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May 13, 2016

Vox Admits There Will Be No Carbon Tax Deal

May 13, 2016
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One of the typical arguments climate interventionists use to entice conservatives and libertarians is to promise that a new carbon tax will be “revenue neutral” and that such a “market solution” will allow for the elimination of top-down regulations like the EPA’s power plant rule and CAFE mileage mandates. So even if you don’t think there’s a looming global warming catastrophe—so the argument goes—you might as well go along with a carbon tax deal, because it will boost the conventional economy and have climate benefits as a cherry on top. Here at IER I’ve shown how empty those promises are (e.g. here, here, and here).

That’s why it’s so refreshing to see a new series from Vox that proves my point. Their resident climate wonk, David Roberts, is openly admitting that progressives should not think that a carbon tax is enough, and that a massive political restructuring of the economy is needed in order to avoid a climate catastrophe. Furthermore, it’s not as if Roberts is spouting crazy talk that other progressives abhor. On the contrary, Paul Krugman approvingly linked to the Vox series, and let’s not forget that in Seattle, environmental groups are very much opposed to Yoram Bauman’s revenue-neutral carbon tax plan.

Inconvenient Truths, as Vox Sees Them

Interested readers should go read all of David Roberts’ initial post, but here let me give some key excerpts. After first explaining the historical context and why so many economists think that a carbon tax is a “fire and forget” strategy to deal with the (alleged) problem of catastrophic climate change, Roberts lets the cat out of the bag:

So the new left fixation on a carbon tax is at least facially peculiar, since…the policy issues from classically neoliberal instincts. It is a way of achieving a social goal (less carbon) while minimizing interference in markets.

The impetus for minimizing interference is a deep-seated belief that attempts to meddle in markets via industrial policy, “command and control” regulations, and targeted spending tend to backfire, distorting the economy and slowing growth…

Reinforcing that skepticism is not a wise long-term strategy for climate hawks, because I can guarantee that climate change is eventually going to require activist government. No market-based policy is going to equitably resettle the residents of Miami. [David Roberts, emphasis added.]

Notice that Roberts is saying the problems of climate change will eventually require “activist government.” And the whole tenor of his piece is to say a carbon tax is fine, it’s just not the whole solution. Keep his attitude in mind whenever you see a faux-libertarian promising he can arrange a deal with progressives that will save the planet and shrink government.

To understand why Roberts is so skeptical of a carbon tax alone getting the job done, you need to see what he thinks an ultimate solution looks like. Here he tells us:

We need to reduce emissions lot — to zero, or close to it — as fast as possible. That’s going to require more than changes at the margins. It’s going to require phasing out virtually our entire installed industrial base and replacing it with new, low-carbon technologies and practices. It’s going to require an explosion of innovation and building, the likes of which hasn’t been seen since the Industrial Revolution — only much, much faster, constrained by a tight carbon budget.

And thus we see the corner into which the climate alarmists have painted themselves. Because Roberts believes that the world needs to quickly move toward (close to) zero carbon dioxide emissions, he acknowledges that any (politically feasible) carbon tax won’t be enough. Making carbon dioxide emissions more expensive will make people shift out of carbon-intensive activities, but it won’t make them cease the use of fossil fuels altogether. That’s why Roberts says we need to rely on massive government intervention:

It has been proactive government, developing and diffusing technologies, sculpting markets through regulations and investments, that has sparked industrial shifts in the past.

But it is dangerous to believe that a carbon price, or any single market-based policy, will do the work for us, rendering other efforts superfluous or unnecessary. There’s a lot of messy, frustrating work ahead, involving any number of political compromises and kludged, suboptimal policies. No way around it.

Creating a whole new world is hard. Tax or no tax, our children and their children will still be working at it. And they will need every tool they can get their hands on. [David Roberts, emphasis added.]

