Conservative Thinkers Entertain Liberal Idea: Carbon Taxes

Ken Silverstein | Jul 17, 2012

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Conservative thinkers are playing host to a liberal idea: the enactment of carbon taxes. The issue is making news right before the national elections in the fall, and it could gain increasing momentum.

The American Enterprise Institute, which just held a conference on the subject, is saying that the fundamentals underpinning carbon taxes deserve to get aired. Many liberals would agree. But most -- if not nearly all of conservatives -- would disagree that the idea has validity. Contrary to that thinking, however, carbon constraints is a policy that is making international headway, and one that over time will ingratiate itself into U.S. energy policies.

“We have to have a system where all forms of energy bear their full costs,” says George Shultz, former U.S. Secretary of State under President Reagan. “For some, their costs are the costs of producing the energy, but many other forms of energy produce side effects, like pollution, that are a cost of society.

“The producers don't bear that cost, society does. There has to be a way to level the playing field and cause those forms of energy to bear their true costs. That means putting a price on carbon. We've studied a variety of ways to do that, and to me the most appealing way is a revenue-neutral carbon tax. That is, you distribute all the revenue from the carbon tax in some fashion back to taxpayers, so there is no fiscal drag on the economy,” Shultz concludes.

The GOP legend, who issued his remarks to Stanford University, goes on to say that British Columbia has such a carbon tax. In that case, the government there gradually increased the tax and then redistributed it to individuals, making it popular.  He adds that the Republicans have historically been known as the party that issued policies to protect the environment, noting that it was under President Nixon that the 1970 Clean Air Act passed.

Schultz’ comments are coming on the heels of the AEI confab. There, both Republicans and Democrats gathered to discuss the potential policy. According to news reports, representatives from Al Gore’s climate campaign and AEI’s own scholars represented the Republican view point, as did a former congressman from South Carolina who is starting the Energy and Enterprise Initiative. The progressive view is one led by U.S. Representatives Henry Waxman, D-Calif., and Ed Markey, D-Mass., both of whom have chaired key energy committees.

Technologies Key

Among those scholars not present at the AEI meeting  was AEI’s Ken Green, who used to favor the carbon tax but now says the idea is “anti-competitive.” A carbon tax, he fears, would simply go into general revenues. He adds that unilateral action by developed countries would give unfair advantages to those developing countries that would have no such curtailment efforts.

“I naively thought that a revenue-neutral carbon tax might be possible, and if done right, might offer economic benefits that might mitigate its economic harms; if we replace taxes on productivity with taxes on consumption, we might get a net economy-wide benefit,” writes Green, in an EnergyBiz Insider column appearing a year ago.

Most of the earlier discussions centered on a carbon tax or cap-and-trade scheme, where carbon ceilings are set and utilities must meet them, or buy credits that allow them to exceed such limits. But those debates occurred after President Obama came to Washington and when his party controlled both legislative chambers. When the Republicans took over the U.S. House in 2010, those ideas died.

Under a carbon tax, government would tax utilities according to their carbon footprints that can be readily measured. NextEra Energy says that it is a fairer way to compute results and that it is easier to administer than a cap-and-trade system. The proceeds from the carbon fee would then be targeted directly to an account that would help fund the development of new technologies.

“Although both a tax on emissions and a cap-and-trade system use the power of markets to achieve their desired results, a tax is generally the more efficient approach,” adds Peter Orszag, former director of the Congressional Budget Office. “Studies typically find that over the next several decades, a well-designed tax would yield higher net benefits than a cap-and-trade approach.”

If the president is re-elected, the notion of carbon constraints will get resurrected. And while such policies would still have an uphill climb over the next four years, that will slowly change as the technologies to enable the capture of carbon dioxide are developed and potentially commercialized.


EnergyBiz Insider is named a 2012 Finalist for Original Web Commentary presented by the American Society of Business Press Editors. The column is also the Winner of the 2011 Online Column category awarded by Media Industry News, MIN. Ken Silverstein has been named one of the Top Economics Journalists by Wall Street Economists.

Twitter: @Ken_Silverstein

energybizinsider@energycentral.com

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Comments

Anonyomous letter writers

Anonyomous letter writers claming to hold the truth to all of science! Now that is one step below those brilliant radio talk show host with no college degrees! If you make that kind of statement, give your name and give your sources and give your financial interests so the rest of us can evaluate your credibility.

