Even though the June 9 House Resolution rejecting a carbon tax has no force of law, it does send a message. If Republicans retain the House in November, the resolution will serve as a marker just as SR-98 did with the Kyoto Treaty.
In commenting on the vote, The Hill noted the support for a revenue-neutral carbon tax by number of organizations and the breadth of support across the political spectrum. Proponents, including a number of economists, especially those who consider themselves to be environmental economists, contend that a carbon tax is needed to address the projected damages from human induced climate change. Their support is based on a number of assumptions, all of which are flawed; a carbon tax is said to be more efficient than command and control regulation or a cap and trade approach, easily internalize the cost of environmental damages, substitutes for other more distorting taxes, can be the foundation for a rewrite of the Clean Air Act.
These assumptions make a carbon tax appear to be an environmental panacea. But, as the saying goes, if it appears to be too good to be true, it likely isn’t.
Proponents begin with the logical position that climate change policy should be viewed as a risk management problem. While it is hard to argue with that perspective, it is predicated on being able to accurately assess risk and damages. That is a non-trivial problem because the range of both covers the spectrum from trivial to catastrophic. Over the past 20 years, projected warming and damages have been steadily reduced and become more uncertain as a result of new knowledge and empirical evidence. In addition, the damages are always in the distant future. Like the horizon, they always recede as we approach it. Without a more robust and credible estimate of damages caused by CO2 emissions, it is impossible to calculate an accurate price to put on carbon. Sophisticated guesses for estimating the effects of a tax is poor approach to public policy.
No one can argue with the proposition that a carbon tax would be more efficient than cap and trade or command and control regulations. Unfortunately, there is no politically practical way to substitute a carbon tax for the myriad of regulations that impose burdens on the use of carbon based fuels. Removing regulations requires the same process under the Administrative Practices Act that is followed in implementing new regulations. EPA would have to issue a finding that existing regulations need to be repealed and then go through a public comment and hearing process. The other alternative would be to rewrite the Clean Air Act to accomplish the same objective. Does anyone really think that either of those options is realistic? Republicans will do well to hold onto their slim Senate majority in November, much less increase it enough to prevent a filibuster. A more likely outcome is that a carbon tax would be in addition to current regulations.
The Niskanen Center, for example, claims that “used properly, carbon revenues will help people.” Citing a CBO analysis showing that a $20/ton tax would raise $100 billion annually, Niskanen claims that the revenue “should pay for a reduction in other taxes or be returned to households paying higher energy bills.” Who would decide which taxes get reduced and given past tax history, how do you ensure that they stay reduced? It is a virtual certainty that lobbyists would work overtime to ensure that their clients fared well from any carbon tax initiative. And a legion of special interests would make their case for special treatment, making the proposed tax ever more complex. And, how will the government know who is paying “higher energy bills” so it could remit revenue to them?
Even if these obstacles could be overcome, there is still the questionable premise that CO2 is the culprit.
A look back at US temperatures and CO2 increases from the start of the 20th century to the present demonstrates that there is no correlation. From 1900 to the present, atmospheric CO2 has steadily increased while temperatures have been cyclical: first rising, then declining, and then rising from 1978 t0 1998. Since then, temperatures have not increased. Further, as Professor John Christy testified before the U.S. House of Representatives Committee on Science, Space & Technology earlier this year, the models that serve as the foundation for climate dread and emission reduction proposals have projected temperature increases 2.5 times greater than have actually occurred. This makes clear that climate sensitivity, the effect of doubling CO2 in the atmosphere, is much less that advocates assert.
A carbon tax is a politician’s dream because with small changes it generates large amounts of revenue. With the House resolution, at least some politicians have taken a principled stand against it.
William O'Keefe is the President of Solutions Consulting. You can follow him on Twitter here.
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