The Case(es) for a Carbon Tax

https://www.clcouncil.org/media/2017/03/The-Conservative-Case-for-Carbon-Dividends.pdf

 

https://www.peoplespolicyproject.org/wp-content/uploads/2018/09/CarbonTax.pdf

 

 

Comments

[Margot McConnell]

Overall, I really enjoy the article on The Conservative Case for Carbon Dividends. One of my pet peeves when it comes to environmental policies is that they have to be politicized as being “liberal” or “leaning left.” The media especially tries to frame you as a bad guy if you are conservative and believe in policies for the environment. This article really proves that all the nonsense arguments that people try to make against carbon dividends, taxes, and so on are just excuses.
One of the points that sticks with me the most is that these carbon dividends can help working class Americans. That should be enough just by itself for people to want to vote for such a policy. Helping working class Americans and the environment seems to be like the best combination there could be when it comes to environmental policies because it consists of the added bonus of helping Americans struggling to make ends meet and increasing disposable income.
I also found the argument about less government involvement to be an important point. Conservatives always argue that they do not like taxes and so on because it increases government involvement. The idea is focused on the fact that if there are fewer taxes, people have more disposable income, and will use that extra income on supporting small businesses, donating to hospitals, and so on. In this case, they would make the argument that maybe with more disposable income people would have the choice to switch to more sustainable forms of energy, for example, like installing solar panels on their house. In reality, this argument never holds. Especially when it comes to the environment, we see that having taxes or tourist fees or whatever it might be are important because otherwise people would not pay the money to support these environmental issues. Therefore, as this article points out, being able to shrink the size of the government and streamline regulations would be beneficial to both economic growth and the environment.
In the other article, The Progressive Case for a Carbon Dividend, I thought it was interesting that the same point we have talked so much about in class about the inequalities between pollution and socioeconomic status is one of the main points talked about. This article does a good job of further emphasizing how important it is that even if your only argument towards solving the pollution issue is that it would help those in poorer communities, it is enough of a reason for something to be done and for change to be needed as soon as possible.
I actually was reading an article earlier today about how the Dutch are planning to delay putting a carbon tax into effect because of COVID-19. The main argument made is that pollution is already down because of the virus. However, what I found most interesting is how the idea of the carbon tax even came about in the Netherlands to begin with. It turns out that it was a Supreme Court ruling that said that the state is required to reduce greenhouse gas emissions on the grounds that it is necessary to protect people’s health. Imagine what it would be like if people thought of pollution this way in the United States.
https://www.dutchnews.nl/news/2020/04/dutch-to-delay-carbon-tax-for-industry-because-of-coronavirus-fd/
https://www.dnb.nl/en/news/news-and-archive/DNBulletin2018/dnb379743.jsp
This last article is one that I found while researching the Dutch carbon tax, and I thought it was interesting. The main argument is why it is important to report carbon emissions especially during this COVID-19 pandemic. As we have talked about, now is not the time to back down on environmental policies towards reducing pollution.
https://cointelegraph.com/news/the-need-to-report-carbon-emissions-amid-the-coronavirus-pandemic

[Valerie Marshall]

I found reading both of these articles really interesting and insightful. It definitely gave me hope that there could be a bipartisan carbon tax policy that would pass Congress in the not too distant future. While there was a lot to be hopeful about in reading both of these policy suggestions, I was worried by the vastly differing ideas on how much the actual tax should be. While both groups recognized around $40 as the socially efficient price of carbon, the progressive article said this would not be enough to reduce carbon emissions to reduce warming to the IPCC desired level. I was curious as to why the socially efficient price of carbon and the price that prevents warming from exceeding IPCC recommendations were so different. I also feel the progressive recommendation of $230 per ton of carbon is not politically feasible, and while a carbon tax might be passed by Congress, the final bill would end up with a tax much closer to $40.

