In Washington, policy wonks, Hill staff, lobbyists, and consultants love to follow bright, shiny objects. It’s not just a past time in the nation’s capital – it’s a way of life. And these days, the topic of a carbon tax is the bright, shiny object that’s mesmerizing many energy and environment pundits across the political spectrum.
Washington’s obsession with the carbon tax took off when it became known in July that the American Enterprise Institute (AEI) had hosted the fifth meeting in a series of “secret” discussions with environmentalists and moderate Republicans. AEI and others claimed that the meetings were simply “brainstorming” discussions, but conservatives and libertarians didn’t buy that explanation — including The Heartland Institute. After all, this wasn’t just one meeting – it was clearly a process established by a left-right coalition to backdoor a climate agenda. And that outraged conservatives who had been fighting the Obama Administration’s climate change program.
Despite hefty criticism from conservative groups, the left-right coalition talks on the carbon tax have developed into a public dialogue with AEI hosting a forum on November 13. In a recent interview with Greenwire, AEI economist Aparna Mathur tried to downplay the event as only being “an academic meeting.” And she’s right – whether she was being sincere or not.
Of course, my conservative colleagues are likely to disagree with my “optimistic” assessment, but the prospects of this left-right coalition producing a politically-viable outcome are zero. Regardless of next week’s election results, this bright, shiny object doesn’t have anything real behind it at all.
And why is that?
On its face, the carbon tax looks like a tax policy, but it’s not. The carbon tax is the implementation of climate change policy. And its context is the backdrop of more than a decade of street fighting between environmentalists and industry interests, including battles over Kyoto, cap-and-trade, and EPA regulation. That setting, which is political reality, is incredibly important to understand when calculating the likelihood of a carbon tax becoming the law of the land.
Certainly, the carbon tax talks is an excellent example of how Washington does not work, an occurrence which is more often than not.
Let’s begin by looking at the “3 Ps” associated with the related discussions – its process, politics, and policy. As in the case of any topic in Washington, the least important “P” is the actual policy, a fact that frustrates policy wonks and academics. Smart politics will always trump the most brilliant policy. And really bad process will undermine what otherwise should be excellent politics. Effective process, therefore, is the key to smart politics and instrumental to the successful formulation of any policy.
However, the carbon tax has been mired in incredibly bad process from the beginning.
Dialogues can only serve as a foundation for negotiations if participants can speak on behalf of their respective constituent interests. That’s probably common sense to most Americans, but that hasn’t been the case with the talks surrounding the carbon tax.
Since the beginning of the Obama Administration, industry, utilities, energy companies, and their political allies have faced an onslaught of moves by the Democrats, backed by their environmentalist partners, to reduce U.S. carbon emissions via legislation or by regulation under the Clean Air Act – the most recent made by EPA. These battles, which have left body parts and spilt blood across Washington, have created warrior classes on both sides. However, no veterans from the Republican side of the Climate Wars have been included in the carbon tax discussions. Instead, Republican participation has been limited to AEI and moderate groups, such as the R Street Institute and ConservAmerica. Needless to say, these groups have had little to no influence over GOP policy on climate change.
The left, however, has been represented by groups that have been impact players, such as Union of Concerned Scientists and Resources for the Future, the Brookings Institute, and Joe Aldy, a current surrogate for the Obama campaign and former key White House staffer on climate change. So why the gap in representation?
Unquestionably, the price of participation of any GOP conservative player on climate change would be far too high for environmentalist groups and Democrats – a link between a carbon tax and EPA preemption, which would require amending the Clean Air Act. Of course, the left would not support amending the Act to strip way EPA’s authority to regulate greenhouse gases. That’s a non-starter for their side.
Many economists argue that a carbon tax would be more efficient than a carbon emissions trading scheme or EPA regulation – a fact that attracts moderate Republicans. Economists are right from an academic perspective. However, we live in a world shaped by political realities and not academic fantasies, which precludes a carbon tax steep enough to cut emissions to the level supported by environmentalists. And the left knows this.
