural gas and less coal, a cheap way to cut lots of emissions quickly. In the long term, the demand for green technologies would expand, and with it private investment.

Sorry Record – Waiting for breakthrough technologies is not the way to reduce greenhouse gases (July 11, 2006)

[The Administration] has resisted taxing carbon use, preferring instead to provide incentives for oil and gas extraction — just the opposite of what’s needed.

Some Positive Energy — Now Start Talking About a Carbon Tax, (June 25, 2007).

As important as many of the measures in [the Senate energy] bill are, they amount to only tinkering at the margins of a serious problem. What the Senate bill doesn’t do — and what the House bill won’t do when it is brought to the floor for consideration next month — is spark a necessary debate on the imposition of a cap-and-trade system or a carbon tax. This must be on the agenda after the Fourth of July recess when the Senate is expected to take up global warming. Sooner or later, Congress will have to realize that slapping a price on carbon emissions and then getting out of the way to let the market decide how best to deal with it is the wisest course of action.

Los Angeles Times

How California can best fight climate change (July 14, 2014):

A carbon tax that pushes up gas prices would give all California drivers reason to be gas-thrifty. They could then decide whether to use their tax credit to offset the increased cost of buying gas or find ways to reduce gas purchases and use the credit for other purchases. Substantially larger tax credits would go to lower-income residents and perhaps to rural residents for whom public transit isn’t available. Some of the money could be set aside for rebates to residents who buy fuel-efficient cars, or to agricultural operations that switch to cleaner farm vehicles or methane-capture technologies.

The L.A. Times ran two stirring editorials in May-June 2007 that powerfully made the case for taxing carbon. Here are excerpts:

Time to Tax Carbon, (May 28, 2007):

There is a growing consensus among economists around the world that a carbon tax is the best way to combat global warming, and there are prominent backers across the political spectrum … Yet the political consensus is going in a very different direction. European leaders are pushing hard for the United States and other countries to join their failed carbon-trading scheme, and there are no fewer than five bills before Congress that would impose a federal cap-and-trade system. On the other side, there is just one lonely bill in the House, from Rep. Pete Stark (D-Fremont), to impose a carbon tax, and it’s not expected to go far.

The obvious reason is that, for voters, taxes are radioactive, while carbon trading sounds like something that just affects utilities and big corporations. The many green politicians stumping for cap-and-trade seldom point out that such a system would result in higher and less predictable power bills. Ironically, even though a carbon tax could cost voters less, cap-and-trade is being sold as the more consumer-friendly approach.

A well-designed, well-monitored carbon-trading scheme could deeply reduce greenhouse gases with less economic damage than pure regulation. But it’s not the best way, and it is so complex that it would probably take many years to iron out all the wrinkles. Voters might well embrace carbon taxes if political leaders were more honest about the comparative costs.

Reinveting Kyoto, (June 11, 2007):

A better treaty [than Kyoto] would scrap the unworkable carbon-trading scheme and instead impose new taxes on carbon-based fuels. As recently explained in the first installment of this series [Time to Tax Carbon, above], carbon taxes avoid many of the pitfalls of carbon trading. They would produce an equal incentive for every nation to clean up without relying on arbitrary dates or caps, or transferring money from one nation to another. They’re also much less subject to corruption because they give governments an incentive to monitor and crack down on polluters (the tax money goes to the government, so the government wins by keeping polluters honest)… Real solutions to global warming, such as carbon taxes, won’t come cheap — they’ll make power bills steeper and gas prices even higher than they are now. But the economic news isn’t all bad. Much of the clean technology of the future will probably be developed in the United States and sold overseas. Think of [a carbon tax] as a novel way of reducing our trade deficit with China while building a cleaner world.“

For the strong critique of cap-and-trade in the Time to Tax Carbon editorial, click here.

Other Newspapers

Albany Times-Union:

THE ISSUE: Evidence of a warming planet is clear and obvious.

THE STAKES: A carbon tax is needed to stave off a looming global crisis.

[Fossil fuel subsidies] are an absurd use of public finances, and must be eliminated as quickly as possible. That long-overdue move must be coupled with a stiff carbon tax that makes fossil fuels artificially and increasingly expensive. Such a tax would immediately make greener energy more competitive, and encourage private enterprise to develop new and better technologies. And it would acknowledge that fossils fuels have a negative societal cost that is increasingly intolerable.