While reading the progressive article in particular, I had the question of what would happen to lower income families once they stopped receiving a carbon dividend. While initially the increased price of goods from a carbon tax would be offset for lower income families because of the carbon dividend, as the tax is raised less firms are willing to pay it and turn to renewable energy sources, which is the goal of the policy. Eventually the tax will be so high almost no firms will pay it, and there will be no dividend to return to lower income families. My concern is that while we would have successfully reduced GHG emissions, the cost of goods will not return to their original level prior to a carbon tax. Firms will now be using renewable energy sources to produce their goods, which would be less expensive than the carbon tax, but likely more expensive than the pre-tax price of goods because fossil fuel subsidies were making these goods artificially cheap. Once the carbon dividend is no longer being returned to the American people, is there a chance lower income families will struggle because they no longer have the dividend to raise their income so they can afford the higher prices of goods?

[Steven Black]

After reading both the Conservative and Progressive cases for a carbon tax, I am left thinking that there should be overwhelming bipartisan support for a carbon tax and carbon dividends. Since there does not appear to be significant progress towards a carbon dividend policy, that leaves one major question: Who is opposed to it? The vast majority of consumers would benefit from this policy, most Americans in the bottom 3/4 of the income bracket. Stereotypically, environmentalists tend to be wealthier and more educated, so it is reasonable to assume that many people in the top 1/4 would be supportive of it as well. Someone who would have taken a net loss could also alter their behaviors to benefit from the dividend as well. The carbon would predominately affect electricity and gasoline, which are relatively inelastic goods. Because of that and basic economic theory, it would be the consumers paying the brunt of that tax and not producers. Therefore, producers shouldn't be strongly opposed. A carbon tax would actually reduce the size of the government by cutting out the regulation bureaucracies, which would satisfy the small government people. We get cleaner air, reduced dependence on foreign energy and the vast majority of Americans would benefit financially as well, which is why I am confused that the idea has not gained more traction than it has thus far.

[Nikki Doherty]

When studying a conversation of carbon tax, the three I’s we often discussed in class quickly come to mind: Interests, Ignorance, and Ideology. In the carbon tax discussions, ideology is particularly problematic. “Its Ideology, Stupid” (UPenn) includes interesting graphics demonstrating the importance of ideology. Figure 3 shows the vote share of carbon taxes in 2016 and 2018 and a function of democratic presidential votes in the state of Washington. Ideology best accounts for this voting pattern. A continuous trend shows Washington’s most “liberal” deciles with the greatest share of “yes” votes for the carbon tax; it shows its most “conservative” deciles with the lowest share of “yes” votes for the carbon tax. Interestingly, the trend is nearly identical between both 2016 and 2018 carbon tax votes. To me, this shows that changes in the policy do little to overcome ideology and worldview... ideology is sticky over time.

The first article stresses the importance of ideology, and how it has been an impediment to moving forward with climate change related policy. It also brings hope. Importantly, it emphasizes that wherever you stand on the issue of climate science, that something must be done, and something in line with conservative thinking can be done. Maybe both sides are in, or at least can be support of the carbon tax (while still aligning with their party’s ideals). How we frame things like policy, impacts the likelihood that they will gain favor. For example, if we can highlight certain benefits of a policy to certain groups, and other benefits to other groups, fitting them to their respective worldviews, we can get a lot further in open discourse. It is interesting to frame the carbon tax as a way to oppositely decrease government involvement. For instance, this piece argues that the carbon tax will phase out the EPA’s regulatory powers. Further, framing the tax as a benefit, not burden to the majority of Americans, especially to the working-class is important. Letting the public be aware, that they will gain disposable income is key to garnering this support.

Putting the conservative case directly into conversation with the progressive case is interesting. The article discussing the progressive case brings vulnerability to the forefront. Helping the future, means the future of all people not just certain groups. The article is careful to discuss the potential consequences a carbon tax might have on the lives of the poor. Although the cost in dollars might be higher for high income individuals, the real burden will be for lower income individuals as they will lose a much greater percent of their income to the tax. To curb this, the article proposes that carbon revenues be distributed to individuals lower in the income distribution. Like the first, this articles framing of a very similar carbon tax and dividend is fit to the worldview of progressives.

