November 2, 2015

Ed Gillespie is Dead-Wrong about Carbon Taxes



Last week, the former chairman of the Republican National Committee—Ed Gillespie—warned that “disconcerting chatter among some conservative-leaning academics and pundits in support of a carbon tax” threatens to doom any Republican chance of winning the White House next year. If the Republican nominee were to be seduced by that chatter, he warns, Republicans can kiss Colorado and Virginia goodbye, two energy-producing states they desperately need, he says, to win the 2016 presidential election.

While it’s too early to definitively handicap the electoral impact of a Republican call for carbon taxation (we have, after all, no political data points to go by), it’s not too early to handicap the electoral impact of the position forwarded by most of the Republican presidential candidates today: pretending that climate change is an open scientific question while offering cheap fossil fuel as the holy grail of federal policy. That position mightpace Gillespie—turn oil, gas, and coal states permanently red. But it does so at the cost of the rest of the electoral map.

I say might turn energy-producing states red because that Republican argument failed to deliver many of those states in the last election. Mitt Romney, you may recall, campaigned hard against Barrack Obama’s alleged “war on fossil fuels” and promised to rewrite the Clean Air Act to take greenhouse gas regulations out of EPAs hands. Yet Romney still lost Virginia and Colorado … along with Pennsylvania, Ohio, and Illinois—all energy-producing states.

And 2012 was no anomaly. The popular vote in three of the last four presidential elections has gone to candidates who campaigned forcefully to move America beyond fossil fuels.

This shouldn’t surprise. Public opinion surveys find overwhelming support for federal policies to address global warming. Consider just a few of the more recent surveys.

In a report released last month, the Gerald R. Ford School for Public Policy at the University of Michigan and the Institute of Public Opinion at Muhlenberg College found that:

  • A record 70% of those surveyed agreed that there is solid evidence that global warming is happening, 65% are “very confident” in that belief, and only 16% believed that no such evidence exists.
  • While only 47% of Republicans believed last year there was solid evidence of global warming, 56% of Republicans surveyed this fall now believe that’s the case.

In a report from the University of Texas at Austin last month:

  • A record 76% of those surveyed believe that “global climate change is occurring.” That includes 59% of Republicans, 74% of independents, and 81% of libertarians (!)
  • Only 14% of those surveyed believe that global warming is not occurring.
  • When asked Would you be more or less likely to vote for a presidential candidate who supports imposing a carbon tax?—“more likely” beats out “less likely” in all age groups save for those 65 or older and did so as a whole amongst Democrats, independents, and libertarians.

In a report conducted last August by Echelon Insights, North Star Opinion Research, and Public Opinion Strategies:

  • 68% of those surveyed—including 53% of Republicans—agreed that We should require power plants to pay a fee for the carbon they emit, and return that fee directly to consumers as a tax credit to offset a seven percent increase in utility bills.
  • 60% of those surveyed said they were more likely to support a candidate who said Climate change is an urgent challenge and therefore we need to strengthen the EPA’s restrictions on carbon emissions and significantly subsidize clean energy.
  • Only 36% were more likely to support the candidate who said The science around climate change is not at all clear, so the government should focus on other, more important issues.

In a report released earlier this year by the Yale Project on Climate Change Communication:

  • 70% of those surveyed—including 56% of Republicans and even 54% of self-identified conservative Republicans—supported regulating carbon dioxide, the primary greenhouse gas, as a pollutant.
  • 64% of those surveyed supported set[ting] strict carbon dioxide emission limits on existing coal-fired power plants to reduce global warming and public health. Power plants would have to reduce their emissions and/or invest in renewable energy and energy efficiency.

Now, it’s important to keep in mind that, despite what most pollsters might tell you, the public has very few firm, informed opinions on public policy. Surveys like these, however, tell us how likely the public is to respond favorably to various issue frames. And the evidence suggests that voters are more open to carbon taxation than the present Republican position that climate change is no big deal and requires little federal response.

That’s particularly the case if a Republican nominee were to lead on the issue. Academic studies find that the single biggest impact on changes in public opinion regarding global warming is what Republican officeholders are saying about it. Democratic support for climate action is fairly steady. It is Republican opinion that is subject to movement, and Republicans (like Democrats) tend to follow the lead of their political champions.

