Here’s a carbon tax plan that U.S. Sen. Pat Toomey can live with | Bruce Ledewitz

November 6, 2019 6:30 am

U.S. Sen. Pat Toomey, R-Pa., speaks during an event at the Dauphin County Courthouse in Harrisburg, Pa., on Wednesday, 10/9/19 (Capital-Star photo by John L. Micek)

There is not any reasonable doubt that climate change is happening, that humans are causing it and that the consequences are harmful. Scientists tell me that there is liquid water under the surface of Saturn’s moon Enceladus and I believe it. Why would I doubt them over this?

Bruce Ledewitz (Capital-Star file)

Anyway, I can see myself that it is warmer since 1980 worldwide. I can also see that high tides now routinely flood Florida beachfront property. There is only so much adaptation that is possible if the Southwest becomes the Sahara.

Given these realities, we must try to prevent, or at least limit, the warming by reducing greenhouse gas emissions. But, how?

 One principle should be that solutions must be aimed at climate change alone.  Recent Green New Deal proposals include policies concerning economic inequality. That suggests climate change is only a pretext for action.

A second principle is that solutions must be systemic. Behavioral changes by individuals will be both spasmodic and ineffective.

On the other hand, any solution is going to cause economic dislocation. You can’t produce less carbon without hurting some people. Not taking action, however, will hurt everybody in the not-too-long-run.

The cause of climate change is not mysterious. It is not happening because humans are inherently destructive, or too numerous, or that capitalism is evil.

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Climate change is happening because of a classic case of market failure, well-known to economists. It is called the tragedy of the commons, after a 1968 paper by Garrett Harkin.  Climate change is happening because no one owns the climate. 

The idea is simple.  Because no one owned the common grazing area in the English village, no one had an incentive to ensure its long-term health. This led to overgrazing. If there had been an owner, there would have been a cost for grazing that would have allowed the resource to be developed sustainably. 

Similarly, if there were an owner of the climate, we would have to pay to change it. We could never afford to do so, because the current climate is so profitable to so many people in so many ways. Therefore, the climate would have stayed the same as it has been for thousands of years.

So, all that is needed to forestall climate change is a price for actions that change the climate that reflects the costs of doing so. Or, in common parlance, a carbon tax.

Economists agree that a revenue neutral carbon tax is the cheapest, easiest and most efficient mechanism to prevent further climate change. Beyond the details, which are tricky, there are three fundamental objections to a carbon tax.

First, because it would work to limit greenhouse gas emissions, a carbon tax would cost jobs. Certain sectors, like fossil fuel production, would be hurt inevitably and, if the U.S. acted alone in enacting a carbon tax, America would be at a disadvantage globally. 

This problem is not insurmountable. Such a tax would be gradual, so that sectors could adjust. A tax is not a regulation, so actions like carbon capture that reduce emissions, would save jobs. And the U.S. could always institute a carbon tax only when a certain percentage of other countries do the same.

The other two objections are more difficult to address: People could not afford the tax and the tax would not remain revenue neutral.

As was seen in the yellow vest protests in France, increasing the price of basic commodities like heating oil and gasoline will be immensely unpopular. But this is the beauty of a revenue neutral tax. The carbon tax raises the price of changing the climate.

That is its only job. The actions that follow do not require government programs. The market, given this price signal, limits climate change on its own.

That means that almost every penny of the proceeds of the carbon tax can be returned to the people, per capita. The higher the tax, the larger the check.

There will still be pain. But, since the rich use more carbon than do working people, the effect of the tax will not increase economic inequality overall. And people will adjust to the new price structure.

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But now we come to what can be called U.S. Sen. Pat Toomey’s objection. On climate change, as on gun control, Toomey, a Republican from the Lehigh Valley, cuts a centrist figure.

He doesn’t deny climate change is happening, that humans are causing it or that it is serious. But, when it comes to a revenue neutral tax, Toomey argues that Washington politicians will “always find a way to use a new revenue stream.”

History shows Toomey is right about that.

Even this objection, however, can be assuaged by the structure of a carbon tax. The answer is to return the money to the people first.

Imagine that on January 1, 2022, short-term “carbon bonds” are issued by the federal government. Such bonds would have low interest rates because they would be backed by the proceeds of the new carbon tax. The funds raised would immediately be distributed per capita to the American people.

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The tax would go into effect on Feb. 1, 2022.  Since the checks were distributed first, the blow would be softened.  As the carbon tax revenues are collected, they are dispersed to redeem the bonds. There never is a new revenue stream — never a pot of money to tempt Washington politicians.

Then, on Jan. 1, 2023, the process repeats, with a larger bond issue supporting a higher carbon tax.  And so on.

If climate change is a threat, then it must be confronted directly, not used as an excuse for other policy choices.  The needed action is so great that it must be bipartisan. We must stop thinking that such actions are impossible and begin taking steps that will actually work.

Our future depends on it.

Capital-Star Opinion contributor Bruce Ledewitz teaches constitutional law at Duquesne University Law School in Pittsburgh. His work appears biweekly on the Capital-Star’s Commentary Page.  Listen to his podcast, “Bends Toward Justice” here.

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