Representative Carlos Curbelo, a moderate Republican representing a swing district in south Florida, has just released an ambitious new carbon-tax proposal, and in doing so he has received plaudits from a number of environmentalists, including Eric Holthaus, who describes Curbelo’s bill as a long shot worth taking in an op-ed for Grist.
You might think it delusional to propose a carbon tax right now. In Canada, Prime Minister Justin Trudeau’s plans for a more comprehensive carbon-pricing system have faced intense political resistance, bolstered recently by the election of a right-of-center government in Ontario, the country’s most populous province, which is likely to be followed by another right-of-center victory in Alberta, the country’s most energy-rich province, next year. And the political prospects for carbon pricing in the U.S. are, to say the least, even less propitious than in our neighbor to the north. So why bother talking about it? To my surprise, Curbelo has come up with a pretty politically attractive proposal. For one, it abolishes the federal tax on motor-vehicle fuels. With a few tweaks, it could gain a head of steam. Alas, the tweaks I have in mind would make the proposal far less attractive to environmentalists, but we’ll get to that shortly.
I would describe myself as a carbon-tax agnostic. Oren Cass, a senior fellow at the Manhattan Institute and a regular NR contributor, has on several occasions made the case against carbon taxes (see his 2015 essay on the subject for National Affairs) and he’s done an effective job of surfacing some of the contradictions in the arguments made by the most zealous carbon-tax advocates. Nevertheless, I’ve remained open to the idea, mostly because I believe that there is a more modest case to be made for carbon taxes.
Say you believe, as I do, that, as Alex Trembath and Matthew Stepp have written, “the only way to get to dramatic cuts in global emissions is by developing significantly cheaper and better clean energy technologies,” and that carbon-pricing regimes are unlikely to yield energy breakthroughs in the absence of significant and sustained public investment. What then? Do you support carbon taxes high enough to force drastic changes in land-use patterns and consumption (that would never pass muster politically)? Or a leakproof global carbon-pricing regime that would bind the emerging economies of East and South Asia, which will be chiefly responsible for rising emissions in years to come? Good luck convincing the said Asian states to sign on or building the enforcement mechanisms that would be required to make such a regime work.
There is, however, another reason to favor a modest domestic carbon levy. No, it won’t magically transform the economy. By definition, a modest levy won’t have a huge influence on how Americans live and work. What it could do is provide a revenue source for advanced energy research. Here I am drawing on an argument Roger Pielke Jr. made in his 2010 book The Climate Fix. In it, Pielke posits an “iron law of climate policy,” which holds that “when policies focused on economic growth confront policies focused on emissions reductions, it is economic growth that will win out every time.” A low carbon tax that rises only as new low-carbon technologies prove their economic viability would sidestep the iron law while also providing a forward-looking price signal.
Enter Curbelo’s proposal, which would impose a $23-per-ton tax on carbon emissions that would rise over time, or even more if emissions reductions fail to reach targets, while eliminating the federal gas tax. First, the proposal is revenue-positive. Despite eliminating the federal gas tax, it raises more revenue for the federal government than under current law, which will no doubt alienate tax-cutters. Given rising deficits, I have no objection to raising additional revenue, especially if the funds are earmarked for public investment (including infrastructure, which is the use Curbelo has in mind). Second, Curbelo’s carbon tax is quite high — far higher in real terms than the low carbon tax that Pielke proposed in 2010. That strikes me as a mistake. To build a broader coalition, I’d suggest a much lower carbon tax, albeit one that would still rise over time. This would give Pielke’s iron law its due, and it would help ensure that the winners from Curbelo’s new bargain greatly outnumber the losers.
Now let’s turn to the bill’s proposed abolition of the federal gas tax. Why should we celebrate the death of a tax that the great Charles Krauthammer famously wanted to hike? I see a federalist case for doing so. Getting rid of the federal gas tax would allow us to shift much of the responsibility for the ongoing maintenance of highways from the federal government to state governments, which could hike their own fuel taxes or, better still, create alternatives, such as vehicle miles traveled (VMT) taxes that would do a better job as user fees as drivers embrace more fuel-efficient vehicles. Eventually, forward-looking states might learn from Australia and New Zealand and transform their Departments of Transportation into state road enterprises, as David Levinson proposed in 2013. As small-bore as this might sound, such a development would do far more to improve our transportation infrastructure than a short-term infusion of federal funds, as envisioned by Donald Trump on the campaign trail and in the early months of his presidency.
All in all, Carlos Curbelo deserves a great deal of credit for pushing a quirky, innovative approach to climate policy that has the potential to create a new coalition for environmental legislation. One wonders if he can bring more Republicans on board. As if to rebuke Curbelo, an overwhelming majority of House Republicans backed a resolution sponsored by House majority whip Steve Scalise that denounced carbon taxes as detrimental to the economy. But who knows? Perhaps a low carbon tax coupled with gas-tax abolition could sway some of them.