Conservative Thinkers Entertain Liberal Idea: Carbon Taxes

Global warming is a fraud driven by the environmentalist religionists based on skewed if not contrived data and skewed reasoning to push their agenda. Two types of persons promote the global warming scam, represented by Prince Charles and Al Gore, stupid and crook respectively.  The "rank and file" is emotionally driven and chooses to not pursue a search for facts counter to their "faith".  The real pending disaster is cooling based on climate history.  Take a look at  http://icecap.us/index.php/go/new-and-cool

Carbon Tax Frightens

Dear Ken,

Reading this article in today's EnergyBiz reminds me of an approximate calculation I prepared for my teen-age grand-daughters the other day:

Carbon tax is a frightening thing - most recently I saw a proposal of $30 / ton of CO2. Now $30 is a lot of money - it's what you would pay for about ten gallons of gas.

And no one has any idea of a ton of CO2. It's a gas! How do you weigh a gas?

Beginning with simple chemistry, gasoline is mostly like CH2 and burning it produces CO2 and H2O. CH2 has a molecular weight of 14 and CO2 has a molecular weight of 44. So burning a pound of gasoline produces 44/14 pounds of CO2. In words, burning one pound of gasoline produces about three pounds of CO2.

Now a gallon of water weighs about 8 pounds - as they say, "a pint's a pound the world around". Gasoline is a little lighter, let's say 7 pounds per gallon.

For every gallon of gasoline we burn, we produce about 7 x 3 = 21 pounds of CO2. That's about one hundredth of a ton. So we have to burn about 100 gallons of gas to make one ton of CO2. The proposed carbon tax of $30 per ton comes out to be about 30 cents per gallon of gasoline.

I think an "environment" tax of 30 cents a gallon of gas is a number that people can understand much more readily than $30 a ton of CO2.

(Is such a tax is reasonable? Would it be acceptable to the American public? These are other questions, to be addressed at another time, perhaps in a different place.)

Ciao  B

Berol Robinson

redistribution equal corruption

Redistribution is corruption.  All this will do is support friends of Congressmen and their corrupt frauds, like Solyndra ilk.  Why not just skip the game.  Theft is theft. 

If you want to get 80-90% of the fuel gone, we have the concepts to achieve it at solarmotorworks.com.  Government types don't understand it nor are they interested.  My governor said "we hope you fail" when it was explained. 

All this is is about naked power.  CO2 is just a Wicked Witch by another name.  Same con.  Tax us instead of burn us. 

redistribution equal corruption

Redistribution is corruption.  All this will do is support friends of Congressmen and their corrupt frauds, like Solyndra ilk.  Why not just skip the game.  Theft is theft. 

If you want to get 80-90% of the fuel gone, we have the concepts to achieve it at solarmotorworks.com.  Government types don't understand it nor are they interested.  My governor said "we hope you fail" when it was explained. 

All this is is about naked power.  CO2 is just a Wicked Witch by another name.  Same con.  Tax us instead of burn us. 

Carbon Tax

Although not in favor of carbon taxation myself, I fail to follow the reasoning behind your statement, “A carbon tax, in any form, including selling emissions allowances, as proposed by Waxman-Markey, Kerry-Boxer and Kerry-Lieberman, would merely add to the societal costs of a transition to low/no emissions.”

 

How so? Why would societal costs rise? What link is there between a carbon tax and societal costs of a transition to low//no emissions? Could you perhaps expand a little on this point?

Carbon Tax

The carbon tax does not, in any way, offset or diminish any of the investment required to actually reduce carbon emissions. It is an expense that the emitters must pay, while they are also investing in facilities and equipment to reduce or eliminate emissions. Thus, it is additive. A carbon tax is also indiscriminate, in that it taxes both those emitters capable of rapid emissions reductions at low cost and those emitters for whom the emissions reduction technology is not commercially available, or requires major investments, or long lead times and construction times at the same rate, beginning at the same time. 

Carbon Tax

The naivete is captured in this sentence:  "The proceeds from the carbon fee would then be targeted directly to an account that would help fund the development of new technologies."  Like the Social Security Trust Fund, I suppose.


Conservative Thinkers Entertain Liberal Idea: Carbon Taxes

What is the justification for a carbon tax?

Rationalization not Justification

Congressional desire for an additional revenue source. During the discussion of the various bills, there often seemed to be more congressional interest in this new revenue stream than in the potential emissions reductions.

Oxymorons and Actual Morons

A "revenue neutral carbon tax" is an oxymoron. I do not believe that the US Congress is capable of constructing a truly revenue neutral tax of any kind. The "carbon tax" components of Waxman-Markey certainly made no pretense of revenue neutrality.

