Conservative economists write op-ed in support of carbon tax

Michael Bastasch | Energy Editor

Conservative economists George Schultz and Gary Becker wrote an op-ed in the Wall Street Journal Monday advocating for a revenue-neutral carbon tax on the grounds that it will level the playing field for energy producers and eliminate wasteful energy subsidies.

“Clearly, a revenue-neutral carbon tax would benefit all Americans by eliminating the need for costly energy subsidies while promoting a level playing field for energy producers,” wrote Schultz and Becker in the Journal.

Schultz and Becker invoked the conservative argument that fossil fuel energy producers should not receive any special privileges and should pay the full cost of their actions. In this case, that would mean paying for the social costs imposed on public health and the climate from emitting carbon dioxide.

“Americans like to compete on a level playing field,” the economists wrote. “All the players should have an equal opportunity to win based on their competitive merits, not on some artificial imbalance that gives someone or some group a special advantage.”

A tax placed on carbon would push energy producers to use fuels that emit less carbon, like natural gas, and more environmentally friendly vehicles like electric and hybrid cars.

Carbon tax proposals have been put forward in both houses of Congress. Vermont independent Sen. Bernie Sanders and California Democratic Sen. Barbara Boxer introduced a bill to put a gradually rising fee on carbon dioxide emissions which would fund green-energy projects such as wind, solar, geothermal and biomass. Democrats in the House and Senate have also released draft legislation for a gradually rising carbon tax.

Schultz, former secretary of state under President Ronald Reagan, and Becker, Nobel laureate economist and economics professor at the University of Chicago, are among a small group of conservatives who have voiced support for a carbon tax.

Conservative supporters of a carbon tax also include former South Carolina Republican Rep. Bob Inglis, Mitt Romney’s former economic adviser Gregory Mankiw and economist Art Laffer.

However, many conservative lobbying groups have banded together to oppose such a tax. The heads of conservative and free-market think tanks have joined the American Energy Alliance to oppose a tax on carbon dioxide emissions.

“A carbon tax is a penalty on American families, however popular it might be among the so-called clean energy elites who labor in the cottage industry of bad ideas on both coasts,” said Ben Cole, communications director at the American Energy Alliance.

Schultz and Becker wrote that they support a revenue neutral carbon tax that would not allow the government to finance other pet projects and won’t be a drag on economic growth.

“We argue for revenue neutrality on the grounds that this tax should be exclusively for the purpose of leveling the playing field, not for financing some other government programs or for expanding the government sector,” Schultz and Becker wrote. “And revenue neutrality means that it will not have fiscal drag on economic growth.”

However, a study by senior economist Robert Murphy at the Institute for Energy Research (IER) argued that a revenue-neutral carbon tax could be a “cure worse than the disease” because it will be twisted in the political process to serve special interests.

“The dismal record of the U.S. government in implementing efficient climate change policies is hardly evidence in favor of a massive new carbon tax (or cap-and-trade program),” Murphy wrote. “[S]uch a new program will be abused in the political process, and will not be tailored to the recommendations of climate scientists and environmental economists.”

“Such abuse could take the form of exempting favored constituencies from the scheme, setting the carbon tax rate in line with fiscal needs rather than climate objectives, and/or using carbon tax receipts to fund inefficient yet politically powerful groups, such as producers in ‘clean energy’ sectors who, in principle, should not need federal support in the presence of a well-designed carbon tax,” Murphy added.

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