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A Republican Carbon-Tax Based Climate Proposal: Pros and Cons

by Peter A. Belmont / 2017-02-09
© 2017 Peter Belmont


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This essay was republished on CounterPunch on 2/15.

The Feb. 8 New York Times op-ed ”A Conservative Case for Climate Action” has provided the sole even slightly hopeful piece of news I’ve seen this year from Republicans —here statesmen rather than politicians. This proposal is spelled out at greater length here.

This proposal is hopeful principally because it calls for some/any climate action—chiefly in the form of a carbon tax to replace environmental regulations—at a time when nearly 100% of President Trump’s cabinet, most of his advisors, and many Republicans in Congress appear to be ideological or corrupt climate deniers who will fight any action whatever to end emission of greenhouse gases. The proposal comes at a time when the Koch brothers and their ilk are indeed riding high.

Let us hope that this proposal from a council of Republican elder statesmen will turn enough of these Republican politicians around, convince them that action on climate change is necessary, that the problem is real and grave, and that they should buck the president and his entourage.

That said, the proposal is presented rather as though it were, in and of itself, a satisfactory recommendation about what the USA should do about climate. If this is what the authors actually had in mind, they are surely wrong. See section ”Final Thoughts” below.

And, sadly, it is obvious that neither this proposal nor any other proposal to fight climate change has a snowball’s chance of being implemented or (as to Obama’s EPA regulations) retained, in the present political circumstances.

What one hopes for is a change of political circumstances. I suppose it could happen. One good sign, perhaps, the New York Times has been paying quite a bit of attention to this “carbon tax”: here 2/7, and here 2/13.

Pros: Getting The Voters On Board

This proposal imagines re-distributing carbon tax collections to all Americans evenly per capita—$500 in the first year!—rather than spending the tax collected on green-energy projects or re-distributing the collected taxes regressively via tax reductions. Since a large increase in gasoline tax will hit the poor especially hard, an equal (per-capita) carbon-tax rebate to every American with a social-security number will be most welcome. Perhaps the proposers of this plan had in mind voters with a financial stake in supporting the plan initially and later working to prevent its repeal?

(And, wild hope, once we have an arguably-socialistic per-capita carbon-tax rebate, even if proposed by Republicans, can single-payer all-citizens health care be far behind?)

One might ask, of course, whether $500 annually per child—in the first year, mind, and more later—might encourage unwise population growth.

Pros: Preventing Carbon Tax From Wrecking American Exports

The proposal has an interesting idea, namely, rebating this tax for exported manufactured goods whose manufacture incurred the tax, and charging the tax (as a tariff) on manufactured goods imported. This proposal would keep American manufactures competitive.

Whether such a rebate/tariff system comports with international trade law is another matter.

Of course, how any of this comports with the sovereignty-surrendering profit-guarantees of so-called “free-trade” (that is, foreign investment protection) treaties such as NAFTA is beyond my competence.

But Will This Carbon Tax, Alone, Defeat Emissions?

Whether the proposed annually increasing “carbon taxes”—however implemented, the devil being in the details—will accomplish a sufficient reduction of greenhouse gas (GHG) emissions is a question that Americans must study and debate.

And to this end we should be aware that the very modest (read: insufficient) GHG reductions aimed at by the Obama-era regulations were modest because of Republican opposition, not because they were sufficient to combat climate change in a timely manner. Very much greater GHG reduction was and remains needed.

We must be mindful that what is needed is something like 100% fossil-free electric generation by 2025 and 100% fossil-free transportation (ground, air, sea), building heating, and industrial heating by 2045. If any tax scheme is to be useful, it must be robust enough to bring this about. Merely saying the words “carbon tax” is not sufficient! After all, there is the question of methane produced by animal farming; and unwise cutting of forests, neither of which is primarily related to “carbon” (i.e., fossil fuel burning).

Cons: Problems

Anyone who thinks this Republican proposal might become law should think about the likely consequences.

The proposal embodies a defect present in existing policies for funding highway and road repair from (current) gasoline taxes: as cars and trucks become more efficient—or more electric—they will use less gasoline and thus reduce gasoline tax collections, making the funding of road repair problematic.

