One of my central objectives as a policy analyst here at the Institute for Energy Research is to elevate the caliber of dialogue that surrounds energy, greenhouse gas emissions, and climate. The debate in this area—symptomatic of our broader political milieu—has too often become a stage for emotive political theater. I would argue that the left (broadly speaking) has initiated this downward spiral with its doomsday tales and its coziness with misanthropic strains of environmentalism. The right, however, is not without fault of its own, as it has failed to serve as the necessary brake on sensationalism. Instead, the right (again, broadly speaking) has formed a habit of going beyond a healthy skepticism and responding with cries of conspiracy to scientific inquiry that yields results threatening to its cherished beliefs.
These unfortunate defaults carry over into our discourse on policy. Advocates for climate action notoriously ignore the stark truth on carbon taxes: the purpose of such a tax is to increase the cost of people’s lifestyles and coerce them toward the tax advocates’ preferred behavior. Carbon tax opponents, for their part, often focus solely on costs, ignoring the essential theme of calls for a carbon tax: that we ought take on costs today in order to preclude greater costs in the future.
Rather than sensationalism and dissembling, we need evidence-based dialogue and honest argumentation founded on sound political principles. My colleague Robert Murphy is one of the best in the game at this, exemplifying the restrained commentary we so sorely need. Dr. Murphy provides some of the strongest arguments against a carbon tax when he shows the drawbacks of the tax even when accepting the climate science premises of its proponents. For my part, I think that I presented the style I’m touting well in August of this year, but not as well when I used some inflated language to describe the costs of Rep. Carlos Curbelo’s MARKET CHOICE Act.
Majkut to Forbes
On that thread, I will in this piece discuss and counter Niskanen Center Director of Climate Policy Joseph Majkut’s critique of Steve Forbes’ recent op-ed in The Hill on the Curbelo carbon tax. My motivation for doing so is that Dr. Majkut takes in his rebuttal to Forbes the sort rhetorical tone that the energy, emissions, and climate discussion merits, one of thoughtful consideration, and for that I tip my cap to him.
Two passages in particular stand out to me as appropriately sober and restrained.
- “While it is true that taxes aren’t free, just how much of a threat the MCA would be to the economic recovery is a question that requires sober analysis. The same study that Forbes cites for gas price increases includes estimates of the MCA’s effect on GDP. Over the first 10 years the carbon tax is collected, GDP is reduced by a relatively constant 0.1-0.2 percent. Importantly, the negative effect of the tax doesn’t grow in time. So, while there is a significant, but small cost, the MCA would hardly halt economic growth.”
- “Increased energy production is a part of the current economic boom, and the geopolitical implications of the United States becoming a net exporter of energy should not be dismissed.”
These passages, in my estimation, demonstrate the honesty purposeful discussion requires. Majkut acknowledges both the value to our lives that fossil energy provides and its unique capacity to weaken the hand of bad political actors in the international sphere.
McGillis to Majkut
With that established, I’ll turn now to my criticisms.
First, a matter of economic evaluation: After giving credit to the energy boom for its benefits, Majkut asserts that the boom would not be curtailed by the Curbelo carbon tax. “But the MCA, will not, as Mr. Forbes would have it, crimp the energy boom,” Majkut writes. “The energy boom came about because of improvements in development technology, which lowered the costs at which U.S. producers could supply oil and gas to the market. So while there has been a 70 percent increase in domestic oil production since 2010 (and a 30 percent increase in gas production), there has been little or no increase in domestic energy consumption over the last 8 years. The energy boom has mostly led to increased energy exports, which the MCA does not tax.”
This claim must be challenged. The very same pro-tax study that Majkut and Forbes cite informs us that the Curbelo carbon tax would reduce natural gas production by between 5 and 8 percent from business-as-usual projections by 2030. This reduction, while not catastrophic, would weaken the geopolitical progress the natural gas boom enables. To Majkut, a 5- to 8-percent reduction might not meet the threshold of “major change,” but I doubt natural gas producers will see it the same way.
A second economic angle that I think Majkut would do well to address is one of the stronger points brought forth by Mr. Forbes, who writes, “(Affordable energy) is also a major reason why capital investment is fleeing high energy costs in foreign countries and relocating here in the United States.” How much foreign investment will we forego if we adopt the Curbelo carbon tax, or one similar? And will carbon leakage negate the modest emissions reductions that Curbelo claims his bill would achieve? Relatedly, how costly will the administrative burden of border-adjustment measures grow to be? And lastly, what are the implications of imposing border adjustments in an increasingly fraught international trade environment?
It is indubitable that a carbon tax qua carbon tax will reduce productivity. Even a revenue-neutral carbon tax (which the Curbelo proposal is not, I should add) might actually increase the total distortions to the economy caused by the tax code. The question we must be frank in asking is if these reductions and distortions are justified by the costs greenhouse gas emissions are alleged to impose.