Here’s another idea with merit: an import tax that charges manufacturers for the carbon impact of their products. Such tariffs, which are now being weighed by the European Union and Democrats in Congress, would leverage American buying power to force global changes and reduce concern that fighting climate change domestically puts the country’s economy at a global disadvantage.

Certainly, carbon taxes and tariffs would hit lower-income Americans too hard. That’s why both must be structured with rebates that alleviate the pain.

But as 100-year storms become 10- or 5-year storms, the cost of our stubborn inaction grows increasingly clear. The time for change is now, if not sooner.

Editorial: How soon is now?, Sept 8, 2021.

Detroit Free Press:

A tax on carbon dioxide emissions, phased in gradually but relentlessly, would be the most transparent and efficient step this country could take in the search for energy independence and reductions in many emissions, including carbon dioxide. It would send a hugely important signal to the markets — for cars and for alternative energy sources such as windmills and solar collectors, in particular — that innovation and conservation are essential. Consumers are going to pay for any measures taken to reduce greenhouse gases and shift away from dependence on foreign petroleum. But most politicians choose instead to hide the costs by placing expensive demands on automakers and by dispensing subsidies for alternative fuels, such as ethanol, that become a hidden tax burden. A cap-and-trade system for emissions also would have disguised costs. Keep Carbon Tax in the Mix of Solutions, July 12, 2007.

Chicago Tribune:

[T]he ultimate goal should not be to reduce the price consumers pay at the pump. It should be to reduce the amount going to oil producers. Global warming is more than ample grounds for levying taxes on carbon-based fuels, including gasoline, to reduce emissions. But those taxes would fall partly on foreign oil producers. By cutting consumption, they promise to put downward pressure on world crude oil prices—weakening OPEC and stemming the flow of dollars to anti-American regimes. American consumers have a choice: They can pay high prices to oil producers or to themselves. The tax proceeds can be used to finance programs of value here at home or to pay for cuts in other taxes—even as they curb the release of carbon dioxide. Pump Pain, May 20, 2008.

Christian Science Monitor:

Consumption taxes, after all, are often designed to wean people off bad behavior, such as smoking. A 90 percent drop in these emissions is probably what’s needed to limit any rise in atmospheric warming to 2 degrees Celsius, a goal that many scientists recommend. Most presidential candidates do endorse pinching pocketbooks, but only indirectly, such as by calling for higher fuel efficiency in vehicles and a cap on greenhouse-gas pollution from company smokestacks. Such demands on industry have the advantage of creating more certainty in reducing emissions, but they are complex to enforce. Gore would do both: tax carbon use and cap emissions. Putting a crimp on global warming can’t be done solely by promoting new energy technologies and voluntary conservation. Consumers of oil and coal need a direct tax shock. Christian Science Monitor, July 5, 2007.

The Monitor was even more direct in a pair of editorials on Oct. 25 and 26. In the first, Be Wary of Complex Carbon Caps, the Monitor noted the loopholes, fraud and other problems that have hamstrung carbon cap-and-trade programs. In the second, A Tax on Carbon to Cool the Planet, the Monitor summarized the first editorial:

Indeed, caps may put the US on a knowable track to, say, an 80 percent reduction in carbon emissions by 2050. But as the previous Monitor’s View pointed out, the flaws in cap-and-trade plans as experienced in other nations – their complexity and vulnerability to fraud and special-interest lobbyists – would reduce the intended effect. They also take a long time to set up and get working right. And, in the end, they also raise energy prices for consumers, just not as directly as a tax.

The Monitor then concluded:

With Europe’s cap-and-trade system faltering, the US should be a leader in using a carbon tax, even if big polluters such as China don’t follow. As a last resort, the US could tax goods from countries that fail to cut their carbon emissions.

A carbon tax is not the whole solution. Regulations will still be needed, such as stiffer fuel-economy standards for cars and trucks. And the US should fund research into alternative fuels, too. All it takes is the political will to act.

Eugene (OR) Register-Guard:

The crisis presented by global warming demands a response that is simple, comprehensive and effective. A tax on carbon consumption is the only response in sight that both discourages the production of emissions that cause global warming, and finances the rapid transition to a post-carbon economy… “The best way to tax carbon fuels is at the point of production: at the wellhead, mine or biofuel plant. The added tax should be large – starting at the equivalent of $1 per gallon of gasoline, and increasing to the equivalent of $6 per gallon of gasoline over 10 years… The phase-in of high taxes on carbon fuels over 10 years will provide huge incentives for market-financed, market-driven, market-governed development of unsubsidized, safe, sustainable alternate energy sources, far more efficient uses of energy, and other alternate products and methods. (The Cold Truth, July 22, 2007).