Waxman-Markey was passed by the US House while the Democrats were in control. The companion bills in the US Senate (Kerry-Boxer and Kerry-Lieberman) failed, so there was no opportunity for a conference to produce a bill which could be presented to the President for signature.

Reducing carbon emissions would require massive investments in low/no emissions facilities and equipment. Eliminating US carbon emissions would require the investment of ~$45 trillion over whatever period. A carbon tax, in any form, including selling emissions allowances, as proposed by Waxman-Markey, Kerry-Boxer and Kerry-Lieberman, would merely add to the societal costs of a transition to low/no emissions.

In the absence of legislation requiring carbon emissions reductions, the Administration is now using EPA to force carbon emissions reductions, both by forcing many older coal generators to close and by setting carbon emissions limits for new coal plants which are currently unachievable with commercially available technology. However, global annual carbon emissions will continue to increase, driven by the rapidly growing emissions from the developing nations of Asia.

Carbon Tax

Although not in favor of carbon taxation myself, I fail to follow the reasoning behind your statement, “A carbon tax, in any form, including selling emissions allowances, as proposed by Waxman-Markey, Kerry-Boxer and Kerry-Lieberman, would merely add to the societal costs of a transition to low/no emissions.”

 

How so? Why would societal costs rise? What link is there between a carbon tax and societal costs of a transition to low//no emissions? Could you perhaps expand a little on this point?

Carbon Tax - Jul 19, 2012 - 6:09 AM

The carbon tax does not, in any way, offset or diminish any of the investment required to actually reduce carbon emissions. It is an expense that the emitters must pay, while they are also investing in facilities and equipment to reduce or eliminate emissions. Thus, it is additive. A carbon tax is also indiscriminate, in that it taxes both those emitters capable of rapid emissions reductions at low cost and those emitters for whom the emissions reduction technology is not commercially available, or requires major investments, or long lead times and construction times at the same rate, beginning at the same time.

Republicans Need Something

I agree, it is naive to believe the federal government will keep its promises.  But Republicans need a better policy in November than an ostrich with its head in the sand pointing a finger at China.   Yes, this idea needs more work; maybe the tax starts low and only increases when other countries have equivalent policies; maybe the revenue funds 'all sources'.  Bottom line - I think the proposal is a good start, i.e. a huge improvement over cap-n-trade.    

 

David Dixon

Sec of State Shultz

It really does take the elder statesmen of the Republican Party to help bridge the differences it has with the Democrats. These guys have no political aspirations and want to do what is best for the country and not what is best for themselves or their political careers. Some of these Republicans who have tried to work across the political divide have been defeated in their primaries by Tea Party candidates, including the man from South Carolina who is heading this new energy association. Thanks to them for leading this discussion. I wish they would write in and take credit for their honorable actions.

"Revenue neutral carbon tax"--insanity

Let's see, we are discussing setting up a tax on utilities and then that tax would be redistributed to the population.  Just the bureaucracy to handle the money will be a drain on the system.  And, we are supposed to trust the Federal Government to not divert it for something else?  Right...  Revenue neutral--all that means is the Feds take the money in and pay it back out to someone--someone else that is.  Kind of like the idiot schemes where the cash strapped Federal Government is paying $26 a gallon for biofuel to take the place of $3.60 petroleum based fuel.  Kind of like the programs where the Federal Government is paying a fortune to install solar panels at military bases without recognizing that electricity from solar is effectively more than double the cost of electricity available on the power market besides not being reliable when it is cloudy, not being dispatchable, and requiring 100% backup from fossil power.

That is bull****.  Need proof?  Social Security comes to mind. 

Any carbon tax applied will raise the cost of electricity and decrease the ability of our businesses and manufacturing to compete in the world marketplace.  It will further damage our economy if not kill it altogether.  For goodness sake, look at what is happening in Europe--they are going downhill economically at least in part due to energy policies that added to the price of electricity.  And all that has been accomplished is to grow the economies of China, India and some other developing countries that are powering their businesses and manufacturing with environmentally uncontrolled coal power and hydropower (which damn sure is not "green").

Just the money we have taken from taxpayers to give to green energy firms as incentives could have been used to build newer, more efficient, and cleaner burning power plants, which through their increased efficiency have knocked a huge chunk off CO2 emissions in this country--a much larger chunk than all of the wind and solar facilities built will.  And the PTCs for ethanol as a emissions reducer is a ridiculous joke, except a painful one rather than a funny one.

 

Carbon Tax

The naivete is captured in this sentence: