Four months into the Biden presidency, it is clear that the administration’s position on the carbon tax will not mesh with the hopes of the Pigou Club.
Despite the hundreds of thousands of dollars being shoveled toward the cause of a revenue-neutral tax-for-regs swap (See: Politico article below), the policy cannot muster support beyond its narrow center-right coalition (See: Examiner article below).
“McCarthy lays out case against business-backed carbon tax”
5/21/21:
For years, opposition from corporations helped prevent any carbon pricing plans from gaining traction in Congress, but now the business lobby has changed its tune. The American Petroleum Institute, U.S. Chamber of Commerce, National Association of Manufacturers and American Chemistry Council have all endorsed carbon pricing as a means of controlling emissions. And all say they are actively lobbying Congress to adopt a pricing scheme. So far, however, they have little to show for the effort.
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The Alliance for Market Solutions, which advocates for carbon pricing, this week launched a new advocacy push, seeded with a high six-figure investment from Dow Chemical and Exxon Mobil, for carbon pricing on Capitol Hill, according to its executive director Alex Flint.“This commitment by Dow and Exxon Mobil demonstrates they are serious about engaging Republicans on climate policy and on a carbon price, in particular,” Flint said. “They see climate being a real issue and that a government response is inevitable. It’s a choice between regulations and subsidies or creating a market mechanism that drives responsible climate policy.”
IER’s Take
As I wrote a month back, now is a convenient time to advocate for a carbon tax that would replace other taxes and regulations. At a time of high public pressure on climate policy, it signals you’re willing to “do something,” yet puts you on the hook for very little, since a carbon tax swap is a political needle that won’t be thread anytime soon.
The Alliance for Market Solutions backs just that sort of carbon tax. According to its site, the Alliance advocates supplanting, rather than supporting, regulations. It claims the carbon tax “gives conservatives a pro-growth policy prescription to resist an expansion of the regulatory state.”
That’s a reasonable stance. It also, however, runs bang into political opposition from the mass of the climate movement. The major players in climate policy do not see carbon taxes and emissions regulations as either/or. For them, it’s both/and. The carbon tax is “one tool in the toolbox,” as Kathy Castor (D-Fla.) put it.
The American Petroleum Institute, Dow Chemical, and Exxon Mobil know that. The Alliance for Market Solutions knows that too.
Now, one could say these outfits are making a good-faith effort to win over their opponents. Others, particularly dyed-in-the-wool climate activists, will argue that investments like Dow and Exxon Mobil made in the Alliance for Market Solutions are perfidious—meant to show concern without adding to the likelihood of real action.
“McCarthy lays out case against business-backed carbon tax”
5/19/21:
The Biden administration won’t accept a carbon price if it replaces the ability of federal agencies to directly regulate emissions, national climate adviser Gina McCarthy said, teeing up conflict with big business groups coalescing around that approach.
“If you want to put a direct price on carbon through a congressional mandate, we will not appreciate that it ties our hands in other sectors in terms of our ability to more directly regulate,” McCarthy said yesterday during remarks at a virtual forum hosted by Columbia University’s Center on Global Energy Policy.
IER’s Take
“(T)hat’s terrific,” Gina McCarthy told the Columbia audience, according to Bloomberg’s Jennifer Dlouhy, “but don’t tie that to a string of other things that we cannot do or investments we cannot make.”
And with that off-the-cuff remark, Biden’s top climate advisor douses the near-term outlook for groups like the Alliance for Market Solutions. The carbon tax checks a lot of boxes for people who are market-oriented and climate-conscious, but the tidy tax swap they envision, doesn’t get very far in Biden’s Washington.
A carbon price that comes on top of the existing thicket of emissions policies is far more likely than the version peddled at think tank luncheons.