18. How will carbon taxes handle carbon sequestration? Plastics? Petrochemicals?

Offsetting credit will be provided to the extent the carbon dioxide is actually sequestered, in order to eliminate any disincentive to sequestration. Releases of CO2 from converting fossil fuels to plastics or petrochemicals in non-combustion processes will be taxed at the same level as CO2 emitted in the production of energy or for transportation purposes.

19. Will a carbon tax apply to nuclear power?

A carbon tax will only be imposed on the use or combustion of carbon and the resulting emission of carbon dioxide. A carbon tax would not be imposed directly on the generation of nuclear power, though of course it would apply to any CO2 released in mining, enriching and transporting uranium, in other uses ancillary to the generation of nuclear power (such as fuel used for back-up generation), and in storing radioactive wastes.

20. How high should carbon taxes go? How fast should they climb?

While carbon taxes will need to be rise briskly to create the required price incentives, they will need to be phased in to give individuals and businesses the opportunity to adjust. There’s no magic formula or perfect number, but a tax that grows fast enough to reduce CO2 emissions by 1/3 within a decade probably offers a viable combination of meaningful incentive and opportunity for adaptation. The $15 per ton of CO2 “starter tax” mentioned earlier, equating to around 14 cents a gallon of gasoline, fits the lower end of that range. At least as important as the tax level is the commitment to keep raising the tax, preferably annually, so that energy-critical decisions, from car-buying (Hummer vs. Prius) to home-buying (exurb vs. transit-oriented community) to factory locating (highway interchange vs. rail line), are made with carbon-appropriate price signals.

21. Must carbon taxes be global to work?

Though carbon taxes can be applied locally, nationally or globally, the eventual goal is a global tax. Not only is the climate crisis global in both scope and solution, but a global carbon tax will avert potential leakage by carbon emitters attempting to move their combustion of carbon from countries that tax carbon to those that don’t. U.S. carbon tax legislation should include border tax adjustments to help protect domestic industry from unfair competition and to tax imports of other nations until they enact their own taxes on carbon pollution. Still, let’s not make perfection the enemy of the good; carbon pollution should be taxed wherever possible.

22. Why a carbon tax instead of a cap-and-trade system?

Carbon taxes are superior to cap-and-trade programs for seven fundamental reasons:

• Carbon taxes will lend predictability to energy prices, whereas cap-and-trade systems will only exacerbate price volatility that discourages investments in carbon-reducing energy efficiency and carbon-replacing renewable energy.
• Carbon taxes can be implemented more quickly than complex permit-based cap-and-trade systems.
• Carbon taxes are transparent and easily understandable, making them more likely to elicit public support than opaque and complex cap-and-trade.
• Carbon taxes aren’t easily manipulable by special interests, whereas the complexity of cap-and-trade leaves it rife for exploitation by the financial industry.
• Carbon tax revenues can be more or less guaranteed and integrated into state or federal fiscal policy, owing to their predictability, whereas the price-volatility of cap-and-trade precludes its being counted on as a revenue source.
• Carbon taxes are replicable across borders, since the price “metric” embodied in a carbon tax is far more universal than the quantity-reduction metric underlying cap-and-trade.
• Perversely, cap-and-trade discourages voluntary/individual carbon reductions, since those cause a lowering of prices of emission permits which undercuts low-carbon investments; carbon taxes are free of this unintended negative consequence.

23. How responsive is energy demand to the price of fuels?

That varies with the type of fuel, the expected persistence of the price change, and the availability of substitutes. The two forms of energy that economists have studied most intensively are gasoline (which in 2014 accounted for 20% of U.S. emissions of carbon dioxide) and electricity (39%).  From our own micro-economic analyses as well as a literature review, CTC believes a “price-elasticity” of 35% (or negative 0.35, in the jargon) is an appropriate assumption for gasoline demand, and 70% for electricity. These assumptions mean that drops in demand are less steep than rises in the fuel price but are still substantial. For all other fuel uses, ranging from diesel fuel for trucks and jet fuel for planes to home heating and industrial fuels — the overall price-responsiveness is probably greater than for gasoline but less than for electricity. (See more detailed discussion on our “Effectiveness” page.)

