Some Economists Say Carbon Taxes Are a Silver Bullet. The Reality Is More Complicated.

A carbon tax isn’t a bad idea, but by itself could be politically dangerous.

Kate Aronoff

Piles of coal sit in front of Pacificorp's 1440 megawatt coal fired power plant in Castle Dale, Utah. (Photo by George Frey / Getty Images)

For alternate perspectives on this issue, see The Government Should Write Everyone a Check — Paid for by a Carbon Tax” by Owen Poindexter and Don’t Tax Carbon — Just Stop Digging It Up” by Cynthia Mellon.

Carbon pricing could do a small number of things very well: It could deal a final death blow to coal (the most potent carbon dioxide emitter), which would become prohibitively expensive where it’s not already. It could tip big institutional consumers toward more energy-efficient decisions regarding things like construction materials and vehicle fleets. At the everyday consumer level, it could encourage spending extra income on, say, a low-carbon trip to a local theater rather than a high-carbon tchotchke shipped from Amazon. The revenue gained from carbon pricing, rather than all going toward a dividend, could provide a much needed burst of investment in green jobs and resiliency programs that serve communities on the front lines of the crisis — as campaigners behind a failed progressive carbon tax in Washington state proposed in 2018.

So I don’t think, as Cynthia argues, that a carbon tax should be taken off the table, but she’s right about its limits. A carbon tax won’t do what’s ultimately needed: Keep the carbon in the ground. In fact, a minimal carbon tax like what’s currently proposed could be just enough to leave oil and gas companies alive while killing off coal, fueling a dangerous infrastructure build-out and extraction boom.

In addition, we should be wary of the political impacts of treating carbon pricing as the tip of the spear of climate action. The past decade of climate policymaking offers scant hope that a carbon tax could get us to necessary, more ambitious changes. A decade ago, federal legislation to implement another type of market-based carbon pricing legislation — the Waxman-Markey cap-and-trade bill — collapsed after industry withdrew its support midway through the legislative process. The implosion has since kept ambitious climate action off the federal legislative docket. Attempts at carbon pricing from state legislatures have also been reliably stymied, in large part thanks to industry meddling.

Whatever variant of carbon pricing you may prefer, a national fight over that policy will be a fight on industry terms. Corporations claim to support the idea and have already claimed a seat at the table, ensuring the debate would be about what price the industry pays and passes down to consumers instead of what policy might actually reduce and end fossil fuels. One carbon tax that perhaps is gaining steam, for example, is a real devil’s bargain, coming to us from the ExxonMobil and BP-sponsored Climate Leadership Council: In this version, industry would accept a modest price on emissions in exchange for protection from climate liability lawsuits and regulations.

Even if a carbon tax passes, poor implementation could poison the policy debate and eat up time we don’t have. As France’s Yellow Vests movement revealed, crassly pushing through a gas tax is a recipe for disaster in the context of austerity and inequality. Owen suggests a dividend would help win popular support, but a dividend won’t be enough to shore up those who stand to lose most from a sloppy energy transition. Even a few thousand dollars a year won’t replace the livelihoods and pensions of coal workers, and carbon-intensive expenditures aren’t a matter of choice for many people. In rural or underserved areas, for example, there are no alternatives to driving. A carbon price alone — dividend or no — can’t provide the massive public infrastructure investments needed to make low-carbon lives possible for all. The success of any carbon pricing measure depends on a suite of complementary policies; carbon pricing alone would hardly pave the way.

As Cynthia rightly points out, there are far better places to start, such as ending the tens of billions of dollars that industry rakes in each year from state subsidies. Passing commonsense regulations to end drilling near homes, playgrounds and hospitals would be a great start, too.

All that said, it would be premature to swear off carbon pricing — given the scale of the climate crisis, we need all the tactics we can get. Carbon pricing isn’t a bad one, just a foolish (and maybe even dangerous) place to begin.

For alternate perspectives on this issue, see The Government Should Write Everyone a Check — Paid for by a Carbon Tax” by Owen Poindexter and Don’t Tax Carbon — Just Stop Digging It Up” by Cynthia Mellon.

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Kate Aronoff is a staff writer at The New Republic and author of Overheated: How Capitalism Broke the Planet — And How We Fight Back. She is co-author of A Planet To Win: Why We Need a Green New Deal and co-editor of We Own the Future: Democratic Socialism—American Style. Follow her on Twitter @katearonoff.

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