A carbon tax proposal might be gaining momentum among policy groups on both the left and right despite opposition from some free-market think tanks and Republican leaders on Capitol Hill.
The Hill previously reported that a coalition of left and right-leaning organizations discussed the proposal at a meeting held last week at the American Enterprise Institute, a conservative think tank in Washington, D.C. Though previous attempts to regulate greenhouse gases with measures such as cap-and-trade legislation have sputtered, the groups appear to be considering the tax as a vehicle for both curbing emissions and reducing budget deficits:
Advocates of a carbon tax call it a simpler, more efficient way than cap-and-trade to begin pricing carbon emissions.
Adele Morris, a Brookings Institution scholar who was listed on the agenda, declined to discuss the AEI meeting. But she said that “there is a lot going on in the analytical community” about the idea of a carbon tax as a way to address climate and the deficit.
Morris said that AEI, Brookings and the International Monetary Fund are sponsoring a joint event in November about ways to craft a U.S. carbon tax.
“This event is going to explore the design of a carbon tax and its role in broader fiscal reform,” she said, and noted other work in policy circles on the idea.
Continuing discussions about the carbon tax have sparked a backlash among other conservative policy analysts. Marlo Lewis, a senior fellow at the Competitive Enterprise Institute — another conservative think tank — dubbed the coalition the “carbon tax cabal” and included the agenda for the meeting in a blog post.
The agenda, titled “Price Carbon Campaign/Lame Duck Initiative: A Carbon Pollution Tax in Fiscal and Tax Reform,” designated the policy discussion as the fifth such meeting of the groups. Participants included officials from AEI, free-market think tank R Street, the Center on Budget and Policy Priorities, Taxpayers for Common Sense, the IMF and Al Gore’s Climate Reality Project.
Lewis’ post also included a memo from Myron Ebell, director of CEI’s Center for Energy and Environment, lambasting the carbon tax proposal as ineffective and bad politics:
We defeated capntrade in 2009-10 by convincing the American public that it was really capntax. Twenty-odd House Democrats who voted for Waxman-Markey lost their seats. The Democratic Senate refused to take it up. It’s political poison, so naturally the more brain-dead parts of the Republican and big business establishment have decided how clever it would be to resurrect the carbon tax and push it as an alternative to regulation. I don’t notice anything in the AEI agenda about repealing the greenhouse gas emissions standards as part of the deal. Why don’t we do that first? Then we can talk about alternative policies—if any.
Also, note the idea that a deal could be done so that a carbon tax would be offset by reductions in other taxes and would therefore be revenue neutral. There are multiple problems with the idea of revenue neutrality. First, it never works. A new tax will quickly be raised. Second, the poorer people are, the higher the percentage of their income that goes for energy. Poor people already don’t pay much or any income tax. So a consumption tax offset by, for example, cuts in the corporate income tax rate, would be highly regressive. Third, the only way a carbon tax would reduce fossil fuel consumption and thus greenhouse gas emissions is if it’s set quite high. And the only way a carbon tax will raise much revenue is if it’s set quite high. Thus they must be advocating European levels of taxation. Say $5 dollars a gallon of gasoline. Roughly $500 per ton of coal (which is currently selling for $65 a ton at most).
The Republican leadership, currently engaged in a public spat with President Obama concerning the extension of the Bush-era tax cuts for top earners, flatly rejected the notion of a carbon tax when asked by the Hill:
“Boehner spokesman Michael Steel had a one-word answer when asked, on Friday, whether the Speaker would ever consider a carbon tax to help address climate change and the deficit: “No.”
Similarly, McConnell spokesman John Ashbrook said Monday that “Leader McConnell opposes a national energy tax.”
I talked briefly with AEI President Arthur Brooks about the meeting after he gave a lecture Tuesday on his new book, “The Road to Freedom: How to Win the Fight for Free Enterprise.” Brooks, who advocates for tax reform that would lower rates and eliminate loopholes in his book, stressed that AEI is not spearheading advocacy for the carbon tax and discussions are still at an early stage.
“It was a meeting that AEI didn’t organize, and we don’t take institutional positions,” Brooks said. “Our scholars are interested in all sides of this. The only scholar who has taken a position on it personally is Ken Green, and he’s against it. So we really haven’t gone very far down this road at all. Some other outside groups organized a meeting and that’s basically all it was. It kind of got reported on as if it were an AEI initiative but it wasn’t.”
Still, Ebell told me in a phone interview that AEI is endangering its credibility by approving efforts by its scholars to become more politically engaged.
“I just don’t think that’s an adequate reply,” Ebell said. “If AEI wants to continue to give a great deal of academic freedom to their very accomplished scholars to take positions, I think that’s fine. But to then encourage them to get involved in partisan politics besmirches academics.”