These estimates are “long-run” elasticities, meaning that price rises take years to fully affect demand. Households and businesses can’t overnight adjust their stocks of energy-using equipment (cars, major appliances, office layouts, etc.), nor can they instantly adapt location decisions that determine distances that people and goods travel. On the other hand, carbon taxes and the resulting relative rises in fossil fuel prices will induce reductions in carbon emission rates on the supply side. For example, higher coal prices due to carbon taxing will lead cost-minimizing power grids to more heavily dispatch lower-emitting natural gas power plants in the short run, and to switch increasingly to zero-carbon wind and solar generation over time.

24. What are the non-climate costs of using fossil fuels?

Fossil fuels burden human beings, communities and nature with enormous environmental and social damages apart from destabilizing climate. Chief among them are “traditional” air pollution such as car and truck exhaust and smokestack emissions; destruction of land and water from extracting and transporting fuels; and the militarism, economic inequality and political authoritarianism that is endemic to extractive economies (e.g., Saudi Arabia, Nigeria, Indonesia). Many researchers believe the magnitude of these and other “indirect” costs exceeds the “market” prices paid for coal, oil and gas.

25. What are the ancillary benefits of taxing carbon?

As the previous Q&A suggests, U.S. carbon taxes will deliver vast non-climate benefits by discouraging use of fossil fuels. These will range from better air quality and less strip-mining to reduced entanglement in the unstable and dangerous Middle East and a less powerful fossil fuel industry. Americans can also look forward to a slew of indirect benefits – for example, lighter road traffic arising from a decrease in vehicle-miles traveled, as families and businesses adapt to higher gasoline and diesel fuel prices by trimming their least essential trips and consolidating others.

26. Who favors carbon taxes?

Carbon taxes are supported by a diverse group of opinion leaders, pundits, scientists and economists. The task now is to broaden and deepen support for taxing carbon among both the political elites and the grassroots – and to do so in the face of concerted opposition from fossil fuel interests determined to preserve (and increase!) their sales rather than watch their sector, and profits, shrink as the carbon tax steadily diminishes sales and use of coal, oil and gas.

27. How have past fuel tax efforts fared in the U.S.?

Poorly. The idea of taxing energy to better reflect its full costs collides with Americans’ historical entitlement to cheap energy and the anti-tax ideology of the past 35 years, not to mention the political muscle of the fossil fuel industry. This triad helped kill the last big effort to tax energy — President Clinton’s Btu tax in 1993. Nevertheless, we’re optimistic that making the carbon tax revenue-neutral, with all revenue recycled via tax-shifting or returned via carbon tax dividends, can soften resistance. Indeed, as described in the next Q&A, polls now point to strong support for a revenue-neutral tax designed to combat climate change.

28. What does polling indicate about carbon taxes?

Opinion polls increasingly find Americans grasping the need to address climate change and warming (oops) to a revenue-neutral carbon tax. A January 2015 poll by political scientists at Stanford University and Resources for the Future found that two-thirds of Americans support making corporations pay a price for carbon pollution, provided the revenues are redistributed, i.e., made revenue-neutral. (See graphic at left.)

More recently, in March 2016, nearly two-thirds (64%) of Americans polled told Gallup’s annual environmental poll that they are worried a “great deal” or a “fair amount” about global warming. That figure is up from 55% in March 2015 and is the highest reading since 2008, according to Gallup. (See graphic below.)

Other results from the 2016 Gallup poll are equally striking. They show a record-high share of Americans stating that climate change poses a threat to them and their way of life; a record number agreeing that climate change is caused primarily by human activity; and climate concern climbing across the political spectrum.

There’s more about these two polls as well as earlier ones on our page on opinion polling.

29. What will a carbon tax look like to me?

On the one hand, just about everything requiring fossil fuels, from a drive in the country to imported produce, will cost more, with prices rising the most for activities or goods that use the most fossil fuels. But the upside is three-fold: (i) your tax reduction or dividend check will offset much, perhaps more than 100%, of those price increases; (ii) you’ll be able to minimize your tax bite by cutting down on fuel usage (e.g., shortening those country drives, buying locally-grown produce, purchasing “green power” from wind and solar cells); and (iii) Americans’ combined behavior changes in response to the carbon tax will go a long way toward protecting the climate and averting the cataclysmic consequences of unchecked global warming.

30. Who’s taxing carbon now?

See our Where Carbon Is Taxed page. Or, download Sightline Institute’s excellent 2014 report, All the World’s Carbon Pricing Systems in One Animated Map, with maps tracing the institution (and, in at least one instance, Australia, the rescission) of carbon taxing worldwide, as well as carbon pricing administered via cap-and-trade programs. The Sightline report includes helpful tables, too.

