Wednesday, June 20, 2018

What to Do about Conservative Rationality in Addressing Climate Change?

Two business-friendly conservatives, both former senators, Trent Lott and John Breaux, have an op-ed in today’s New York Times announcing the formation of new group, Americans for Carbon Dividends.  Now out of office, they recognize climate change as “one of the great challenges of our generation.”  To counteract it they propose a bipartisan coalition to institute a carbon tax, with all the revenues returned to the public on per capita basis.  The carbon price would cut emissions and spur the development of alternatives to fossil fuels; the rebates would redistribute income progressively and protect the incomes of the majority of the population.

What’s a progressive climate policy activist like myself to do?

Basically, I’d like to say, “Welcome to the party.  Let’s sit down and work out the details.”  While I believe resistance from capital is the underlying reason the last three decades of climate activism have been so dismal, I don’t see any purpose in drawing lines of ideological exclusion.  On the contrary, if the deepest problem is the role of wealth (at risk from rapid shifts in energy prices) and not divergent philosophies as such, we should be happy to form broader coalitions so long as they don’t require unacceptable compromises.

(I don’t subscribe to the Marxist base-superstructure formulation as a matter of theoretical commitment, but I think it applies pretty well to the problem of climate change.  There is no intrinsic conflict between political conservatism and climate action, except insofar as conservative ideology is a cover for the interests of owners of capital—which it typically is.)

I am in full agreement with the two fundamental principles laid down by Lott and Breaux, putting a price on carbon and rebating the revenues through equal dividends to all citizens.  Of course, I differ on other matters:

1. The first step, even before a carbon price or other measure is proposed, is for the government to announce a carbon budget, the total number of metric tonnes of carbon (equivalent) we intend to allow ourselves to emit between now and the end of the century.  Without a benchmark we have no way to evaluate how stringent policy should be or whether it’s working.  Also, it’s an initial act of global coordination, since it represents our “bid” for what we regard as our share of the world’s collective budget.

2. A system of auctioned permits is far preferable to one of taxes, provided it is comprehensive and allows for no loopholes, like offsets.  It shifts uncertainty from emissions (which taxes don’t pin down) to prices, which makes sense since the cost to humanity from getting emissions wrong is much, much greater.  It accommodates structural change in the economy better.  And it gives us a better framework for the many years of revisiting and tweaking targets and policies that lie ahead: we should have political debates about whether to raise or lower the amount of emissions we allow, not the taxes we put on them.

3. The op-ed suggests $40 a tonne as a starting price.  In carbon equivalent terms, this is about the same as a forty cent tax on gas at the pump—less than the normal year-to-year fluctuation in market prices that have nothing to do with carbon policy at all.  Here’s where the carbon budget comes in.  Once we announce it, the next step is to propose an emissions path that stays within it, and the starting carbon permit supply is the first year’s allocation on that path.  It’s the budget that tells us what the goal is and what’s good enough to get us there.  (I anticipate plenty of political conflict over the size of that budget, but policy can only give us a framework for politics; it can’t make it go away.)

4. I agree with Lott and Breaux that US leadership by example is the single biggest step we can take internationally, but we will need to do more if we want to address the legitimate concern of people in low income countries that overcoming poverty can’t take a back seat to curbing emissions.  Both fairness and realism require the US to greatly increase its support for social protection and economic development in return for cooperation on carbon.  A first step, which we could take unilaterally, would be to join the Leading Group on Innovative Financing for Development.  Of course, we should be doing this even if there were no climate crisis that required it.

5. Once the economy faces dramatically higher prices for carbon energy, there will be a big demand for government programs to speed up alternatives: subsidies for renewables and energy efficiency, mass transit and infrastructure, research and development on frontier technologies.  Here a coalition between left and right would probably break down.  But that doesn’t mean we shouldn’t forge one to get to that point.

I will spell out these ideas, and many others, in much greater detail in my book on climate change, which I hope will be out early next year.  In the meantime, I’m happy to welcome support from conservatives who sense the urgency of preventing a climate catastrophe.


bbk said...

How can this: "the rebates would redistribute income progressively and protect the incomes of the majority of the population."

be squared with this: "with all the revenues returned to the public on per capita basis."?

Wouldn't rebating on a per-capita basis be inherently regressive since the flat tax nature of the proposed carbon tax will, like all flat taxes, hit the poor harder than the rich. Since $0.40 per gallon is a bigger hit to someone with $40.00 in their pocket than someone with $40,000.00 in their pocket. And if the rebate flows back on a per capita basis the regressive impact of the tax isn't ameliorated by having those her are impacted more by the carbon tax receive a larger rebate proportional to their income/wealth/etc.

Not that the carbon tax proposal being regressive is a reason to immediately reject it entirely.

Because if a plan to tackle emissions and their impact on our climate needs to be bi-partisan to have any chance of implementation, then any plan is going to be filled with elements people on the left don't like.

There is a huge asymmetry between the left and right with fighting climate change. It's the same sort of asymmetry that rears its head in all kinds of attempts at policy making. Like with the healthcare and the ACA.

Since (broadly) conservatives don't actually care about climate change, any plan to tackle the issue is already a concession to the left straight out of the gate. So the right is going to want to make any plan follow their deontological principles concerning property rights, taxes, etc. and ideological assumptions about markets and prices.

And most frustratingly, since the right doesn't care about climate change at best and at worst is against doing anything about it (due to the impact any plan would have on their constituents like extractive industries), they are more than willing to walk away from the table and just keep the status quo.

So it's going to require concessions to even keep them at the table. Conversely, on the left, climate change is a monumental problem which must be tackled if we have any hope of continuing to live on a habitable earth. So the left doesn't really have a Best Alternative to a Negotiated Agreement other than years of hard work to politically defeat the right such that they lose the ability to prevent programs to tackle climate change. But we may not have that kind of time and it's not even clear whether the type of total defeat of the right politically is possible.

Sometimes I get so angry that I have to share a planet with people who have the power to make all of us suffer tremendously if we don't agree to their terms. Their power comes from just not caring and we (as in the broader center to left) can't break that power so we have to humor their idiotic, insane, cruel beliefs.

Peter Dorman said...

Actually a per capita rebate is highly progressive. You miss that, while low income people pay a higher percentage of their income in a sales tax, they pay a lower dollar amount. This means, when you factor in both what they pay out (in higher carbon prices) and what they get back, lower income people come out ahead. For details and a rough estimate, see "A Distributional Analysis of a Carbon Tax and Dividend in the United States", University of Massachusetts Political Economy Research Institute, Working Paper No. 434 by Anders Fremstad and Mark Paul.

There is a lot of irony here: the right wing proposal on fee-and-dividend is actually much better from a social justice standpoint than most proposals from the left, which earmark carbon revenues for public investment. I don't take that to be a sign of enlightenment on the right so much as an indication of how misguided the left is on climate change.

I'll be giving a talk on this very topic at the URPE 50th birthday party in September.