Caratittini et al (2018) determine public opposition to be one of the largest obstacles to carbon taxes. They seek to study the barriers of public support and the main concerns they find are as follows:
(1) The cost to the individual is seen to be very high
(2) The taxes will disproportionately hurt lower income households
(3) The tax may lead to unemployment and a worsened national economy
(4) The tax is not going to effectively discourage high-carbon behavior
(5) Governments are just using this for more revenue

They take their learnings of these barriers and apply them to their final step in analysis—creating suggestions of carbon tax designs that are more likely to garner public support (ie trial periods, tax escalators, lump-sum transfers etc). If we want to pass a carbon tax, we need to take similar steps—evaluate what is stopping people from voting yes, and craft policies that overcome these barriers. After reading the conservative and progressive case for carbon tax/ dividend, the top five concerns of the public (Caratittini et al 2018) seem like they can be eased through a greater understanding of what the policy will entail… and a better framing of policy’s benefits and consequences in language that fits their worldviews, or in this case their concerns.

Clashing ideologies make bipartisan support tricky, but common ground between climate policy can be elevated in conversations. Compromise will always need to be had, but maybe crafted language can help to reach this.

References
UPenn https://kleinmanenergy.upenn.edu/policy-digests/its-ideology-stupid
Caratittini et al (2018) https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6473478/

[mattiegrant]

It was interesting to read about different cases for carbon taxes coming from both sides of the political spectrums. As was mentioned before, the proposals are surprisingly similar, even though the current times would have us believe that Republicans are anti-environment and any conservation or betterment of the environment comes from Democrats. It was almost comical to observe the differing rationale that appeared in each proposal. The Conservative case emphasizes the economy, the working class, and a reduced need for future regulations. The most prevalent themes seem to be strengthening the economy and reducing the power of the government in the long term. The Progressive case emphasizes the scientific argument of a carbon tax and the benefits to lower income families if a dividend is enacted.
In my politics class about Congress we always talk about the problems that political division tends to have on meaningful policymaking. Texts from my politics class state that the right has moved further right over the past 10-15 years, leaving little room for overlapping politics. There has been a trend in recent years away from moderate or middle stances on most policy issues, so I found it optimistic to read two pieces that were marketed to different audiences but with very similar policy goals.

[Maisie Strawn]

First, I wonder about how the authors of these two pieces reached their remarkably divergent conclusions for what the beginning price of the carbon tax should be. Besides differences in language and framing, this seemed to be the only major dissimilarity in the conclusions of the two papers. I would like to discuss the environmental and economic impact of choosing a $40/ton tax versus a $230/ton tax. How could the authors reach such different conclusions? Can they be reconciled? It is promising that at least the two groups agree that there should be a tax, but why does this seem to be so politically unfeasible? I found this article from the Urban Institute & the Brookings Institution, which touched on the unpopularity of carbon taxes with voters globally: https://www.taxpolicycenter.org/taxvox/economists-love-carbon-taxes-voters-dont. I think that the carbon dividend aspect should be really helpful in passing a carbon tax, but it seems that achieving any carbon tax will require successful communication to voters and politicians.
Second, I really appreciated that the conservative argument for a carbon tax piece touched on the role a carbon tax could play in stimulating investment in infrastructure. We have such an opportunity right now to invest in America’s infrastructure (https://www.brookings.edu/blog/the-avenue/2020/04/07/covid-19-is-a-chance-to-invest-in-our-essential-infrastructure-workforce/). It’s interesting to think about how a carbon tax could be a part of that.

