On August 1, 2013, four former Republican administrators of the Environmental Protection Agency published an op-ed in The New York Times, in a last-ditch effort to save their party and the environment. In “A Republican Case for Climate Action,” the four proposed one of two options: adopt a market-based solution such as a carbon tax or, “rather than argue against [President Obama’s] proposals … endorse them and start the overdue debate about what bigger steps are needed and how to achieve them.”
However, this appeal fell on deaf ears among House Republicans. Indeed, the next day, Rep. Steve Scalise (R-La.) introduced an amendment to H.R. 367 that “require[s] the Administration to receive approval from Congress before implementing a carbon tax.” Aside from the fact that Congress—not the president—approves new taxes, President Obama’s recent EPA proposal is based purely on regulations, not taxes. In fact, it falls directly in line with the traditional, regulatory-based environmental policy the United States has espoused for the last 40 years. Scalise’s reflexive opposition is indicative of a broader problem: the GOP lacks serious policy proposals to combat environmental crises. For the good of the party and the country, Republicans need to offer substantive proposals that address climate change.
The State of the Debate
At present, Republicans tend to fall into two distinct groups in terms of their environmental views: either they reject the evidence for global warming entirely or they opt for a moderated version of the Democratic policy of legislative coercion. Among 2016 presidential hopefuls, Rick Perry, Ted Cruz, Rick Santorum, Rand Paul, and Mike Huckabee represent the former category; Chris Christie, Jeb Bush, and Bobby Jindal fall into the latter.
Both the deniers and the moderates hurt the Republican Party. Perhaps most obviously, having two competing approaches divides the party. Moreover, the non-believers put themselves at odds with 97 percent of scientists, as well as the majority of Americans who, according to a recent New York Times poll, believe in human-induced global warming. Environmental moderates within the GOP do not fare much better. By advocating for lenient versions of Democrats’ regulatory proposals, they accept the assumption that prescriptive regulation is the best way to protect the environment. In other words, moderates implicitly accept that one’s commitment to the environment is tied to the size of regulation proposed.
While Republicans are split as to their own policy, conservative leaders do agree that a new proposal by the EPA must be stopped. Earlier this year, the EPA released a program that aims to cap carbon dioxide emissions in the United States for the first time. This initiative, called the Clean Power Program, relies on the old technique of regulation to decrease the prevalence of harmful gases. Republicans argue that the new agenda constitutes government overreach and that the program will kill jobs. This claim is all well and good, but without a substantive counterproposal to address climate change, Republican leaders run the risk of appearing reactionary and unoriginal.
The Conservative Tax Hike: A Revenue Neutral Carbon Tax
Instead of hindering environmental policy, conservatives should champion an agenda focused on implementing free market solutions and streamlining regulations. As it stands, a carbon tax represents the only viable environmental policy that can be reconciled with conservative principles.
Significantly for conservatives, a carbon tax offers a market-based solution to climate change. In an interview, former EPA Administrator and Governor of New Jersey Christine Todd Whitman argues in support of a carbon tax: “One of the things that most affects people’s behavior is cost. [Companies] respond to that.” In other words, industry responds to economic incentives better than regulation. In fact, Whitman contends, “Companies hate what regulation implies: you’ve got to have inspections, and that takes time and money to prepare for. There are a whole lot of understandable reasons … they would rather do anything than have more regulation.”
A carbon tax imposes a tax on each unit of greenhouse gas emissions and gives firms an incentive to reduce pollution whenever doing so would cost less than paying the tax. By contrast, a cap-and-trade system, such as the one proposed by Obama this year, sets a maximum level of pollution—a cap—and distributes emissions permits among firms that produce emissions. A carbon tax sets a price; cap-and-trade sets an emissions limit. Both policies achieve similar ends, but a carbon tax does so without the heavy hand of regulation associated with a cap.
Implementing a carbon tax may not be as hard as imagined. In an email, Gilbert E. Metcalf, professor of economics at Tufts and a research associate at the National Bureau of Economic Research, explains both the premise and the genius of a carbon tax: “For competitive markets to operate efficiently, all goods and services should have prices that fully reflect their total cost of production or use.” Metcalf adds that “a [revenue-neutral] carbon tax could provide the fiscal flexibility to help finance real tax reform,” since it “would [help us] move from taxing things we like (capital formation and labor supply) to things we don’t like (pollution).”
Moreover, a carbon tax is economically sound, as evidenced by two recent proposals. In 2013, the Brookings Institution proposed a carbon tax-based environmental policy. This plan set the cost per ton of CO2 at $16 and pegged the growth rate of the tax at 4 percent plus inflation. The Brookings report found that the United States would receive an extra $2.7 trillion and that carbon output would be reduced by 12 percent over the next 20 years.
