Friday, December 21, 2012

Will anti-carbon tax arguments make a comeback?

In the Wall Street Journal today, an op-ed: “Will the Carbon Tax Make a Comeback?” by William O’Keefe, CEO of the Marshall Institute and a former executive of the American Petroleum Institute. 

It begins with some triumphalism about the defeat of Bill Clinton’s proposed BTU tax almost 20 years ago, which O’Keefe describes as “a similar gambit” to a carbon tax. O’Keefe writes:
The proposal provoked a brutal backlash, to the surprise of no one but the Clinton White House, environmental advocates, and liberal members of Congress such as Henry Waxman (D., Calif.). The vocal anti-BTU coalition included small businesses, the agriculture sector, the building trades, the transportation industry, manufacturers and even social-service organizations that relied on gasoline and heating oil to care for the poor and homeless.
A few months after Mr. Clinton proposed the tax, the administration and Democrats in Congress abandoned the idea. As the great English writer Samuel Johnson observed, there is nothing like a hanging to concentrate the mind. "BTU" became a verb, and from then on no politician wanted to be "BTU-ed." A year later, in November 1994, voters gave control of the House to Republicans for the first time in decades.
Me: Ah, good times, good times. Actually, wait a second. The BTU tax would’ve been imposed on a broad range of energy sources including non-carbon ones such as nuclear and hydropower, and had no mitigating cuts in taxes elsewhere. A carbon tax, aimed at promoting non-carbon energy sources and coupled with cuts in income and payroll taxes, might get a very different reception.

Here’s more O’Keefe:
A carbon tax is intellectually elegant to economists but dangerous and complex in practice. The theoretical basis is to raise taxes on things considered bad (carbon from energy consumption) and to lower taxes on things considered good (labor, for example).
But energy is consumed to produce things that people value, and there are no near-term substitutes for fossil fuels. So a carbon tax would affect food prices, consumer goods, electricity, mobility, charitable works and more. It would also destroy jobs, and a recent study by the Congressional Budget Office concluded that it would "impose a larger burden on low-income households.
Me: Yes, “energy is consumed to produce things that people value,” but some types of energy produce vast social and environmental costs that a carbon tax would make better reflected in energy prices. Why not let people keep more of their money to begin with, and then choose (directly and indirectly) among energy sources?

As for there being “no near term substitutes for fossil fuels,” that is a straw-man argument. There are some non-carbon substitutes for fossil fuels and importantly there are also lower-carbon fossil fuel substitutes for higher-carbon fossil fuels. A carbon tax would accelerate the recent push toward more use of natural gas. The goal is not some green utopia but rather a more sustainable mix of energy sources.

A carbon tax is a slippery slope. Once in place, small changes in rates would yield large increases in federal revenue. Who is naive enough to believe that Congress wouldn't be tempted to make small increases that accumulate over time?
Me: Yes. There should be small increases that accumulate over time. In fact, there should be a schedule of such increases, so as to minimize shocks to the economy and encourage investment in cleaner energy. Gradualism would be a virtue in a carbon tax, not the insidious menace O’Keefe portrays.

What's more, the climate-change justification for a carbon tax is bogus. Greenhouse-gas emissions are rising in China and other emerging economies, not in the United States. Carbon-dioxide emissions in the U.S. have been declining and by 2035 will return to 2005 levels, the Energy Information Administration projects.

Me: U.S. carbon-dioxide emissions declined from 2005 to 2010. From 1990 to 2010, they increased by 10.5%. The U.S. remains the second highest emitter of CO2 in absolute terms and a far larger per-capita emitter than China and other emerging economies. Moreover, a properly designed U.S. carbon tax would impose costs on imports from countries that don’t have a carbon tax, precisely because this is a global problem that requires international action to address it.

Advances in climate science, meanwhile, raise even more doubt about the assertion that human activities are the primary cause of warming. Former NASA scientist Roy Spencer, for example, has shown that temperatures since 1976 have risen and stabilized in parallel with the Pacific Decadal Oscillation, a natural climate pattern affecting all sorts of natural phenomena. An increasing number of experts now admit that natural variability is poorly understood and poorly reflected in the models that are the foundation of so much climate-change dread.
Me: There remains a strong consensus among experts that human-caused greenhouse gas emissions are the primary driver of climate change--and O'Keefe's wording is rather slippery, as the number of contrarian experts could be increasing while remaining very low, and as acknowledging uncertainties about natural variability does not equate to thinking they plausibly could account for global warming. Also, fossil fuels, especially coal and oil, indisputably cause vast damage to humans and the environment even apart from climate change. But O’Keefe’s resort to the science denialism card is revealing. It suggests that he and his editors perceive that his case against a carbon tax can’t stand up without that crutch.

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