Yahoo Finance Democrats are blowing it on climate change
Here we go again.
Vermont Sen. Bernie Sanders has fleshed out his version of the Green New Deal, and it’s like many of his other policies: heavy-handed, extraordinarily expensive and politically implausible.
Under the Sanders plan, the government would take over much of the energy sector and become the chief seller of electricity. It would also sue and tax energy firms like Exxon and Chevron into oblivion. Government spending would rise 40%, or $1.6 trillion per year.
Maybe next millennium.
Most of the Democratic presidential contenders support some form of the Green New Deal, which would be a massive government program remaking much of the economy and costing trillions. But they’d get more traction against President Trump with a simpler, more effective way to address the global warming crisis: A carbon tax that would rise over time, making it more expensive to pollute and creating powerful incentives for private industry to develop carbon-fuel alternatives.
Earlier this year, hundreds of economists, including former Federal Reserve Chairs Janet Yellen, Ben Bernanke and Alan Greenspan, endorsed a carbon tax as “the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary.” The long list of backers includes top economists in both Democratic and Republican administrations.
A big problem with carbon pollution is that those emitting the carbon—energy-intensive industries, transporters, airlines and their passengers, drivers, home electricity users—don’t bear the cost of the pollution. Those who do bear the cost are those directly affected by global warming and other types of climate change: coastal residents (especially in poor countries), farmers losing their crops to extreme weather and future generations that will have to deal with tougher environmental conditions.
The case for a carbon tax
A carbon tax, in theory, would rectify those imbalances, while also forcing the adoption of cleaner forms of energy. The tax could be on energy producers, such as utilities, which would then pass on the higher costs to their own customers, all the way through the economic chain. Carbon taxes typically rise over time, sometimes rapidly. The idea is to raise the cost of fossil fuel emissions in a predictable way that makes alternative fuels more desirable and generates technological development of those fuels.
A carbon tax would raise costs on consumers, through higher prices for fuel, home electricity and other forms of energy. But it would also raise a lot of government revenue, which can then be rebated to consumers to offset the higher cost of energy. The cleanest arrangement would be a revenue-neutral carbon tax that returns the same aggregate amount to taxpayers that they pay in higher costs.
The main benefit of a carbon tax is that it compels the adoption of cleaner energy, as the Green New Deal would, but it lets private-sector investors and technologists determine the most effective way to do it. The profit motive would lead companies to move fast, provided the incentives were powerful enough. The Green New Deal, by contrast, would put politicians and bureaucrats in charge of economic decisions involving trillions of dollars and millions of jobs. Political meddling, perhaps on a vast scale, would be a certainty.
A carbon tax isn’t a silver-bullet solution. There could still be political meddling by politicians tempted to divert carbon-tax revenue to pet projects or favored constituencies. It also wouldn’t solve the problem of carbon pollution by poor countries that can’t afford to tax energy consumers, which are major carbon emitters. Other measures would be needed to address a climate crisis that touches literally every corner of the globe.
But there’s probably no better starting point than a carbon tax, which nine U.S. states and several other countries, including Canada, the U.K. and Australia, already have. Even China is considering a form of carbon tax, to help combat choking pollution in some of its biggest cities.
Out of step with public opinion
Most of the Democratic presidential candidates make no mention of a carbon tax in their climate policies. Front-runner Joe Biden’s climate plan says “polluters must bear the full cost of the carbon pollution they are emitting,” but it doesn’t contain the phrase “carbon tax” or anything similar. Beto O’Rourke has an elaborate alternative to the Green New Deal that calls for “legally binding emissions reductions,” but, again, doesn’t mention a carbon tax. John Delaney is a strong advocate of a carbon tax—but he’s polling at just 1% and probably won’t make the cut for the next set of prime-time debates.
This seems like a lost opportunity for Democrats. President Trump has no plan at all to address climate change, even mocking the whole concept as a hoax. Yet polls show a majority of Americans view climate change as a serious threat, and want action. Trump is out of step with public opinion.
But so are Democrats. Americans don’t want the massive disruption to their driving habits, electricity use and probably their wallets that Sanders and many of the other Dems are hawking. As with health care, Americans are open to sensible change, but not to huge new government programs that give politicians more control over their lives. Trump will brand every backer of the Green New Deal a socialist, and it will probably work.
Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman
Confidential tip line: rickjnewman@yahoo.com. Encrypted communication available. Click here to get Rick’s stories by email.
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