[Allie Case]

For the two cases of carbon taxes I brainstormed some differences that also highlight the main points of each article. In my opinion, one of the biggest differences between the People’s Policy Project case and the Climate Leadership Council’s case was the language used to describe economic inequality. The PPP case really highlights how higher emissions are connected to richer individuals. I found this statistic the most interesting: “…in the richest decile (the top 10%) pollutes nearly six times as much as the average person in the poorest decile (the bottom 10%)” (Fremsted & Paul, 2018). Again even though the CLC article talked about economic inequality, look at the difference in the language they use to address it: “Yet these dividends are not giveaways; they would be earned based on the good behavior of minimizing our carbon footprints”. The CLC article talks about how these taxes will benefit “the little guy” but I’m thinking they don’t necessarily mean the same impoverished communities as the PPP case. The CLC case also does not use the same time of climate models as the PPP case, most likely to appeal to those that do not believe in manmade influences- this was hinted at in their intro: “While the extent to which climate change is due to man-made causes can be questioned…” (Baker et al., 2017). What I did like that the CLC case highlights is how the carbon taxes would actually help companies and firms because it would allow for more security in future investments.

Overall, I actually really enjoyed reading the more conservative case. It made me less pessimistic about the state of bipartisan climate policy- the facts and case for carbon tax seemed reasonable and sensible and like Margot writes, it really showcases that a strong environmental policy does not always have to be associated with the left/liberals. I think the biggest obstacle each case faces is how difficult changes in the transportation sector will be. An increased use in public transportation doesn’t seem as easy in the slightest- a lot of resources will have to be dedicated to make significant changes. The costs for massive infrastructure changes, people needing to live closer in the cities, and public dissent for this type of transportation limit any progress in this area so I'm curious as to what projects are in the works or how states plan to improve public transport.

[Christopher Watt]

Based on the outlook of the two articles, it seems that putting a price on carbon emissions through a carbon tax could be policy on which both sides of the political divide can agree. Pricing carbon and addressing climate change should not be a politically divisive issue: it provides benefits in one form or another to nearly all people. By reducing emissions, incentivizing investment and alternative energy, and promising an opportunity for subsidies, tax rebates, or even direct transfers, a carbon tax could promote both economic and environmental wellbeing. The idea of "tax bads, subsidize goods" like we talked about earlier in the semester seems so rational, especially when the promotion of goods could be checks directly into citizens' bank accounts. These readings got me truly excited about a policy that can improve our environment through the reduction of Greenhouse gases and promote wellbeing in other ways.
One of the things I am curious about is what will happen if in a couple of decades we fully phase out of carbon use in the energy sector. It is likely that carbon emitting processes will still be used to produce consumables made of plastic and medical equipment etc. It is likely that the tax could become the only form of regulation, or will other regulatory measures be instituted as well? Furthermore, if a tax were instituted, would states like California that have state mandated quantity controls drop their state regulatory policy to abide only by national policy, or seek to do some type of hybrid program? Mixing quantity and price controls would be challenging.

[Olivia Luzzio]

The “Progressive Case for a Carbon Dividend” ties together climate change and income inequality in a way that I had not previously considered. The paper explains that the poor and middle class tend to have a smaller carbon footprint than the average, meaning they will pay less for polluting, while the wealthy will pay more due to their larger carbon footprints. Thus, the poor and middle classes will incur a net gain with the carbon dividend in place while the wealthy will incur a net loss. This means that a carbon dividend is a mechanism for reducing income inequality, which I think is an advantage that is often overlooked. Although it may have yet to be admitted, this ideology is easily reconcilable with the conservative case’s point that you earn the tax you pay fairly based on the amount you pollute. While progressives and conservatives may have vastly different motives and priorities, a carbon tax and dividend addresses each group’s goals to a certain extent.

