Why Republicans Should Reconsider Their Blanket Opposition To A Carbon Tax

REUTERS/Carlos Barria

Catrina Rorke Director of Energy Policy, R Street Institute
Font Size:

As House Republicans take up a resolution declaring they are against ever considering the possibility of a carbon tax, it bears noting that there are good reasons for Congress to act to address carbon emissions, even (perhaps especially) for members who disagree about the science of climate change.

That is to say, even those who question the role of government in this arena should seek a legislative solution, not primarily to the problem of climate change, but to the hubris and regulatory overreach of the Environmental Protection Agency.

The EPA currently awaits a decision from the Supreme Court on whether its Clean Power Plan, which limits carbon emissions from the nation’s power plants, will go into effect. It appears likely it will, particularly given how unlikely it is that a conservative justice is not appointed before the court takes up the rule. Once implemented, the CPP would see the agency enforce pollution control on an entire industry, not a specific source.

The regulation is expected to be both expensive and ineffective. The EPA estimates the CPP will cost $8.4 billion annually to implement, but the rule will do no better to reduce emissions than recent low prices for natural gas have. The likely end result is a hefty price tag for little to no environmental gain.

We currently limit carbon emissions through an exhaustive and exhausting regulatory and incentive infrastructure that tends to be completely obscured from view. In addition to the CPP, the EPA also limits greenhouse-gas emissions through regulations on the vehicle fleet, oil and gas operations, landfills and transportation fuels. There also are regulations from the departments of Energy and Interior, as well as an abundance of loan guarantees, subsidies, tax incentives and other efforts across government.

Regardless of one’s opinion on the science and risk of – or the appropriate policy response to – climate change, our status quo is expensive, arduous and ineffective. That’s why it’s surprising and disappointing that the House is set to vote this week on a resolution that takes one alternative to EPA regulation off the table: a direct price on carbon.

The resolution the House considers this week asserts, “a carbon tax would be detrimental to American families and businesses, and is not in the best interest of the United States.” This is, at best, an oversimplification. Is a carbon tax necessarily worse for Americans than the myriad solutions advanced by the environmental left and the Obama administration to limit carbon emissions?

To be clear, there certainly are ways to design a carbon tax that would limit economic growth and opportunity, impose high costs on families and businesses, force jobs overseas and burden the poor and elderly. This would be the case if the tax were set too high, were not accompanied by cuts to other costs or taxes, were not adjusted at the border or were layered on top of redundant federal policies. Interestingly, that’s exactly how existing carbon regulation functions: a steep, ineffective, damaging cost on energy and consumers.

But there’s also a right way to do it. R Street supports a revenue-neutral price on carbon that cuts or outright eliminates other taxes on capital and income; that can be adjusted at the border for imports and exports; and that’s accompanied by preempting existing EPA, Interior and DOE carbon regulations. A properly designed price on carbon could be used to eliminate some of the most harmful taxes and regulations that restrain economic growth. If designed correctly, a carbon tax might be excellent for American families and businesses and in the best interest of the United States.

These are conservative ideas. Economists like Art Laffer, Greg Mankiw, Doug Holtz-Eakin, Irwin Stelzer and Alan Viard – people conservatives trust to guide good decisions in tax and economic policy – all have supported a revenue-neutral carbon tax, if designed correctly. It behooves no conservative to treat these ideas unfairly and distort the debate by conceding as fact something that is not necessarily true.

Let’s deal honestly. Recent polls suggest that 64 percent of Americans are worried about climate change and voters aged 18-29 mention climate change as a “very important” issue more than any other public-policy topic facing legislators today. There’s little political upside, at this point, to ignoring the challenges of carbon or eliminating viable solutions from consideration. There’s growing consensus that action is needed on climate change. We need an alternative to the regulatory machine in place now.

In the end, the best policy to address carbon emissions won’t necessarily be a tax on carbon. There are plenty of other approaches that might be more effective, lower cost or more politically palatable. To find them, we need creative and active debate about what the role of government should be in this challenge.

Catrina Rorke is the energy policy director and a senior fellow for the R Street Institute, a free-market think-tank based in Washington, D.C.