The most notable carbon tax in the Western Hemisphere remains that in British Columbia. Carbon dioxide emissions from that province, Canada’s third most populous, began to be taxed on July 1, 2008 at a rate of $10 (Canadian) per metric ton and were raised annually to reach the current rate of $30 per metric ton (which equates to just over 20 U.S. dollars per U.S. ton). (We assessed BC’s carbon tax in a December 2015 report.) Voters in Boulder (Colorado) passed a carbon tax referendum in 2006; while Boulder’s tax equates to just $7/ton and applies only to electricity, it nonetheless establishes an important precedent: the first climate-protecting tax ever levied in the United States. Citizens in Washington State and five other states are campaigning to enact statewide carbon taxes.

31. What’s the political strategy for winning carbon taxes?

An effective campaign for carbon taxes must be both intellectually sound and politically palatable. The key point: Taxing climate pollution is economically and morally preferable to taxing productive activity such as work, savings or investment. Instead of discouraging productive effort, initiative and investment as other tax burdens do, a tax on carbon pollution raises the cost of harmful activity and thereby encourages efficiency and renewable energy. Revenues from carbon taxes can fund “dividends” to all U.S. residents or be used to reduce existing taxes, shifting tax burdens onto pollution and pollution-generating activities. Framing taxes on carbon pollution as an embodiment of the “polluter pays” principle unites interests as diverse as environmental-justice advocates, free-market conservatives and classical economists. Sound design of the revenue side of carbon tax legislation will also ensure that people of limited means, who use less energy than average, are made better off, not worse.

32. What can I do to advance carbon taxes?

The big need now is to develop grassroots support for a carbon tax. Start talking about a tax on climate pollution at your local environmental, religious or civic group meetings. Subscribe to CTC’s occasional but timely emails by filling in the sign-up pop-up box on our home page. Join Citizens Climate Lobby, the vital and committed nationwide network of activists that is putting the revenue-neutral carbon tax known as “fee-and-dividend” (delightfully explained in CCL’s 2-minute video) on the policy map. And please donate to the Carbon Tax Center, via our on-line Donate page. It’s contributions from people like you that enable us to conduct research, work on advocacy, and share knowledge and hope on carbon taxing. Thank you.

A “robust” carbon tax — one high enough to significantly change fuel incentives, drive innovation and transform our energy system and culture — is going to generate large amounts of revenue.

Fossil-fuel burning in the U.S. now (pre-pandemic, 2019) emits around 5 billion metric tons of carbon dioxide a year. A carbon tax set at the threshold of robustness — $50 per metric ton — would generate roughly $250 billion a year in new tax proceeds. That’s a significant figure by any measure. It equates to 6-7 percent of total U.S. tax proceeds (currently $3.86 trillion). Spread among the country’s 128.5 million households (as of 2017), it’s $1,950 a year.

Not surprisingly, “what to do with the carbon tax revenue” is the most contentious issue surrounding carbon tax proposals, especially for possible carbon taxes at the federal level where the tax rate could be higher and political divisions are starker.

Revenue-Neutral Carbon-Taxing

Revenue-neutral means that government retains little if any of the tax revenues raised by taxing carbon emissions. Instead, the revenues are returned to the public; with, perhaps, small amounts utilized to assist communities dependent on fossil-fuel extraction and processing to adapt and convert to low- or non-carbon economies.

There are two overlapping but nonetheless disparate reasons for structuring a carbon tax to be revenue-neutral.

One is to appeal to (or appease) voters and elected officials who claim to abhor government and thus don’t want to swell its coffers.

The other is to counter or at least minimize the natural regressivity of carbon taxes by returning revenue in a way that protects the less affluent, while preserving the tax’s price-incentive to reduce emissions. (Keep in mind that wealthier households use more energy, since they generally drive and fly more, have bigger (and sometimes multiple) houses, and buy more stuff that requires energy to manufacture and use.)

There are two primary approaches to returning or recycling the tax revenues.

One approach, discussed below in detail, returns revenues directly through regular (e.g., monthly) “dividends” to all U.S. households or residents. Every resident or household receives an equal, identical slice of the total carbon revenue “pie.” In this approach, which adherents at Citizens Climate Lobby call fee-and-dividend, each individual’s carbon tax is proportional to his or her fossil fuel use, creating an incentive to reduce; but everyone’s dividend is equal and independent of his or her usage, preserving the conservation incentive. Alaska’s dividend program has provided residents with annual allotments from the state’s North Slope oil royalties for three-and-a-half decades.

