By Institute for Energy Research ——Bio and Archives--March 26, 2015
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Even were conservatives to eliminate federal action to address climate change, states would remain free to act. Presently, there is a cap-and-trade program in California and a regional cap-and-trade program across nine Northeastern states (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, Rhode Island, and Vermont). A federal regulatory retreat on greenhouse gas regulation would likely trigger further increases in regulation at the state level.Moreover, there is a plethora of piecemeal regulatory interventions to reduce greenhouse gas emissions at both the federal and state level. Renewable energy portfolio standards, green energy subsidies, and energy efficiency standards are but a few of the costly programs that are, in part, justified by concerns about global warming.Hence, the political question is not whether government should act to control the emission of greenhouse gases. That question has been settled for the foreseeable future. The relevant political question is how government should control greenhouse gas emissions. [Taylor, pp. 7-8, italics in original.]
Regardless, a carbon tax does not introduce this issue to the climate policy debate. The United States is already acting unilaterally to reduce greenhouse gas emissions outside of a global agreement. Our political commitment to unilateral action, as noted above, appears to be irrevocable. If the United States is going to act unilaterally, better that it do so at the least cost possible.To make sure everyone understands what Taylor is saying here: It’s not the case that conservatives should support a carbon tax out of a desire to reduce dangerous greenhouse gas emissions; Taylor admits that “it is unclear to what extent U.S. leadership might encourage other nations to act,” though he does think that nations can agree to tax themselves more readily than they have agreed to install cap-and-trade programs on themselves. Rather than arguing that a U.S. carbon tax will lead to a global agreement which will then avert dangerous climate change, instead Taylor ends this section by saying the U.S. is unilaterally cutting back emissions anyway, and so we might as well go along with his idea for a carbon tax deal. That is hardly an adequate response to those (like us here at IER) pointing out that a U.S. carbon tax doesn’t even remotely address the climate change fears that its proponents bring up, which is (supposedly) the whole reason we’re even having this discussion. Once Installed, a Carbon Tax Will Increase the Size of Government Taylor acknowledges the danger that even if there is initially an “efficient” deal that makes the new carbon tax appealing, who is to say that federal policymakers will respect the deal decades into the future? Once they see this new source of revenue, won’t federal officials increase the carbon tax well above what the economists tell them is the “optimal” level? Moreover, as [2] Here Taylor’s response to such concerns is astounding. He writes:
Many conservatives resist carbon taxes because they believe that increases in federal revenues will increase the size of government. But virtually every proposed carbon tax put on the political table includes offsetting tax cuts to ensure revenue neutrality. Revenue neutral carbon taxes will not increase the size of the federal treasury. [Taylor p. 21]Contrary to Taylor, I can think of one proposed carbon tax that is not revenue neutral—namely, the proposal from Adele Morris that Taylor endorsed five pages earlier in his paper. As Taylor explained to us, “Morris calculates that her carbon tax would bring in about $88 billion in the first year, rising to $200 billion a year after 20 years, and provide a net deficit reduction of $815 billion over that period” (p. 17). The way Morris’ carbon tax proposal reduces the deficit by $815 billion is that it constitutes a net tax increase of (at least) $695 billion.[3] Besides the fact that Taylor himself just got finished proposing a carbon tax that would not be revenue-neutral, we can look at other U.S. examples. For example, Governor Jay Inslee of Washington State has proposed a cap-and-trade program (though it is sometimes simply called a carbon tax), in order to fund a $12.2 billion transportation bill. Similarly, the state of California has used some of its cap-and-trade revenues to fund its high-speed rail project. A website devoted to the Regional Greenhouse Gas Initiative (RGGI)—a cap-and-trade program for Northeastern and mid-Atlantic states—boasts about the various “green investments” on which its funds have been spent. We also have the experience of Australia with its carbon tax—none of the promises that Taylor makes to Americans came true in that country, as this study by Australian economist Alex Robson documents. (As this blog post was being published, two news stories broke to further illustrate the danger in giving governments access to new revenues–one in New York and one in Illinois.) Later in his study Taylor brings up a different argument to soothe conservatives’ fears over opening the door to a new carbon tax:
But conservatives have less reason to fear runaway taxation than they have to fear runaway regulation. It is more difficult to increase taxes than to increase regulation because the former imposes politically visible costs while the latter imposes politically invisible costs. Public opposition to tax increases—and corresponding support for increased regulation—is well known. [Taylor p. 25]Taylor is right that the public opposes explicit tax hikes more than new regulations; this is one reason that Taylor’s proposed deal to eliminate energy regulations in exchange for a carbon tax is dangerous—regardless of what the initial deal required, the regulatory authority could simply be phased back in over time, with little public resistance. However, even though the public resists tax increases, that hardly eliminates the threat of runaway growth. For example, as I explain on pages 24-29 of this IER study, when the modern federal income tax was first introduced in 1913, it was sold as a very light tax on the super-rich, which would allow for the government to reduce tariff rates. Believe it or not, some of the supporters of the new federal income tax argued that it would restrain government spending, because the tax would fall directly on the public who would thereby be interested in economical government. Needless to say, these promises were soon dashed. The top income tax rate in 1913 was 7%. A mere five years later, because of the massive spending of World War I, the top income tax rate had risen to an astounding 77%. Ironically, the monster unleashed in 1913—the federal income tax—is now one of the chief arguments in favor of a new federal carbon tax. The people (like Taylor) assuring Americans that a new carbon tax will make government leaner—if they get their way—will look as naïve to future Americans as those pushing the income tax in 1913 look today.