[Max Gebauer]

Before I get into my main point, I'd like to preface that I do find it encouraging that there is potentially a point of agreement across the aisle concerning a potential general outline for an effective public policy concerning climate change. My concern deals with the implicit (and sometimes explicit) point in both of these articles that the atmosphere currently suffers from being overexploited as a public good, a tragedy of the commons-esque case that can be resolved by an understanding of ownership where we understand the right to access the atmosphere as a sink for GHGs as being divided equally on a per capital basis, at this point, at a very general level I can get behind this though I have significant concerns with some of the implications of an equal per capital split but theyre not relevant to my main argument: that even if we decide that everyone has an equal share of the atmosphere (speaking very generally here), it would be an unfounded logical jump to assume that the burdens of our polluting behavior are spread evenly. Roughly speaking, the MDF for individuals varies significantly depending on ones health, geographic location, wealth, etc. Therefore, even if everyone is getting the same checks and are subject to the same taxes, this still isn't necessarily equitable. Individuals whose demographic, personal, and geographical factors make them relatively unaffected by the effects of a changing climate is better off than an individual whose unique characteristics (which are often outside their control) predispose them to feel the effects to a higher degree. Impoverished residents of low-lying costal regions, indigenous peoples, those living in areas that are already dangerously hot during certain times of the year all face vastly different MDFs given certain amounts of emissions/degrees of warming. The effects of pollution and climate change are inherently intersectional and recognition of this fact is important if we consider equitable access to a safe, clean, and hospitable environment some kind of aspirational goal. Of course, it's not necessarily the burden of this specific policy to deal with this problem, perhaps funding from other sources could help alleviate this, however, I think it would be mistaken to think that this distribution scheme in isolation is just.

Also, I can't say I was surprised to see Mankiw listed as a contributor to the conservative approach to carbon taxing, after using his book in Econ100 that totally checks out.

[Adam Harter]

Reading the conservative case for carbon dividends, I imagined a world companies were held directly responsible for the carbon they emit. In this scenario, companies have an incentive to reduce emissions as much as possible in order to save money. Sounds pretty nice. But what if the carbon tax isn’t high enough? I spent a lot more time imagining this world. In this world, the companies can pay the carbon tax easily and will still pollute the same amount. The American people will be loving the extra money that they have coming in. In fact, companies start to become celebrated for how much money they put into the pockets of the American people. An Exxon Mobil ad runs that excitedly tells the audience that their efforts gave every single person $400 last year. The people love this and don’t want the policy to be changed. It becomes the most important issue for them at the polls. Whole campaigns run about going to Washington and putting down their foot to the talk about raising the price per ton. The policy initially for good creates an adverse incentive so strong it creates a whole new wave of politics. A generation of progress in climate change ideology is suddenly reverted. People run the calculation in their head and prefer the few thousand dollars per month over the health of their planet. And for a lot of those people, who can blame them? They are struggling to make ends meet, but Chevron opening another refinery may make the car bill payable this month.

While I don’t think this scenario is all that likely it is important to consider the possible pitfalls of any policy. The carbon dividend could start with the best of intentions, but later become a problem if the price per carbon isn’t high enough or the energy lobby gets a little too involved. Energy companies may be able to continue about their business mostly, but with added positive PR for them.

[Sydney Goldstein]

In an attempt to make this post more like a discussion, I will reply to what some of my peers have commented. Steven pointed out that both articles have similarities in their cases for a carbon tax/dividend wherein you would think that some bipartisan solution would be feasible. The problem is political polarization wherein neither party is willing to compromise. Maisie pointed out that despite commonalities the Conservative case proposed a 40$/ton tax whereas the Progressive case proposes a 230$/tax. This is quite a large disparity and shows that even though we think of numbers and calculations as something concrete, when dealing with projections and interpreting data, statistics can actually be more subjective than we think. Logically, we would think that even though there is a disparity some compromise would be reached where the tax ends up being in between the two values, but due to political polarization which has only been increasing in the last decade compromise is a lot easier said than done. This goes to the point that while we think something is obvious or is a clear environmental problem that would easily be solved, it doesn’t function like that since everything becomes so politically entangled. Environmental issues are no longer just environmental issues, but rather become political ones entangled with various agendas.