In the other revenue-return method, each dollar of carbon tax revenue triggers a dollar’s worth of reduction in existing taxes such as the federal payroll tax or corporate income tax — or, on the state level, sales taxes. As carbon-tax revenues are phased in (with the tax rates rising steadily but not too steeply, to allow a smooth transition), existing taxes are phased out. While this “tax-shift” is less direct than the dividend method, it too ensures that the carbon tax is revenue-neutral. It offers other important benefits, as well; for example, reducing payroll taxes could stimulate employment.

To repeat: each individual’s receipt of dividends or tax-shifts is independent of the carbon taxes he or she pays. That is, no person’s benefits are tied to his or her energy consumption and carbon tax “bill.” This separation of benefits from payments preserves the carbon tax’s incentive to reduce use of fossil fuels and emit less CO₂ into the atmosphere. (Of course, it would be extraordinarily cumbersome to calculate an individual’s full carbon tax bill since to some extent the carbon tax would be passed through as part of the costs of various goods and services.)

Revenue-neutrality not only protects the poor, it’s also politically savvy since it offers a way to blunt the “No New Taxes” demand that has held sway in American politics for decades. Returning the carbon tax revenues to the public would also make it easier to raise the tax level over time, a point made nicely by McGill University professor Christopher Ragan in a 2008 Montreal Gazette op-ed, and subsequently borne out by the experience in British Columbia where a revenue-neutral carbon tax was ramped up in four annual increments; that tax remains politically popular and is driving down emissions.

In any event, either of the two “revenue return” approaches — carbon dividends and tax-shifting — can make carbon taxes income-progressive. Because income and energy consumption are strongly correlated, most poor households will get more back in their carbon dividends or via tax-shifting than they will pay in the carbon tax. The overall effect of a carbon tax could thus be equitable and even “progressive” (benefiting lower-earning households).

Revenue-Positive Carbon-Taxing (Investing in Alternatives)

It may seem axiomatic that carbon-tax revenues should fund renewable energy or efficiency upgrades. And that approach always polls well, making it politically attractive.

Nevertheless, climate and energy realities indicate that only a robustly-rising carbon tax can deliver the deep and broad CO2 emission reductions needed to avert climate disaster. Building public support and maintaining the fairness needed for such a substantial carbon tax can most easily be done if all or nearly all of the carbon-tax revenue is returned to taxpayers. See “Making a carbon tax income-progressive” and our blog post: “Which Carbon Tax: Robust or Miniature? (July 7, 2013)”

Dividends

(a/k/a Carbon Dividends or “Green Checks”)

One revenue treatment that is both income-progressive and appealingly straightforward is to return the revenues equally to all U.S. residents. This  so-called “dividend” would be a national version of the Alaska Permanent Fund, which since the 1970s has annually sent all state residents identical checks drawn from earnings on investments made with the state’s North Slope oil royalties. (For a federal carbon tax, the “dividend” checks should be provided quarterly or monthly to keep households ahead of the budget treadmill.)

The dividend approach was so attractive and elegant that the nation’s most energetic and active advocacy organization for carbon taxes has organized around it. That’s the Citizens’ Climate Lobby, which calls its approach carbon fee-and-dividend.

Nevertheless, it seems fair to say (and important to acknowledge) that by 2018, the second year of the Trump administration, fee-and-dividend has run out of political room. Not a single “sitting” (i.e., still in office) Republican member of Congress has publicly endorsed fee-and-dividend, even as a concept, let alone an actual bill. Yet the premise of fee-and-dividend has always been bipartisanship, since Democrats, with their preference for activist government, would accept a revenue-neutral carbon tax such as fee-and-dividend only if it delivered Republican votes.

For a decade, we wrote glowingly about fee and dividend — most recently in 2017 articles in The Nation and the Washington Spectator. We also praised the Climate Leadership Council’s “carbon dividend” proposal and advocacy in those two pieces and in numerous blogs (here, here, and here, inter alia). But as we wrote in June 2018, we believe that the time for carbon dividend proposals has probably passed. We wrote:

The [political] center to which Baker-Shultz (CLC) and fee-and-dividend (CCL) were designed to appeal barely exists. It’s not just that no sitting Republican has endorsed Baker-Shultz or indeed fee-and-dividend in any form. It’s also that the Democratic majority that will be needed to pass a carbon tax bill appears unlikely to rally around a revenue-neutral carbon tax, whether it’s organized as fee-and-dividend or some form of tax swap.