Rights and Fairness
For all the caution exhibited through much of the piece, Majkut’s brief foray into the territory of rights and fairness reads as cavalier. I’ll provide Majkut’s full paragraph, in which he is responding to an admittedly clumsy analogy drawn by Forbes, for the reader’s benefit:
“The last concern Forbes brings up is that supporting a carbon tax is opening the door to future malfeasance to liberal congresses and Presidents. The analogy he uses to demonstrate his point—that this bill is akin to homeowners being forced to post notices on their doors and online with instructions for thieves on how to disable their alarm systems—demonstrates a basic lack of understanding the entire purpose of a carbon tax. Carbon emissions are an externality. A carbon price is the homeowner’s sign saying ‘either keep out or pay me to come in.’ The violation of rights here is being perpetrated by the emitters and it is totally fair that the polluter pays.”
The statement with which Majkut concludes lacks justification. Majkut offers us no theory of rights, let alone what would constitute a violation thereof. Assuming certain premises, one can make a rational, rights-based case for climate action, as scholars like Edwin Dolan and Kevin Vallier have done. But these arguments are far from settled and require more diligence than is given here.
To expand on this topic, one glaring weakness of a Pigovian tax as a response to a hypothetical rights violation is that the tax offers no redress to the victims. As Ronald Coase pointed out half a century ago, “As it is not proposed that the proceeds of the tax should be paid to those suffering the damage, this solution is not the same as that which would force a business to pay compensation to those damaged by its actions, although economists generally do not seem to have noticed this and tend to treat the two solutions as being identical…”[i]
A carbon tax, particularly one as meager as Curbelo’s in terms of emissions impact[ii], can scarcely be considered a legitimate remedy if one truly believes carbon emissions constitute a violation of rights. A tax neither enjoins the behavior in question nor compensates those who allege they have suffered harm.
If we are to accept that emissions constitute rights violations, the action that that would necessitate would have to be global in nature and it would be profoundly more painful than the Curbelo carbon tax for those of us in North America who currently enjoy the benefits of emitting greenhouse gases at more than twice the rate of the global mean.
A Point on Politics
My final point will be not on the merit of a carbon tax, but rather on the political risks enacting a tax would entail. Independent of my position on the carbon tax, I do not gauge it as a winning issue at the federal level. Majkut disagrees—or at least wants Republicans to think he does. Here’s what he has to say on the matter in response to Forbes:
“Forbes concludes with a question addressed to the sponsors of the MCA: ‘Why would you willingly inflict bigger government, more taxes and higher energy costs on your constituents? Voters in your districts might well be asking the same question come November 6.’ It really should be no mystery as to why these Republicans would stake out a leadership position on carbon pricing. First of all, the near-term costs of doing so are outweighed by long-term benefits from emissions reductions. It is also very likely the politically smart thing to do.”
Early in his response, Majkut portrays Mr. Forbes’ op-ed as representative of mainstream conservative opposition to carbon taxes, and I think that’s correct. Forbes employs the commonsense argument that a carbon tax will increase energy costs and slow economic growth. In closing, Forbes employs a hallmark conservative argument. “Republicans have no business,” Forbes writes, “backing this kind of anti-consumer, anti-business legislation.” But while true, this argument does little to confront the core of the pro-carbon tax position, which is that despite being anti-consumer and anti-business a carbon tax is necessary to address what tax advocates see as the grave threat of anthropogenic global warming. Why Mr. Forbes chose not to even acknowledge the rationale for a carbon tax, I cannot surmise.
Likewise, however, I think Majkut should recognize the straightforward logic that Forbes delivers: making people poorer (even if slightly) in the near term is an uninviting proposition for politicians whose constituents work in carbon-intensive industries, like manufacturing, and live in less dense places, like the vast, deep red interior of the country, that require an automobile-centric lifestyle.
In response to this point, I anticipate that Majkut will show data from the Yale Climate Opinion Map, or something similar, which suggests that carbon taxes are surprisingly widely popular. What surveys like this have trouble capturing is the reaction people have when energy policies like carbon taxes bite them in the pocket book. Sure, people will answer in the affirmative when asked if we should require fossil fuel companies to pay a carbon tax. But when they begin to see the effect at the pump and on their electric bills, they often trace the hikes back to the politicians who voted in the new policies. On this I’m with Forbes—if a politician’s goal is to remain in office, it’s no wonder that carbon taxes and other policies that drive up prices remain unattractive. If you’re unconvinced, just ask Malcolm Turnbull.
Conclusion
All things considered, Majkut’s approach to energy, greenhouse gas emissions, and climate exemplifies evenhandedness. Honest people can have honest disagreements about public policy. My disagreements with Majkut pertain to his assessment of the economic impact of the Curbelo carbon tax, the rights argument surrounding emissions, and the political viability of a tax at the federal level, but I nevertheless respect the coherence with which he presents his argument and his contribution to the marketplace of ideas. By appealing to readers’ capacities to reason through these issues, rather than to their susceptibility to sensationalism or conspiricism, we can elevate our discourse. And we can say with collegiality: may the best argument win.
[i] Those readers interested in more on the Coasean approach can find it here.
[ii] Analysis by Columbia University projects the MARKET CHOICE Act would reduce emissions to 30–40 percent below 2005 levels by 2030 while current policy will reduce emissions to 19–26 percent below 2005 levels by 2030.
