Pricing carbon — imposing a fee for polluting the global commons — is, as probably any economist would be glad to explain, the most straightforward, cost-effective, and efficient tool for effective climate action. Impose a price on anything and markets will respond — even if not as perfectly as a homo economicus‘ response.
This rational, efficient, and effective tool remains (indefinitely?) dead-on-arrival (DOA) within the U.S. political system — even as President-Elect Joe Biden will return respect for science and intent to lead serious moves to address the climate crisis. That DOA status seems not to be well understood by even well-informed players in climate economics based on a recent conversation with several European-based analysts who found, from what I could tell, astounding my comments that while I understand the power of carbon pricing, I just didn’t see it meriting top-billing on my agenda for analysis and time.
These serious and informed people had grounds for, from a distance, their impression that the U.S. was on the cusp of action for climate pricing.
- President-Elect Biden and the Democratic Party have major plans for climate action and pricing carbon would enable funding their program(s).
- Response: Note that carbon fees (or, if you prefer with wrong framing, taxes) appear nowhere in the Biden-Harris Build Back Better plans and didn’t make an appearance in the Democratic Party platform.
- Aren’t there Republicans supportive of carbon pricing?
- Response: Please show a significant Republican politician who is advocating, anywhere other than in back rooms anonymously, carbon pricing? No matter what they might believe and understand about climate science and the reality of the climate crisis, Republican politicians fear the wrath of their base in primaries and that base will punish them (with a frenzy whipped up by fossil-fuel funded disinformation efforts) for proposing any sort of carbon pricing. To the extent that there are Republicans promoting climate pricing, such as former Representative Bob Inglis, the conspiracy-theory driven Republican base views them as RINOs (Republicans In Name Only). And, Inglis is an excellent example of paying the price — his title is “former” due to a successful primary challenge from the right driven, significantly, due to Inglis calling for the GOP to take climate seriously.
- Corporations are increasingly onboard and proposing carbon pricing, such as Exxon Mobil.
- Response: Exxon Mobil’s business model and strategy is to squeeze every last cent it can from exploiting fossil fuels for as long as possible. Exxon Mobil is a preeminent corporate strategy example of what Alex Steffen terms Predatory Delay. To the extent that Exxon Mobil gives lip service to carbon pricing, this is (a) for a price high enough to disrupt coal but not high enough to significantly dent their ONG (oil, fossil gas) revenue streams, (b) support predicated on trading off for reduced regulatory control and (even more importantly) a get-of-jail-free card for their decades of climate disinformation, and, (c) like their green-washing advertising announcements, far more public relations than substance. As an indicator of (c), try to find Exxon-Mobil lobbying expenditures making the case to (Republican) legislators about the critical importance of putting a serious price on pollution.
Somewhat reverse their logic chain … businesses will pressure Republicans to work with Democrats to move forward carbon pricing. In a rational world that makes just so much sense. However, let’s just consider “Democrats” in that equation.
- It isn’t just Build Back Better and the DNC platform where carbon fees don’t make a showing. None of the Democratic Party primary candidates had carbon pricing in their climate plans … not even the gold star plans from Governor Jay Inslee and Senator Elizabeth Warren. Many of the ‘technocrats’ involved in helping write these plans would agree that carbon pricing would be effective and efficient — they just don’t see the political support to do so and also see clearly the path for pursuing an expenditures (investment) strategy to set the United States on the road forward toward a net-zero economy with improved economic performance while addressing environmental and economic injustice.
- The most significant and aggressive vision from the progressive left, the Green New Deal, does not include carbon pricing. Many in the GND coalition view carbon pricing as regressive.
- There are significant Democratic Party politicians (starting, but not ending, with West Virginia’s Senator Joe Manchin) who will have to be brought kicking and screaming to the table for any carbon pricing. These are ‘all of the above’ Democrats who likely won’t be onboard without significant Republican and Corporate engagement, which doesn’t seem likely.
- Democratic Party politicians and political consultancy class view this as a suicidal third rail.
- President Clinton’s Btu tax was central to GOP messaging in a massive 1994 Republican electoral gain.
- The Waxman-Markey American Clean Energy Security (ACES) bill was a significant part of Tea Party messaging in the 2010 Republican electoral gain.
- Attempts to price carbon have gone down to electoral defeat when proposed, such as two attempts in Washington State that failed to pass due to (a) serious disagreements between climate action supporting communities about how to do this and (b) heavy fossil-fuel interest investment in disinformation campaigns against these proposals.
In short, when it comes to the Democratic Party and pricing carbon, there is:
- nowhere near consensus within the Party (politicians, interest groups, grass roots), and
- fear that, no matter any merits, this is a losing electoral issue.
If one can’t see a path toward robust Democratic Party support for carbon pricing, why even fantasize about Republicans?
Now, with other nations around the world increasingly pricing carbon (such as Canada’s recent call for pricing that will reach $CAN170 by 2030), the reality that nations with carbon pricing will have border adjustment fees and policies that will impact countries without carbon pricing structures, and the continued understanding of the effectiveness of pricing as a (A) tool to accelerate climate action, one should expect continued interest in, promotion of, and discussion of the potential for U.S. carbon pricing. Within the U.S. political system, with the Democratic Party (at best) split and (extremely) lukewarm on the issue and the Republican Party entrenched in denialism, an actually executable road from here to there in the near-term seems to be outside reality and, thus, in the realm of fiction.
To be clear, no direct carbon pricing doesn’t mean inaction when it comes to climate. There will be actions like reducing (ending?) fossil-fuel subsidies, regulation and oversight of polluting industries, mandating clean power introduction, clean-energy innovation and production support, and many other non-(direct) carbon pricing measures that will drive down emissions — even if some might be less technically efficient than a carbon pricing structure.
UPDATE: Shortly after this posted, Dave Roberts put out Giving up on the economy-wide carbon pricing dream, a thoughtful interview with the authors of Making Climate Policy Work (Danny Cullenward and David Victor) which puts meat on the bones of the points made above about political challenges along with discussing inefficiencies of economy-wide pricing schemes.