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Commentary By Oren Cass

There’s No Such Thing as a ‘Conservative’ Carbon Tax

The so-called “conservative” case for a carbon tax has always been a shell game. Point out that such proposals might not meaningfully address climate change, and defenders claim that they’ll boost economic growth. Note that they won’t boost growth and you’re told that they will save the planet.

The confusion abounds: carbon tax proposals are sold as the key to reducing burdensome red tape, even though that tape can be (and has been) cut absent a sweeping new tax regime. The tax is supposed to be “revenue neutral” thanks to offsetting tax cuts elsewhere—even as that same revenue gets promised to households in the form of a “dividend.” Through careful calibration, the tax is meant to offset efficiently the externalities associated with carbon-dioxide emissions — although no reliable estimate of those externalities exists. As I observed more than three years ago: “If we grabbed the wrists of carbon-tax advocates and demanded they turn over the shells all at once, we would find there was never a marble to begin with.”

A new piece of legislation bears out that warning. Congressman Carlos Curbelo (R-FL) has introduced a carbon tax bill with none of the properties that proponents had promised to conservatives. It raises taxes dramatically, while refunding little of the money back to households. It slows economic growth. It does not eliminate EPA authority over greenhouse gases or address other climate-related regulations. It will increase if arbitrary targets are not met. But the criers of the conservative carbon tax aren’t outraged, or even opposed. They are delighted.

“The so-called “conservative” case for a carbon tax has always been a shell game.”

Take the Niskanen Center, whose president Jerry Taylor made waves with his white paper on “The Conservative Case for a Carbon Tax” in 2015. “Conservatives should embrace a carbon tax,” he advised, “in return for elimination of EPA regulatory authority over greenhouse gas emissions, abolition of green energy subsidies and regulatory mandates, and offsetting tax cuts to provide for revenue neutrality.” He now believes that the Curbelo bill, which does none of these things, has “found a bipartisan sweet-spot.”

And then there is the Climate Leadership Council (CLC), led by luminaries like James Baker, Martin Feldstein, Hank Paulson, and George Shultz. Their own manifesto is called “The Conservative Case for Carbon Dividends,” cleverly eschewing the taxation at their proposal’s heart by emphasizing that its proceeds should go entirely toward dividends paid back to all households. “Any climate solution,” in their view, “should be based on sound economic analysis and embody the principles of free markets and limited government.”

Among the crucial pillars they highlighted were that “all the proceeds from this carbon tax would be returned to the American people on an equal and monthly basis via dividend checks” and the need for “the elimination of regulations that are no longer necessary” including “much of the EPA’s regulatory authority over carbon dioxide emissions” and “an end to federal and state tort liability for emitters.” The idea that all tax revenue be rebated to households was especially non-negotiable: “It is essential that the one-to-one relationship between carbon tax revenue and dividends be maintained.” Of course, the Curbelo bill fails these tests.

Nonetheless, the legislation earned a strong CLC endorsement as “an important milestone for conservative leadership.” The Niskanen Center likewise released a statement “support[ing] Mr. Curbelo's effort to bring carbon pricing to the forefront of American climate policy. … The introduction of this bill represents real leadership.”

Compromise is inevitable in any legislative process. But what CLC and Niskanen chose to celebrate was not the final product of hard-fought wrangling within and between the parties. It was the introduction of a bill whose text Rep. Curbelo controlled; and whose roll-out both groups participated in.  Groups are welcome to endorse and promote a carbon tax that they know conservatives should and will oppose. What they cannot do is pretend any longer that they are advancing conservative policy, or feign disappointment when conservatives fail to leap aboard their initiative.

“Carbon tax proposals are sold as the key to reducing burdensome red tape, even though that tape can be (and has been) cut absent a sweeping new tax regime.”

This mess was the inevitable result of endorsing carbon taxes as a concept without ever devising a viable proposal. “Supporters inevitably commit themselves to the project of costly and superficial climate action while achieving no concessions in return,” I warned in 2015. “And this is before Congress gets involved.” Jerry Taylor, for his part, assured conservatives that no such slippery slope existed.

 The “conservative case” was never actually there, but at least now the nature of the game is clear for all to see. The goal, celebrated in the endorsements, is “leadership”— wherever, apparently, it may lead.

Oren Cass is a senior fellow at the Manhattan Institute. He worked previously as the domestic policy director for Mitt Romney's presidential campaign, a management consultant at Bain & Company, and an editor of the Harvard Law Review.

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