More to the point, Steven pointed out how the vast majority of Americans would benefit from this policy being in the bottom ¾ income bracket. He also points out that stereotypically, environmentalists tend to be wealthier so some of the top ¼ of the income bracket would also favor the policy. What most people don’t realize is that most members of congress are in the top ¼ of the income bracket. The base salary for a member of congress is $174,000 annually (keep in mind this is for an individual, not household). In 2018, the median household income in America was $63,179. The individual salary of a member of congress is therefore over double the median household income of an American. This calculation is not even including other wealth members of congress hold such as inherited wealth or money earned from writing books, making appearances etc. Most members of congress are worth in the millions of dollars. So why is this relevant? As the Progressive case explains the wealthy have a much larger carbon footprint than other Americans. Olivia pointed out how a carbon tax could act as an equalizer and solve some issues relating to income inequality while also benefiting the environment. While we see this as optimal, those in power who have large amounts of wealth likely aren’t going to support such a policy due to greed and other personal interests. It’s easy for a politician to say they care about something, but when push comes to shove I’m willing to bet more are voting in their own financial interest than for the greater good. Money classically acts as an incentive and thus when people are motivated by money outcomes are likely to not be socially optimal.

[Didi Pace]

We have the potential to renovate our current energy system to one that is far less dependent on fossil fuels. Both parties need to make energy policy a priority, and these articles make me hopeful that we are getting there. A carbon tax would incentivize people to reduce their emissions because it would equalize the private and social cost of emissions. The tax would allow people to maximize their well-being while simultaneously incentivizing a response of emission reduction from businesses and buyers. Professor Kahn said that the damage of a ton of carbon is estimated to be $50-100. Is it closer to $40? $230? On the lower end of that spectrum, the carbon tax would not result in a huge loss of spending power, but would nonetheless incentivize people to limit their carbon emissions. While we all know that science, not political ideology, should dictate one's 'belief' in climate change, we are getting closer to policy action from both sides of the political spectrum

[abrahamr22]

Earlier this week I ‘attended’ a tele-conference titled “ Power Dialogue: Solve Climate in Georgia by 2030” (https://youtu.be/N5n7WzzPOnQ, toward minute 50 ) where four panelists discussed their regional involvement with sustainable initiatives. The final panelist was the state public service commissioner. His stance as a Republican official advocating for environmental policy seems to confuse some groups. However, as I see Margot begins to menition and “The Conservative Case for Carbon Dividends” emphasizes while encouraging sustainable practices of the commons should not be politically polarized, in order to successfully convince politicians you have to spin proposals to in a sense ‘speak their language’. As rational decision makers, if at least some private benefit is not highlighted there seems like there is a lot to lose. Eschols has made it his mission to push for electric vehicle tax credits by honing in on its “grid utilization, efficiency, ability to keep money in the state, and homegrown fuel,” since more ecological-centered conversations have failed in passing EV tax credits in the conservative-leaning state.

[Giddings Harrison]

I found both of these articles helpful as they articulated the problems that many have with a carbon tax. We often talk about how people think of the economy and the environment on opposite ends of the spectrum. If we help one, we hurt the other. However, these articles pointed to the idea that a carbon tax could actually strengthen our economy. The Conservative Case brought in many ideas that I found compelling as to why we might need a carbon tax. First, a carbon tax would drive a change in behavior and lead to innovation and investment in new technologies. It would provide economic certainty for firms and households. Secondly, it would tip the economic scale toward the "little guy." Rather than focusing on the short term cost of the tax, the Conservative Case points to the "more durable economic growth." Thinking back to Paul Krugman's three I's, I believe this article would be a good way to begin policy discussion as it might sway people who often think of climate change policy as far too "left." As many have said, this article was encouraging as it promoted the idea of a bipartisan plan that would reduce our carbon footprint.