Economic Progressivity of Fee-and-Dividend

In 2016 CCL released a detailed paper examining how a carbon fee-and-dividend would impact U.S. households. The study took into account geographic variations in electricity sources and gasoline use and drew on a database of carbon intensity of expenditures for 5.8 million households to analyze the net effect of returning revenue to households on a modified per capita basis. Here are the major results:

• 53% of households (and 58% of individuals) would receive more in dividend payments than they would spend due to higher fossil fuel prices.
• Another 19% of households would incur only a slight loss, defined as a net loss no larger than one-fifth of one percent of pre-tax income.
• Nearly 90% of households below the poverty line would benefit an average of $311, an increase of roughly 2.8% of pre-tax income.
• In contrast, the net loss for the top quintile of households would average $-322 or only -0.18% of pre-tax income.

Notably, these findings support a dividend plan’s ability to transform a carbon tax into a progressive policy that neutralizes the burden that lower-income households would otherwise face, directly and indirectly, due to higher fuel prices. CTC advocates a progressive distributional outcome for both pragmatic and ethical reasons: pragmatically, because a carbon tax will require broad, sustained, public and political support; and ethically, because it’s not tenable to solve the climate crisis on the backs of those who can least afford it.

A Caveat — CBO’s “haircut”

The non-partisan Congressional Budget Office routinely “scores” members’ bills for their prospective impact on tax revenues. To streamline its analyses, CBO long ago settled the so-called “CBO haircut” by which it assumes that one-quarter of indirectly raised revenues would need to be allocated from the tax proceeds in question in order to make up for reduced tax revenues collected from conventional sources such as personal or corporate income taxes. But modeling of carbon tax proposals consistently finds that when revenue is strategically returned by reducing other taxes that tend to slow down economic activity, the net negative impacts are much lower than CBO’s 25% assumption and in some cases may be eliminated altogether. While returning revenue as “dividends” (which economists call “lump-sum rebates”) offers less potential to reduce economic drag than tax shifts, CBO’s assumption still seems like an over-estimate.

In any event, rigid application of the 25% CBO haircut could, on paper at least — and, likely, in Congressional deliberations — limit the carbon tax revenue perceived to be available for “dividends” to 75%. Yet even with this reduced fraction of revenue, returning carbon tax revenue via a direct dividend represents a simple and income-progressive means to make carbon taxes distributionally fair; though with the haircut, the share of households reaping a net benefit via an equal 75% dividend would be lower than the 58% of individuals mentioned above.

Related CTC blog posts

• The Carbon Tax Revenue Menu (6/10/2011)
• Should Carbon Pricing Advocates Support the Cap-and-Dividend Bill? (12/2/2010)
• Scientist James Hansen Proposes “People’s Climate Stewardship Act”: A Simple Carbon Fee with Revenue Returned to Americans (4/25/2010)
• Progressive Democrats Say: “Cut Out Wall Street — Price Carbon Directly and Recycle Revenue to Households.” (10/20/2009)
• Back to Plan A: The Revenue-Neutral Carbon Tax (7/6/2009)

Related news reports and opinion pieces

• Alaska’s Permanent Dividend Fund — A policy ripe for export (Bangor Daily News, 6/20/2011)
• James Hansen Rails Against Cap-and-Trade in Open Letter, Advocates Fee-and-Dividend to Reduce Carbon Emissions (The Guardian, 1/12/2010)
• Cap and Fade (James Hansen, NYT op-ed, 12/6/2009)
• How CBO budget scoring devalues efficiency (Dave Roberts, Grist 10/15/2009)

Cogent opinion pieces by dividend proponent James K. Boyce (U-Mass, Amherst)

• Does Biden’s insurance policy for the climate go far enough? (The Hill, 2/26/2021)
• Carbon Dividends: The Bipartisan Key to Climate Policy? (Institute for New Economic Thinking, 2/17/2017)
• The Carbon Dividend (New York Times, July 29, 2014)

Tax-Shifting

The distribution of carbon tax burdens creates an opportunity for “progressive tax-shifting,” in which a portion of carbon tax revenue is dedicated to reducing regressive taxes such as the payroll tax (at the federal level) or sales taxes (at the state level). An early proponent of such a carbon tax shift was Al Gore, with his exhortation to “Tax what we burn, not what we earn.” Shifting taxes away from payroll and/or sales taxes and onto carbon pollution could raise, not lower, the after-tax incomes of a majority of below-median-income households, giving this approach a net progressive effect.

In addition to this potential progressive effect of tax shifting, a wide range of economists, [including Lawrence Goulder, Roberton Williams & Ian Parry, Gilbert Metcalf & David Weisbach, Alan Viard, Robert Shapiro, Donald Marron & Eric Toder] have concluded that use of revenue to reduce other taxes would improve the overall efficiency of the economy, for example, by removing burdens on work.

In October 2007, the Brookings Institution published a A Proposal for a U.S. Carbon Tax Swap — An Equitable Tax Reform to Address Global Climate Change by Tufts University economics professor Gilbert E. Metcalf, describing a national carbon tax paired with an income tax credit for payroll taxes paid. Metcalf assessed the impact of a tax of $15 per metric ton of carbon dioxide and five major greenhouse gases. Revenues would be used to credit payroll tax paid on the first $3,660 of earnings per worker. Metcalf showed that such a tax swap would be both revenue-neutral and distributionally-neutral. (Harvard professor and former Bush Administration economist Gregory Mankiw mentioned the Metcalf paper in a Sept. 2007 New York Times op-ed, discussed on our blog.) Rep. John Larson (D-CT) adopted Metcalf’s framework for his “America’s Energy Security Trust Fund Act,” discussed on our Bills page.

More recent analysis has confirmed the importance of carbon tax revenue wisely; using it to reduce other “distortionary” taxes can offer large enough efficiency benefits to reduce or even possibly eliminate the economic drag that a carbon tax would otherwise create. In Deficit Reduction and Carbon Taxes: Budgetary, Economic, and Distributional Impacts (2013) researchers from Resources for the Future found that using carbon tax revenue to reduce corporate income tax rates offers large enough efficiency benefits to more than overcome the efficiency loss of a carbon tax. The next best option is using revenue to cut wage taxes, while using revenue to cutting other consumption taxes is somewhat less efficient. Finally, refunding carbon tax revenue in a “lump sum rebate” (dividend) offers the least economic efficiency benefit.

Reducing the top marginal corporate income tax rate has been articulated as a goal by leaders of both major political parties. In an effort to attract Republican interest, Rep. John Delaney (D-MD) has introduced a carbon tax measure that would devote half its revenue to corporate income tax reduction.

Nevertheless, the growing economics literature on carbon taxes suggests a strong a tradeoff between the efficiency benefits of using carbon tax revenue to cut taxes on capital (as the Delaney proposal would do) and the distributional benefits of cutting taxes on labor (as Rep. Larson’s proposal would).

Related CTC blog posts and articles

• British Columbia’s Carbon Tax Architects Speak (2015).
• The Carbon Tax Revenue Menu, outlining the benefits of various revenue options (2011).
• Carbon Tax Offers Super Powers to Super-Committee, discussing potential for a carbon tax to reduce the deficit (2011).
• Midterm Advice for Congress: Tax Carbon Instead of Jobs (Robert Shapiro, Huffington Post, 2010).
• Capitol Hill Briefing on Carbon Taxes Draws Overflow Crowd, Rep. John Larson (D-CT) led off CTC’s event, articulating the benefits of a taxing carbon pollution while cutting wage taxes (12/9/08).

Related journal articles and papers

• Taxing Carbon and Recycling the Revenue: Who Wins and Loses? (Donald Marron, Eric Toder, and Lydia Austin, Urban-Brookings Tax Policy Center, Nov. 2015).
• Tax Policy Issues in Designing a Carbon Tax (Donald B. Marron and Eric J. Toder, Urban-Brookings Tax Policy Center, 2014).
• Getting to an Efficient Carbon Tax: How the Revenue is Used Matters (Jared Carbone, Richard D. Morgenstern, Roberton C. Williams III, and Dallas Burtraw, Resources for the Future, 2014).
• A Carbon Tax in Broader U.S. Fiscal Reform: Design and Distributional Issues, Adele Morris (Brookings) and Aparna Mathur (American Enterprise Institute), C2ES, 2014).
• Carbon Tax Revenue and the Budget Deficit: A Win-Win-Win Solution? (MIT, 2012).
• The Potential Role of a Carbon Tax in U.S. Fiscal Reform (Brookings, 2012).
• Fiscal Policy to Mitigate Climate Change (IMF, 2012).
• How Climate Policy Could Address Fiscal Shortfalls (Adele Morris & Ted Gayer, Brookings, 2010).
• Addressing Climate Change Without Impairing the US Economy (Robert Shapiro, U.S. Climate Task Force, 2009).
• A Proposal for a U.S. Carbon Tax Swap (Gilbert Metcalf, Brookings, 2007).