Sheldon Whitehouse on the Carbon Tax

Senator Sheldon Whitehouse and three other Democrats - US Senator Brian Schatz (Hawaii), Representative Henry Waxman (California), and Representative Earl Blumenauer (Oregon) - recently unveiled a proposal for a new carbon tax meant to curb climate change.

Here's the thing, though. They haven't worked out all the details. Indeed, they're asking for public input on everything from the proper price polluters should pay (their draft includes prices of $15, $25, and $35 per ton) to the best use of the tax revenue that will result. On their list:

(1) mitigating energy costs for consumers, especially low-income consumers; (2) reducing the Federal deficit; (3) protecting jobs of workers at trade-vulnerable, energy intensive industries; (4) reducing the tax liability for individuals and businesses; and (5) investing in other activities to reduce carbon pollution and its effects.

These are, on some level, wonky obscurities. But they are, on another, some of our biggest questions of policy and politics. If climate change is the most important issue facing humanity, then whether world's largest economy acts - and how it acts - are of great consequence.

Consider the question of pricing. The federal government officially pegs the "social cost" of carbon at $21 per ton. But some economists say the real cost is up to 12 times higher. Trouble is, the higher that cost goes, the more difficult it becomes to woo Congressional Republicans, who are already deeply resistant to taking action on climate change.

These are the sorts of questions I put to Whitehouse in a recent Q&A. The interview is edited and condensed


THERE YOU GO [LAUGHS]. SO I NOTICE YOU'RE ASKING FOR PUBLIC INPUT. IS THIS SOME SORT OF OPEN-SOURCE GOVERNANCE? We want to use the release of the framework as a means to generate some public discussion of this issue, to explore who our supporters and opponents might be, and to find out what technical issues we might want to be aware of as we move on to formally drafting a piece of legislation.

THERE'S BEEN A LOT OF TALK ABOUT THE PROPER SIZE OF A CARBON TAX. WHAT'S YOUR FEEL FOR THE PIVOT POINTS IN THAT DEBATE AND WHERE DO YOU STAND, AT PRESENT? I think the existing data points are at around $20, which is where the [non-partisan Congressional Budget Office] has already scored a version of this. And so, some of the technical research has focused on that level. That is also approximately the level of the social-cost-of-carbon determination that [the Office of Management and Budget] is operating under. That said, there are considerable studies that peg the social cost of carbon well higher than that. And in our discussion [last] week with the White House, we learned that OMB is reviewing that. So it could very well be that the OMB social cost of carbon number increases, in which case that would be an argument in favor of the higher fee to offset the higher damage calculation.

DO YOU TEND TO THINK IT SHOULD BE A HIGHER NUMBER? Yeah. When you roll in the health effects, when you roll in the coastal damage effects from worse and more frequent storms. When you roll in the national security effects and add to all of that the sort of basic climatic changes that affect everything from our orchard owners growing apples in Johnston to the fishermen who count on winter flounder as a catch in Narragansett Bay, I think it ends up being a far bigger number than what is currently on the OMB books.

AS THAT NUMBER GETS HIGHER AND HIGHER, DOES IT GET HARDER AND HARDER TO PASS SOMETHING? I think as that number gets higher and higher, it's a sign of increasing awareness about the damage. And so while the higher carbon fee is, naturally, at least incrementally harder to pass than a lower carbon fee, it also signals an increasing awareness of the need for such a thing, so we're not continuing to subsidize fossil fuels at the expense of sustainable energy competitors who are put at an unfair, uneconomic disadvantage.

SOME OF THE RESEARCH SUGGESTS THAT, WHILE A $20-PER-TON CARBON TAX WOULD CUT THE USE OF CARBON-BASED FUELS IN A REAL WAY, IT WOULDN'T GET THE COUNTRY ANYWHERE CLOSE TO THE 80 PERCENT REDUCTION IN GREENHOUSE GAS EMISSIONS THE PRESIDENT HAS TARGETED FOR THE YEAR 2050. IS THIS ONE PART OF A BROADER STRATEGY AND, IF SO, WHAT DOES THAT STRATEGY ENTAIL? I haven't seen any studies that I find very convincing about what the market effect would be. You get so quickly into the problem of how do you predict innovation, that it's hard to make an assessment of where this would take you once the capacity for innovation was unleashed - [a capacity] that is now being squashed by the subsidy we provide the fossil fues and the unfair competitive advantage that they're given. That said, I do think that we need to continually press forward on other aspects of the problem - most significant to me being making sure that we're doing the scientific research to make us, the United States, the world leader in new energy technologies. The worst possible situation would be to be behind the eight-ball on this and [to have] lost the technological lead in the new energy market and [to] have to face the effects of climate change and the costs of climate change with a failed competitive position.

WHAT WOULD YOU DO WITH THE PROCEEDS OF A CARBON TAX? That's one of the questions that we ask. So I don't want to get ahead of that process. But I have expressed a strong bias that it all should be returned to the American people, rather than be revenues to the government to establish new programs or an expansion of government. That adds a whole secondary fight onto the fight for a carbon fee that I don't think we need. That's why I think the distinction between this being a carbon pollution fee that's returned to the American people, rather than a tax that supports the operations of the government, is a meaningful one. And you could go all the way from having it pay down the public debt, which is a very clear benefit to the American people - in a way, returning money to them, to doing what Alaska does and sending a check every year, based on the energy revenues. Alaska, as you know, does that for its citizens, with the pipeline and energy revenues that they get.

YOU'VE GOT A GOP-CONTROLLED HOUSE AND THE PROBLEM OF THE FILIBUSTER ON THE SENATE SIDE. WHAT'S YOUR THINKING ON THE POLITICAL PROSPECTS OF A CARBON TAX - AT PRESENT AND GOING FORWARD? I think a carbon tax that is used to provide revenue to the United States government - it has a steeper hill to climb than if it's a carbon pollution fee that gets returned to the American people. I think a lot has to do with the upcoming tax reform discussion that we're going to be getting into when these budget issues get settled in the coming months. So it's a little bit hard to pick out, in isolation, what the path to success would be. But as part of a larger tax reform program, it could be a very valuable component with benefits to Republicans.

And the related point that I would make is that we have seen rapid swings by the Republican Party on their opposition to immigration [reform] and on their opposition to gay rights - once they saw that, demographically and electorally, those were loser positions. I think it's only a matter of time before the Republican Party comes to realize that this is a demographic dead-ender of a position for them and that the increasing experiences of harm we see from carbon pollution daily undermines the false proposition that they have to stand on - that this isn't true, that this isn't real, that this isn't a problem.


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