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 August 19, 2019

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.

Kate Aronoff is a Brook­lyn-based jour­nal­ist cov­er­ing cli­mate and U.S. pol­i­tics, and a con­tribut­ing writer at The Inter­cept. Fol­low her on Twit­ter @katearonoff.
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