A second proposal comes from the Massachusetts State House in the form of H.2532. This bill suggests an initial rate of $10 per ton of CO2, rising by $5 a year. More importantly, the legislation is revenue neutral. Whatever the state collects, it offsets with cuts to other taxes: 50 percent of the profits go to a lower corporate tax, 25 percent to a lower income tax, and 25 percent to a lower sales tax. Economists at Regional Economic Models, Inc. (REMI) found that Massachusetts’ GDP would be $10 billion higher in 2035 if the proposal were enacted. REMI also explains that the state would see 11,000 new jobs, because a “relatively high cost of fuel also gives an advantage to industries that tend to rely on labor, such as healthcare or business services. Those industries tend to generate a high level of jobs for their output.”
Massachusetts state senators Michael J. Barrett (D-Lexington) and Thomas P. Conroy (D-Wayland) proposed the bill. When asked about the likelihood of obtaining Republican votes, Barrett told the HPR, “We stand a decent chance at [bipartisan support]. [A carbon tax is] an alternative to top-down government regulation. Republicans prefer market-based legislation that preserves individual choice, and that’s what a carbon tax does.” Nonetheless, “Even a neo-pseudo-quasi-tax like this one is going to encounter the resistance that all taxes encounter.” Barrett expects a new version of the bill slated for release in January 2015 to pass in six to eight years, the traditional length of time for legislation. As he observed, “It’s going to take a lot of education and a lot of discussion, but we’re looking forward to it.”
As H.2532 demonstrates, the carbon tax is not a tax increase, but rather a tax swap. The state or federal government can use the additional revenue to decrease taxes across the board and to offset the increased prices of fossil fuels for low-income families. This realization has significant political ramifications in light of the Taxpayer Protection Pledge, a document that 238 U.S. House members and 41 senators have signed promising never to raise taxes. The pledge has hindered discussion of carbon taxes in the past. As Whitman explains, “Most [House Republicans] signed the no-new-taxes pledge. [Rejecting a carbon tax] is reflexive: they don’t have to reflect, they don’t have to think.” However,Whitman argues that proposing a revenue-neutral tax swap “would be in everyone’s best interest … businesses would come along with that.”
Rethinking Regulation
The second component of a new Republican policy must be regulatory reform. Republican leaders argue for simpler regulation of the oil and natural gas industries; they can easily extend that logic to reviews of infrastructure projects. The environmental review process as it stands in the United States is a bureaucratic mess because no agency is responsible for a whole project. For every major infrastructure project, the federal government must conduct an Environmental Impact Statement. According to Common Good, a non-partisan, reform-minded advocacy group, an EIS takes 3.4 years on average. With highway projects, this number more than doubles to eight years. This timeframe is especially troubling given that the United States’ infrastructure received a rating of D+ from the American Society of Civil Engineers in 2013.
Obama’s 2009 stimulus package offers a striking example of how environmental reviews can hamstring needed infrastructure projects. As Philip Howard, head of Common Good and a former advisor to Al Gore, told the HPR: “Barely three percent of the 2009 stimulus got spent on infrastructure because the president of the United States—duly elected by a majority of the people—lacked the authority to say, ‘Go.’” In fact, Common Good found that only $20 billion had been spent on infrastructure as of 2011 because of review-related delays. As the president commented, “Shovel-ready was not as shovel-ready as we expected.” Other notorious examples of delayed infrastructure projects include the Cape Wind Project (12 years and counting), the Gateway West Power line (eight years), and the dredging of the Savannah River (14 years). Moreover, the duration of a review does not necessarily relate to its thoroughness. Much greener countries like Germany and Canada set caps of less than two years on their environmental reviews yet still maintain a cleaner outlook.
According to Howard, “The system of environmental review can be best described as near paralysis. The flaw in the system is that no official can say ‘enough is enough.’” He likens the situation to “open season on endless bureaucracy.” In light of this problem, Howard noted that Common Good plans to propose regulatory reforms to the president later this year that will allow EPA officials to expedite EIS studies. It is unclear whether this will actually solve the problem of bureaucracy or just enable select projects to skirt years of review. Still, executive action is certainly a start.
Republicans should advocate for a common sense approach to environmental review by supporting simplified, expedient regulation. This reform, combined with a carbon tax, could jolt Republicans back into a position of leadership on an issue they started championing over 100 years ago: conservation. As Whitman noted, inaction on climate change has dire consequences. Last year, the United States spent $100 billion on natural disasters—real money out of the economy. Asthma attacks are the single largest cause of missed school days among children, and emissions cause hospitalization and premature death of the elderly. If we can slow climate change down so that we can better adapt to and anticipate these and other challenges, we will all be better off.
Image credit: Agustín Ruiz