If this increasing carbon tax (with its implied annual gasoline tax increases) causes cars and trucks to use less gasoline, and causes buildings to use less oil and gas and coal for building heating, etc., etc., then the collected tax—and thus the per-capita redistributed tax—will decrease, reducing the public’s political happiness with the taxation program.

Something else to consider: if gasoline tax rates rise not merely annually, as this proposal suggests, but also steeply, and new cars and trucks consequently come to use less gasoline overall, owners of (remaining) gas guzzlers will have difficulty selling them, creating an unrecoverable capital cost situation for such consumers.

Similarly, as fossil fuel taxes rise, owners of fossil-fueled electric generating facilities (unless by political gimcrackery they force consumers to foot the tax bills while refusing to permit replacement by “green” energy sources) will find themselves facing stranded assets—unsellable and unpaid-for fossil-fuel burning plants being replaced by “green” or nuclear or hydro power generation.

But these will not only be economic facts: they will create political facts as well. Just as gun-owners love their guns and want to keep them, owners of gas-guzzlers and fossil-fueled electric generation plants will want to keep them and to keep using them and will oppose the carbon tax rate hikes.

And, of course, as the recent election rhetoric suggests, not only may regulations made by one administration be un-made by another, but the same may happen to programs of taxation, especially those that come to be felt as onerous. A tax on “carbon” begun today must last about 40 years. That’s a long time for a scheme of taxation to go unchallenged in American politics.

Cons: Other Considerations

Many things—plastics, chemicals—are manufactured from fossil feed-stocks. If these manufactures are biodegradable or degradable at all, and will one day release their carbon content to the atmosphere, these manufactured goods (and not only fuels) should fall within the ambit of the carbon tax.

Sad to think of excluding certain plastics from the carbon tax because they are a permanent non-biodegradable blight on the earth’s environment!

Cons: Will Carbon Tax Avoidance Planning Work?

A principal purpose of the proposed escalating carbon tax is to help businesses plan capital projects. And, one imagines, to help ordinary folks plan capital projects such as buying cars or installing electric or fossil-fired heating systems.

Capital planning works on two tracks. The easier track is planning new capital expenses. The harder track is planning to replace existing capital.

For example, if I am a solely-economically-motivated consumer and I definitely need a new car today, I may elect to buy an electric or hybrid car because I know how the gasoline tax will rise over time and because I believe that the gasoline tax will be prohibitive within 5 or 10 years. And I may elect to replace my present car now rather than later if it is a gasoline-burner since its resale value is bound to decrease over time as the carbon tax (and gasoline tax) increases.

But what if I recently bought, and cannot reasonably hope to recover the cost of, a new gasoline-fueled car? When if at all should I sell it (and stop using it)? If the cost of a new car is much greater than the aggregate gasoline tax (now and over the anticipated lifetime of my car), I may elect to keep the car—and thus to defeat the purpose of the carbon-tax.

Does this matter? How much of the USA’s GHG emissions comes from personal cars? Could a policy to defeat climate change ignore personal vehicles?

Well, “The largest sources of transportation-related greenhouse gas emissions include passenger cars and light-duty trucks, including sport utility vehicles, pickup trucks, and minivans. These sources account for over half of the emissions from the sector” (See: federal government source, still on-line 2-9-1017). And the transportation sector, also including freight trucks, commercial aircraft, ships, boats, and trains, produces 26% of total USA emissions. (Ibid.) So passenger cars and small trucks and SUVs produce more than 13% of total emissions.

Cons: Doing The Math

And what will the gasoline tax be, anyway? Well, consider that “[a]bout 19.64 pounds of carbon dioxide (CO(((SB₂SB)))) are produced from burning a gallon of gasoline that does not contain ethanol” (federal government source, still on-line 2-9-1017). This means that a $40 tax on one ton (2000 lbs) of CO(((SB₂SB))) is equivalent to a gasoline tax of $0.40. I rather fear that most drivers will not find an additional 40-cent gasoline tax sufficient reason to abandon their cars.

Of course, the tax is proposed to “increase steadily” but how much per year is not stated. If the carbon tax grows, let us say, by $20/ton annually, thus to $240/ton in 10 years, and to $440/ton in 20 years, the tax would become more significant. The gasoline tax after 10 years would be $2.40, after 20 years would be $4.40. Note, however, that Europeans have been paying taxes at this level for many years and still drive fossil-fueled cars.

If I drive 10,000 miles annually and get 33 MPG, then I burn 303 gallons of gasoline annually, at initial carbon-tax ($0.40) cost of $121. If I figure that my car will be unusable after 10 years, I can figure on an average annual gasoline tax rate of $1.20, an annual gasoline tax of $363, and a 10-year gasoline tax of $3,630.

Over 20 years, on the numbers shown above, this would be $666 annually on average or $13,320 over a 20-year car lifetime (if it lasted that long).

If a new hybrid car costs $25,000, I might find it cheaper to keep my car than to replace it, whether over a 10-year or a 20-year estimated/planned lifetime.

In other words the proposed tax may be (far) too small to be effective in driving GHG emissions to zero within 20 years.

Special Considerations For Electric Utilities

Similarly, if a coal-fired electric generation plant is so expensive to replace (say with “green” electric sources) that it is cheaper over its anticipated lifetime to continue to burn coal than to abandon the plant and replace it, then the electric power company will persist with coal (and pass on the costs, including the annually increasing carbon taxes, to the consumers, who are often captives) than to switch to “green”. And this too will defeat the purpose of the carbon tax. For this reason, federal legislation allowing each consumer to purchase electric power from an independent supplier—and thus from a “green” and un-carbon taxed source—will likely be necessary.[1]

All of which is merely to repeat that “the devil is in the details”. It seems likely that a climate-saving scheme based solely on the “market driven” mechanism of a carbon tax will require not merely an annually increasing tax but perhaps an escalating tax. And that implies a Congressional will not today in evidence.

But what are the alternatives?

Education And How To Get It

One thing that would help would be a lot—a real lot!—of education about climate change, its causes and its present and future effects, on the part of government and media. The New York Times of Feb. 8, 2017, is an example of a shot at this sort of education. I don’t recall seeing such a lot of “climate talk” in a single issue of NYT in years. Let us hope that NYT and all other American media begin to take climate as seriously as it deserves—as seriously as this proposal by Republican statesmen seems to suggest.

If media will not educate the American public about climate without political posturing (such as the roll-out of this proposal), let the political posturing continue, because to get to climate action we desperately need much more education on the part of all American media.

Final Thoughts

No mechanism for specifying the USA’s responsible action to remedy climate change can be “set in stone”, not a carbon tax, not any other.

The reason is that as time goes by (and much time has gone by since the broad theories of restricting GHG emission were announced), the science changes—scientists learn more; and the situation changes—the world emits ever more GHGs, bringing us that much closer to catastrophe and thereby making the required action at that time ever more demanding.

So if the USA creates a carbon tax, the tax rate and its application will have to be adjusted as we see experientially whether or not businesses and others adjust their cumulative behavior in a satisfactory manner.

And if the EPA makes rules about electric generation and transportation and so on, these rules will have to be adjusted for the same reasons: to see to it that the USA’s cumulative behavior in the context of the ever-changing global situation will prove satisfactory.

Most proposals seem to me to have an obvious flaw—they seem to desire to go slow, to take things easy, to make changes as slowly as possible. But nature is not taking things slow, and the industrialized world is not slowing its GHG emissions (yet) as if it wished to avoid catastrophe.

If it accomplishes nothing else, this “carbon tax” proposal has at least got a fairly large notice in the NYT. Anything that gets the usually silent American media to take favorable notice of a project to combat global warming/climate change is all to the good!

In any case, the USA is part of the global system, not apart from it, and must adjust its behavior to the global situation in which it finds itself.

And the politicians and media would do us all a favor to say so.

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[1] In some states, of which New York is one, consumers may purchase electric power from any provider on a list of ESCOs—electric supply companies—although they must continue to purchase electric delivery from their local electric utility, which must maintain the wires in good working order.




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