Until recently, the Republican tax cuts, which President Trump signed into law at the end of 2017, have dominated headlines. I am not here to give my thoughts on the merits of their overall agenda, only to suggest that, somewhere down the line, there is one particular tax that they might actually want to instantiate.
What would a tax that Republicans could really get behind look like? First and foremost, it would be friendly to businesses big and small. As a near-corollary, it would deliver tangible economic benefits. And finally, it would have to be simple for the average American to navigate.
Well, it just so happens that such a tax exists, has support at once widespread and growing, and would benefit America’s economy tremendously. That tax is a carbon tax.
A carbon tax is a fee placed on the extraction of greenhouse gas (such as, but not limited to, carbon dioxide) emitting substances from the Earth, in proportion to how much CO2-equivalent they add to our atmosphere. It is viewed by many as an even more effective, less governmentally intrusive approach to fighting climate change than cap-and-trade proposals like the one Sen. John McCain, R-Ariz., ran for president on in 2008.
Taxing carbon provides an elegant solution to a complex problem. Planet-warming carbon emissions are involved in virtually everything we do, from driving to work, to buying produce at the supermarket (that food had to itself be transported there), to lighting up our houses when the sun goes down. By increasing the costs of goods and services in exact proportion to how much carbon is used in getting them to market, a carbon tax takes the guesswork out of emissions-reduction, and it does so by sending price signals to the consumer, who in turn gravitates towards the more efficient businesses. Pressure is therefore put on virtually all business to be innovative in the service of ameliorating a societal problem.
Just how business-friendly is this proposal? ExxonMobil, perhaps occupying the very last position on the list of organizations that many climate warriors would expect to find themselves allied with, came out along with BP, Royal Dutch Shell, and others last year in support of a carbon tax as the fiscally responsible and innovation-friendly way to fight climate change.
So individual businesses favor a carbon tax, but what should we expect from our economy as a whole? In a 2017 article in the journal Science, Hsiang et al. determined that, in the U.S. alone, a 1-degree Celsius rise can be expected to cost the country $220 billion annually. Worse yet, the cost per degree is expected to exceed linear growth as warming continues. Furthermore, prevention now will likely prove far less costly than more invasive interventions in the future.
The most intriguing aspect of a carbon tax to conservatives, however, may just be its elegance. At first mention, the idea of increasing the cost of every single good and service in society in exact proportion to how much greenhouse gas emissions went into producing it sounds comically intractable. But, in practice, it is fantastically simple. So much so that the idea of having a tax that takes a whole postcard-filling-out’s worth of effort for the average American to comply with looks downright cumbersome!
The key here is that the carbon tax would be applied upstream, wherever each fossil fuel has to pass through the narrowest bottleneck on its way to the consumer. For natural gas, for example, while there are nearly half a million wells in the U.S., all of the gas that comes out of them passes through one of roughly 500 processing plants. It is these plants that would have to pay the carbon fee. The story is similar for coal and petroleum, with the result being that fewer than 1,500 entities would be directly responsible for paying the tax, making collection uninvolved and inexpensive.
A carbon tax is extensive. With only a bare-bones legislative framework and a truly minimal collection apparatus, it is capable of disincentivizing costly greenhouse gas emitting habits across the entire economy. The approach is favored not only by environmentalists and economists, but also by big businesses who themselves own no small share of the nation’s carbon footprint. And with the national costs of climate change in the hundreds of billions annually and climbing, it is high time we self-imposed some small costs today, to avoid paying much larger ones tomorrow. So call your representatives, and let them know as much.
Daniel Palken lives in Boulder.