Carbon Taxes on the Table in US Presidential Campaign
When Wolf Blitzer asked about climate change at a CNN primary debate in Brooklyn last week, he sparked the sort of lively exchange that the world needs to hear more often: candidates for national leadership competing over who has the best plan for cutting the carbon emissions heating our planet.
At 15 minutes, the discussion was the longest and most detailed consideration of climate policy in any of the 22 presidential debates so far. The candidates sparred over the Clean Power Plan, the Paris Agreement, fossil fuel subsidies, nuclear power and fracking—familiar topics to anybody who follows the news.
One topic may have left some viewers scratching their heads: an aggressive call for a carbon tax, an approach that until now has attracted little attention in the U.S. media.
So what is a carbon tax and who supports it?
A carbon tax is a fee charged for each ton of carbon emitted into the atmosphere, for example, when burning coal or oil. Like emissions trading, it is a form of carbon pricing. WRI research, including last year’s Putting a Price on Carbon: A Handbook for U.S. Policymakers, argues that carbon pricing should be a core element for the United States’ long-term strategy for reducing emissions. A recent WRI policy brief shows how a national price on carbon would reduce emissions across key sectors of the economy through conservation, efficiency and investment in new technologies.
Media neglect notwithstanding, taxing emissions enjoys broad support from policy experts across the political spectrum. Look no further than the Pigou Club, described by its founder, Greg Mankiw, chair of the President’s Council of Economic Advisors under President George W. Bush, as “an elite group of economists and pundits with the good sense to have publicly advocated higher Pigovian taxes, such as gasoline taxes or carbon taxes.”
Pigovian taxes are named for the English economist Arthur Cecil Pigou, who famously argued that taxing things you want less of, like pollution, is preferable to taxing things you want more of, like jobs. Pigou Club members range from leftist academic Noam Chomsky to former Federal Reserve Chair Alan Greenspan. Bill Gates, Michael Bloomberg and Laura D'Andrea Tyson, chair of the President’s Council of Economic Advisors under President Bill Clinton, are also Pigou Club members.
Critics of carbon taxes sometimes argue that putting a price on carbon is politically unfeasible. Yet according to an October 2015 New Climate Economy report, some 40 countries and more than 20 cities, states and regions had or were planning to put in place some form of carbon pricing.
At the World Bank/IMF Spring Meetings last week, IMF Managing Director Christine Lagarde and World Bank President Jim Yong Kim hosted a high-level meeting on carbon pricing that drew finance ministers from around the world, CEOs and civil society leaders (including WRI’s Andrew Steer). Notably, Canada and Mexico described plans to pursue national carbon pricing policies, potentially putting the United States in a position of playing catch up with its neighbors to the north and south.
What about the impact on energy prices, poor people and adversely affected groups, such as coal miners? A new WRI brief by Noah Kaufman, Putting a Price on Carbon: Ensuring Equity, shows that just a small portion of carbon pricing revenue would be enough to ensure that poor families and coal-dependent communities would be better off under a carbon price than alternative policy pathways.
As the revenue potential of carbon taxes becomes clear, support may arise in some unexected places. Kaufman recently presented his research in coal-dependent West Virginia where listeners were keen to hear how carbon tax revenue could help them transition to a post-coal future.
Last week’s CNN debate put carbon taxes on the table for the first time in the current presidential election. Given the effectiveness of carbon pricing and the broad appeal of carbon taxes across the political spectrum, it is unlikely to be the last.
“The Obama Administration has made large and important steps in the right direction, but more action is needed,” says Sam Adams, director of WRI’s U.S. Climate Initiative. “Putting a price on carbon is a great approach for policy makers across the ideological spectrum, because emissions reductions can be achieved in a pro-growth, market-friendly way that is cost-effective, efficient and equitable, without impacting the size of government.”