Yet before the public and policy makers sign off on the Kyoto Agreement and embark on an aggressive plan to reduce greenhouse gas emissions, it would be well advised to pause for a moment and think long and hard about the wisdom of any such international accord.
As Cato Institute chairman William Niskanen has noted, for any international action to merit support, all of the following propositions must be proven true:(1) A continued increase in the emission of greenhouse gases will increase global temperature.(2) An increase in average temperature will generate more costs than benefits.(3) Emissions controls are the most efficient means to prevent an increase in global temperature.(4) Early measures to control emissions are superior to later measures.(5) Emissions controls can be effectively monitored and enforced.(6) Governments of the treaty countries will approve the necessary control measures.(7) Controlling emissions is compatible with a modern economy.So as to dispel the suspense among his readers about what to think of this list, the writer of this Cato piece then went on to say, “The case for any one of those statements is surprisingly weak. The case for a global warming treaty, which depends on the accuracy of all those statements, is shockingly weak.” Thus we see that at least as late as 1998, William Niskanen himself was quite skeptical of the case for an international climate change agreement, and wondered whether the very project of limiting emissions was “compatible with a modern economy.” That fact is awkward enough for the folks at today’s Niskanen Center, who now take it as obvious that emissions restrictions are a wise policy move. Yet what is truly awkward is that the author of the above-quoted 1998 Cato essay is…Jerry Taylor. Another of Taylor’s conservative/libertarian heroes is Milton Friedman. On page 9 of his new study, Taylor writes, “For these reasons, free market economists have long embraced emission taxes in lieu of direct regulation,” and then cites Milton and Rose Friedman’s Free to Choose in the footnote. Although he doesn’t come right out and say, “Milton Friedman would agree with me if he were alive,” Taylor certainly leads his reader to believe that. The problem with such a claim is that Friedman was talking about classic types of pollution in his book, and one of the very things under debate is whether emissions of carbon dioxide—which is colorless and odorless, which plants breathe, and which confers net external benefits to humanity through mid-century, according to at least one popular climate model—should be so casually compared to other activities that traditionally were considered pollution. We don’t know for sure what Milton Friedman would say about it—which is why his son was upset when another group claimed his father’s name when pushing a carbon tax—but we do know that Milton Friedman gave this blurb in 1998 to Thomas Gale Moore’s Climate of Fear: Why We Shouldn’t Worry About Global Warming:
This encyclopedic and even-handed survey of the evidence of global warming is a welcome corrective to the raging hysteria about the alleged dangers of global warming. Moore demonstrates conclusively that global warming is more likely to benefit than to harm the general public.(I note with irony that on the topic of global warming science and policy implications, Milton Friedman praising a Cato book in 1998 sounded a lot like Jerry Taylor in his Cato publication from 1998.) Finally we turn to libertarian economist Murray Rothbard. In a section scolding conservatives for ignoring the findings of science, Taylor quotes a passage from Rothbard who wrote in his 1973 book For a New Liberty (when discussing traditional air pollution) that “denial of the very existence of the problem is to deny science itself and to give a vital hostage to the leftist charge that defenders of capitalism ‘place property rights above human rights.’” In the passage that Taylor quotes, Rothbard goes on to say that “a defense of air pollution does not even defend property rights; on the contrary it puts these conservatives’ stamp of approval on those industrialists who are trampling upon the property rights of the mass of citizenry.” Although Taylor doesn’t explicitly say that Murray Rothbard would agree with him in the current policy dispute, that is the implicit rhetorical purpose that the Rothbard quote serves. At the very least, Taylor is implying that any conservative who disagrees with his analysis must be rejecting science and siding with the industrialists who are trampling on property rights—in this case, by emitting carbon dioxide at will. In this context, it is again very awkward for Taylor that in literally the next sentence from where Taylor ended his quote from the 1973 book, Rothbard goes on to a different target of his ire:
A second, and more sophisticated, conservative response is by such free-market economists as Milton Friedman. The Friedmanites concede the existence of air pollution but propose to meet it, not by a defense of property rights, but rather by a supposedly utilitarian “cost-benefit” calculation by government, which will then make and enforce a “social decision” on how much pollution to allow. This decision would then be enforced by licensing a given amount of pollution (the granting of “pollution rights”), by a graded scale of taxes against it, or by the taxpayers paying firms not to pollute. Not only would these proposals grant an enormous amount of bureaucratic power to government in the name of safeguarding the “free market”; they would continue to override property rights in the name of a collective decision enforced by the State. This is far from any genuine “free market”… [Murray Rothbard, For a New Liberty, pp. 260-261, bold added.]And so we see that in literally the sentence after Taylor stopped quoting from him, Murray Rothbard went on to excoriate the policy of the federal government taxing polluters (or enacting a cap-and-trade program) in the name of upholding “the free market.” For those keeping score at home, in this section we showed that William Niskanen—the namesake of the Center that Taylor runs—was very dubious about international agreements to limit carbon dioxide emissions at least in 1998; that Milton Friedman did support taxes on traditional pollution but did not seem to think carbon emissions qualified as such in 1998; and that Murray Rothbard rejected the idea of federal bureaucrats taxing and regulating even traditional pollution (so we can only imagine what Rothbard would have thought of Taylor’s proposed federal carbon tax). Beyond the awkward fact that these icons are hardly appropriate for the uses to which Taylor has put them, it should lead the neutral reader to wonder how accurately Taylor is presenting his other pieces of evidence for his case.
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