And thus we see that David Roberts, with the enthusiasm of someone living in a Disney movie, wants the U.S. federal government to create “a whole new world.” Anyone who thinks a supply-side carbon tax deal will work with guys like this is delusional. Just read what the progressives are actually writing publicly about the limits of a carbon tax.

Is Roberts Right About the Need for Big Government?

Roberts doesn’t elaborate in this particular piece, but he links to an earlier one where he explains why he thinks global emissions need to drop to virtually zero, and quickly, in order to avoid catastrophe. In that earlier article Roberts argues:

We recently passed 400 parts per million of CO2 in the atmosphere; the status quo will take us up to 1,000 ppm, raising global average temperature (from a pre-industrial baseline) between 3.2 and 5.4 degrees Celsius. That will mean, according to a 2012 World Bank report, “extreme heat-waves, declining global food stocks, loss of ecosystems and biodiversity, and life-threatening sea level rise,” the effects of which will be “tilted against many of the world’s poorest regions,” stalling or reversing decades of development work. “A 4°C warmer world can, and must be, avoided,” said the World Bank president.

Notice the rhetorical tricks here. Roberts first relied on the IPCC report to derive a temperature projection, but then mysteriously went to a 2012 World Bank report, and a quote from the World Bank president, to derive policy conclusions.

Well, the whole point of the IPCC publications is to summarize the peer-reviewed literature and help policymakers analyze their options. As I explain in this IER post, using the same projections of physical change that Roberts employed, but further relying on the impact analyses from the IPCC report (not a quote from a World Bank president), we cannot show that even the easier goal of limiting global temperature increases to 2 degrees Celsius makes sense. That is, the IPCC reports show that the reduction in damages from climate change would be smaller than the economic harms from limiting carbon dioxide emissions, even if those emissions are not drastically reduced as Roberts wants to do.

To be sure, the models that the IPCC report summarizes are simplistic and leave out many things, but we find ourselves in an awkward tails-the-interventionists-win, heads-the-market-economy-loses situation. People like Roberts pick and choose from the “consensus” and “settled science” of the IPCC reports as it suits their rhetorical needs. To repeat, one cannot use the analysis of the latest IPCC report to demonstrate the need for a rapid move to virtually zero emissions.

“I’m Paul Krugman, and I Endorse This Message”

Now to be fair, a critic might complain that by singling out Roberts in this article as someone who says carbon taxes aren’t enough, that I’m picking on some lone wolf extremist, who doesn’t represent the typical progressive. Yet on the contrary, Roberts is voicing the opinion of many climate change activists. Let me quote from Nobel laureate economist Paul Krugman, who surely is more sympathetic to the power of a “market solution” than the average environmentalist. Here’s what Krugman had to say when linking to Roberts’ Vox series:

David Roberts continues his carbon tax series. First he argued that such a tax isn’t the be-all and end-all of climate policy; he concludes with a discussion of the political economy, and argues that a carbon tax should be sold as part of a package, with the revenue dedicated to things like clean energy promotion.

I very much agree with the spirit, and probably with the specifics.

The common idea, among economists anyway, that a carbon tax should ideally be paired with offsetting cuts in other taxes, looks good in terms of Econ 101, and sounds like something that should help sell the thing to the public — that is, it sounds that way if you imagine that the public consists of econ grad students. In reality, revenue neutrality is an abstract concept that people will not, in general, believe in even if you try to explain it. [Paul Krugman, emphasis added.]

And there you have it. The resident climate wonk at Vox, and the most famous progressive economist on the planet, both agree that a revenue-neutral carbon tax is a dead end. They might support it in principle—it’s better than nothing—but they both admit that even with a carbon tax, they still want the government to devote huge dollars toward “clean energy investments.”

Any self-styled conservative or libertarian who thinks a carbon tax deal is possible with leftist progressives is insulting these people by refusing to take them at their word. They are quite openly telling the world that a revenue-neutral carbon tax is not going to get the job done, and that they will still lobby for Big Government programs to combat climate change.

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