But let’s just assume for theoretical purposes that Republicans wake up one morning and support a steep carbon tax that could produce the emissions reductions sought by the left, thus negating any need for EPA regulation. What then?
Environmentalists would walk away because they would never trust tax policy over EPA regulation. From a political perspective, it would be much easier to repeal a carbon tax than an environmental regulation that can be politically spun as saving the lives of children, grandmas, and puppies. The left knows this as well.
Moreover, for the time being, environmentalists are in a more powerful position than their Republican counterparts, having defeated court challenges to the Tailoring Rule and Endangerment Finding. And in the foreseeable political future, the left will have the votes in the Senate to kill any Republican attempt to open up the Clean Air Act and remove EPA’s authority to regulate greenhouse gases. This political reality will remain regardless of the outcome of this election.
Thus, conservative Republicans should not hold their breath and wait for an invite from the Union of Concerned Scientists and other environmentalists to discuss a grand deal including EPA preemption. It won’t happen.
By dealing only with GOP moderates, environmentalists are hoping to cook up a climate change policy that will allow them to add a carbon tax on top of a series of EPA greenhouse gas regulations that are already expected to kill the prospects for new coal plants and eventually shut down existing ones. And that’s a non-starter for our side. Without conservative Republicans at the table discussing EPA preemption, there is zero chance of the GOP adopting the carbon tax as policy.
The entire exercise surrounding the carbon tax is simply a low-risk gambit by some environmentalists and Democrats to see what they can sneak by the GOP establishment and American people. In actuality, the left isn’t sincere about reaching a political compromise with Republicans. They want to have their cake and eat it too. That’s bad politics in the eyes of most Americans.
But this hasn’t been a total waste of time. Fortunately, this process has shed some light on the left’s policy motives.
First, environmentalists are not satisfied with the Obama Administration’s climate policy. And they’re not convinced that the EPA will push through regulations that will achieve the U.S. reductions in greenhouse gases that they feel are necessary to avoid abrupt climate change – at least a 80 percent reduction by 2050. Because of the emissions profile of natural gas, environmentalists know that their 2050 goal can’t be met as long as natural gas plays a dominant role in the American economy.
Whereas EPA regulations are about coal, the carbon tax is about natural gas. Environmentalists want a carbon tax to increase significantly the cost of natural gas to improve the competitiveness of renewables, such as wind and solar. But instead of pursuing a transparent approach to their opposition to natural gas – in contrast to the Sierra Club, these environmentalists aim to backdoor the attack via the tax.
Second, environmentalists now recognize that it’s impossible to negotiate an “effective” international climate treaty under the United Nations Framework Convention on Climate Change (UNFCCC). China and India will never accept binding carbon reduction targets under the United Nations – regardless of who is in the White House.
The carbon tax is now the newest global strategy in regulating carbon. Environmentalists would certainly like to use the carbon tax to leverage the imposition of carbon constraints on China and other large developing countries that want to export energy-intensive goods to the United States. Believing that the measure is WTO compliant because it applies to domestic production as well, proponents of a U.S. carbon tax naively believe that the rest of the world would accept such a policy and reduce their emissions profile in order to keep their American markets.
However, the Chinese, in particular, are much more likely to argue that the United States is trying to impose illegal carbon requirements on Chinese imports to protect U.S. manufacturers. In that scenario, the Chinese and others are likely to retaliate. A carbon tax would therefore risk a trade war in the name of climate change, possibly unraveling the liberal international economic framework created in the latter half of the 20th century.
Adding taxes on top of existing regulations to achieve an environmental objective and working to impose carbon constraints on other countries through unilateral action should be a wakeup call that something isn’t right. Environmentalists need to ask themselves why they must pursue bad process and bad politics to reinforce their policy position. If they’re truly objective, they’ll walk away with one answer – it’s really bad policy.
And Republicans – regardless of where they fit in the political spectrum – shouldn’t be part of the bad process and the bad politics that supports it.