The rise of Donald Trump demonstrates that observation in spades. In a recent survey:

  • 16% of Republicans supported universal health care when told that Barrack Obama supports it, but when told that Donald Trump embraces that position, support increased to 44%.
  • 20% of Republicans supported the Iranian nuclear agreement when told that John Kerry supports it, but when told that Donald Trump embraces the deal, support increased to 53%.
  • 57% of Republicans supported protecting Social Security from budget cuts when told that Hillary Clinton embraces that position, but when told that Donald Trump embraces that position, support increased to 74%.
  • 15% of Republicans supported affirmative action when told that Barrack Obama supports it, but when Republicans were told that Donald Trump embraces affirmative action, support increased to 33%.

Public opinion is not static. Were leading Republicans to agree with Democrats that aggressive climate action is warranted and that carbon pricing is the best means towards that end, voters would rally to that position.

Gillespie’s substantive arguments against carbon taxation are even weaker. He complains, for instance, that carbon taxes would “insert political appointees squarely into the marketplace.” But it would do just the opposite. Carbon taxes harness price signals to do the job presently done by bureaucrats. The conservative arguments for a carbon tax are all premised on the idea that the tax would replace existing regulations. Hence, carbon taxes would remove political appointees from the marketplace.

Or consider Gillespie’s charge that carbon taxes would be the equivalent of a new 10% income tax. Alas, he ignores the fact that most conservatives—and even many liberal Democrats—support using some (if not most) of the carbon tax revenues to cut other taxes. Now, to what extent net household tax burdens go up or down depends upon program design, and there are many proposed program designs in play. But to provide one illustrative example, if 70% of the carbon tax revenues were simply rebated back to the American people in equal, lump-sum payments, half of all households—and most of those whose income is below the mean—would be made whole for both the direct and indirect costs of the tax.

Gillespie–like many–ignores the fact that we already have a carbon tax. That’s because the plethora of expensive regulations and tax preferences to address greenhouse gas emissions at both the federal and state level impose a very real tax on fossil fuels by increasing their price. This regulatory tax on fossil fuels, however, is invisible, uneven, and inefficient, and the revenues aren’t going to the government, where they might be sent back to taxpayers. The carbon tax conservatives are forwarding replaces the existing tax with a more efficient one that reduces economic costs. Further, they offer the prospect of sending tax revenues back to the American people in the form of offsetting tax cuts or lump-sum rebates.

Rather than go in this direction, however, Gillespie argues that “A better route to reducing carbon emissions runs through technological innovations that are adopted uniformly by all industries in all countries,” and that “A carbon tax that raises the cost of traditional fuels does not get us there.”

Here, Gillespie is flat-wrong.

That technological breakthroughs are vital prerequisites for affordable greenhouse gas mitigation is well understood by all. But the sort of modest, piece-meal efforts that are popular with politicians like Gillespie (popular because they are not very costly and not particularly economically disruptive)—or even Manhattan-Project style super-efforts—are unlikely to do the job. As noted in the most recent report of the IPCC (Working Group III, Chapter 6, Section 6.5.1 for those of you who would like to follow along at home):

The [economic] modeling literature broadly indicates that relying solely on innovation policies would not be sufficient to stabilize GHG concentrations (see e.g. Bosetti et al., 2011; Kalkuhl et al., 2013), as evidenced by the fact that although most reference scenarios assume substantial technological change, none of them lead to emissions reductions on the level of those needed to bring CO2eq concentrations to levels such as 650 ppm CO2eq or below by 2100 (see Section 6.3.2). Climate policies such as carbon pricing could induce significant technological change, provided the policy commitment is credible, long term, and sufficiently strong (Popp, 2006a; Bosetti et al., 2011), while at the same time contributing to emission reductions.

While the literature suggests that marrying R&D subsidies with carbon pricing might reduce total mitigation costs by 10-30%, few economists believe that the former, as Gillespie would have us believe, is a good substitute for the latter.

The bottom line is that the present Republican message on global warming—that it ranges somewhere between a leftist hoax and a murky, open question and is of little consequence regardless—is political poison outside of the rapidly diminishing ranks of Tea Party activists. If Republicans wish to better compete for votes outside of those precincts, they need to come up with a serious proposal to address climate change. Right now, they don’t have one. Perhaps the newly formed working group of Senate Republicans led by Kelly Ayotte (NH) will produce an agenda of consequence. A carbon tax—harnessing markets to do the job rather than regulators—addresses both the environmental and political challenges at hand.