Will Budget Concerns Ever Influence Carbon Policy?

Climate change legislation died an ignominious death in the Senate earlier this year. If you’d like to understand why, check out Ryan Lizza’s autopsy of the effort in the latest New Yorker. Lizza documents how the “tripartisan” trio of John Kerry, Joe Lieberman, and Lindsey Graham came up short in their effort to craft a 60-vote coalition in the Senate. Among the bumps along the way:

  • On March 31, President Obama announced a dramatic expansion in offshore waters open for oil and natural gas drilling. In so doing, he gave away one of the sweeteners that the trio was hoping to use to attract pro-drilling senators.
  • On April 15, Fox News reported that, according to “senior administration officials”, the White House was opposing efforts by Senator Graham to increase gasoline taxes. That claim was perverse–the bill didn’t include higher gasoline taxes and Graham certainly wasn’t pushing them–but not surprisingly it created problems for Graham back home.

Lizza’s article is rich with such anecdotes, but it’s the larger picture I’d like to emphasize. Kerry, Lieberman, and Graham adopted a traditional approach to building a Senate coalition. They identified their main goal–comprehensive climate change limits–and then started negotiating with individual Senators and special interests to see how they could get to 60 votes. Nuclear power, electric utilities, oil refiners, home heating oil, even cod fisherman all make an appearance at the bargaining table. But it’s not clear that such horse-trading could ever yield 60 votes.

This failure makes me wonder whether the traditional approach will ever generate a substantive climate bill. I suppose that’s still possible, particularly if the EPA begins to implement a burdensome regulatory approach to limiting carbon emissions. That might bring affected industries running back to the table.

But I would like to suggest another strategy: Perhaps the environmental community should make common cause with the budget worrywarts. In principle, a carbon tax is a powerful two-birds-with-one-stone policy: it cuts carbon emissions and raises money to finance the government. (This is equally true of a cap-and-trade approach in which the government auctions allowances and keeps the proceeds.) Perhaps there’s a future 60-vote coalition that would favor those outcomes even if various energy interests would be opposed?

Such a coalition is unthinkable today. Opposition to energy taxes runs deep, as Senator Graham experienced. But fiscal concerns will continue to grow in coming years, and spending reductions may not be enough to get rising debts under control. If so, maybe we’ll see a day in which a partnership of the greens and the green eyeshades will take a stab at a carbon tax.

8 thoughts on “Will Budget Concerns Ever Influence Carbon Policy?”

  1. Well, let’s hope so.

    Economists have been debating cap-and-trade vs. carbon taxes for years, and on technical grounds, they mostly come down on the side of taxes. However, many, myself included, saw a political advantage to cap-and-trade. You had all those billions of dollars of permits to give out free–how could that fail to be enough to build a winning coalition?

    Well, it was not enough to build the coalition, even so many concessions were made that the final version of Waxman-Markey had lost all its teeth in the process of the negotiations. (I have a post on my blog on this topic that has a little classroom-ready slideshow attached, in case there are any other teaching economists in the room. See http://dolanecon.blogspot.com/2010/07/postmortem-on-waxman-markey-politics-of.html)

    So yes, we’re back to square one. Taxes it is, and the new coalition hope is the deficit hawk bunch. But there is one catch. Public “belief” in climate change is fading. (Why is this always spoken of in terms of “belief,” as if we were debating the Trinity or something? The question should not be “Do you believe in global warming?” but “What is your evaluation of the evidence for and against?”) That means we need one more component to get the coalition together–a really, really hot year or two that no one can doubt.

    Thanks for the link to the New Yorker article.

  2. ” In principle, a carbon tax is a powerful two-birds-with-one-stone policy: it cuts carbon emissions and raises money to finance the government. (This is equally true of a cap-and-trade approach in which the government auctions allowances…”

    Perhaps the truth lies elsewhere. I think that our representatives see that the electorate is not interested in new taxes raised to solve a problem that they think is insignificant. Perhaps they recognize that the Hobson’s choice of either new taxes or a ‘carbon-trading scheme’ that the electorate correctly recognize doesn’t produce any reductions is not the best course of action, especially because more expensive energy makes us less competitive in a global economy.

    The electorate is increasingly aware of the futility of the liberal attempts to ‘fix’ problems they create out of whole cloth with changes in the tax code. Since “climate change” (one of the several names applied to this non-problem) is a matter of considerable debate, perhaps a new tax to ‘fix’ it is bad public policy.

    Perhaps those in Washington recognize that the electorate has arrived at the conclusion that Washington has no prior claim on the wealth of the country, and that it is time to downsize the government, starting with the Department of Energy and the EPA. since the DOE has never come close to fulfilling its mandate, and the EPA, having been successful in cleaning the air, has fulfilled its mandate handsomely, and now finds itself compelled to continually find new, illusory, problems to solve.

    I think that, while the voters have come to those conclusions, few in Washington have.

    There’s an election in three weeks, however. Change is coming.

  3. For sure change may come but we still have to pay the piper (esp on the debt)…as they say in the AAMCO commercial….”you can pay us now….or you can pay us later.” We can’t keep getting something for nothiung and unfortunately there are no more free lunches folks! Go Green EyeShades!!

  4. Nice idea, increasingly being bandied about recently.

    For matters of fairness, I would far prefer an ever-rising “carbon tax” whose take would be redistributed on a count-the-noses basis (“pro rata”, a phrase I dislike, means “in favor of rats” in Spanish). However, anything that makes life easier for the ever-increasing percentage of our citizenry who are economically challenged is more and more out of favor with our society’s opinion-makers. And Climate Disruption will be so horrid that minor matters like faith, hope and charitability will be quaintly irrelevant.

    Let the take from the carbon tax go into general revenues. After all, as the New Testament informs us, “For ye have the poor always with you…” (Matthew 26:11), so let them pick up the tab.

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