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Best Opportunity. Best Lost Opportunity? - Dialogues on Canadian Energy skip to Main Content

Best Opportunity. Best Lost Opportunity?

  • Carbon pricing  has had long standing academic support as the  most economically  efficient policy instrument for dealing with the risk of  global climate change. https://www.brookings.edu/research/controlling-carbon-emissions-from-u-s-power-plants-how-a-tradable-performance-standard-compares-to-a-carbon-tax/
  • The relative merits of carbon taxes merits  versus cap and trade to actually are well documented and broadly accepted. The basic attributes of carbon taxes  such transparency, uniformity of application, revenue neutrality , explicit specification of politically sanctioned stringency ,administrative efficiency  and an inherent capacity for gradualism are readily evident and compelling.  https://www.brookings.edu/blog/brookings-now/2016/05/04/9-things-you-should-know-about-the-carbon-tax-2/
  • Yet, within the United States, actual carbon tax regimes are essentially non-existent.
  • Yet, various  states persist with inefficient cap and trade schemes, at significant administrative cost  while generating  relatively low carbon prices,  compared to current estimates of the social cost of carbon. http://www.ucsusa.org/global_warming/solutions/reduce-emissions/regional-cap-and-trade.html#.WPOug9LyvIU
  • And of course the legacy of the Obama administration is one of imperfect regulation, via prohibitions, mandates , subsidies  and explicit carbon reduction targets,  in lieu of carbon pricing. http://www.huffingtonpost.com/entry/obamas-climate-change-legacy-is-impressive-imperfect_us_585d5f21e4b04d7df167cf33
  • Nevertheless,  Barrack Obama did profess a fundamental preference for carbon taxes, https://www.scientificamerican.com/article/obama-calls-carbon-price-better-than-regulations/ And at the other end of the political spectrum  Rex Tillerson, during his tenure as CEO at ExxonMobil, sanctioned carbon taxes becoming  its explicit preferred policy instrument, albeit with various significant caveats. https://www.bloomberg.com/news/articles/2017-02-23/exxon-s-new-chief-endorses-carbon-tax-to-combat-climate-change
  • But we know that  the Obama administration did not try to progress carbon taxes, in their own right,  or as a component of some broader tax reform initiative. But for  that matter neither did ExxonMobil ,or any of the hydrocarbon elites,  ever go  beyond advocacy of carbon taxes  as high concept to support specific terms that could seriously considered in  the US  legislative process.
  • As for the UN process to deal with climate change , its current formulation is to generate an array of essentially voluntary  national carbon reduction commitments for 2030, but entirely unintegrated by any carbon pricing framework. http://theconversation.com/the-paris-climate-agreement-needs-coordinated-carbon-prices-to-be-successful-60781
  • And as for the ideologues of left and right on the climate debate. Neither is a champion of carbon taxes, more often hostile opponent to their serious consideration.  One because of  basic preference for government command and control, and for the other embracing climate  denialism that blights any consideration of  rational  carbon policy thttp://www.vox.com/2016/4/22/11446232/price-on-carbon-fine, http://www.heritage.org/environment/report/consequences-paris-protocol-devastating-economic-costs-essentially-zero
  • All of which brings us to the current opportunity.  The Trump administration’s desire to progress tax reform, and how that can ever be done anywhere close to fiscally responsibly  with out some  substantial incremental  tax revenue.  Clearly,   carbon taxes can significantly provide that revenue.  http://www.rff.org/files/sharepoint/WorkImages/Download/RFF-IB-12-03.pdf  Moreover, they should be  the preferred carbon policy instrument in any event. If not now  for carbon taxes, then when?
  • To date, there has been no legislative initiative for  carbon taxes as the pre-eminent carbon policy instrument in the United States that has had the support of the Congressional leadership of either party. Moreover, none of the hydrocarbon elites have ever promoted a tangible legislative proposal for carbon taxes.  And even less surprisingly, none on the left; inclusive of the elites of the US environmental movement, have done so either.  One can acknowledge that some Democratic Senators and Congressman have introduced  carbon tax proposals, most well known  being that by Sen Whitehouse of Rhode Island,https://www.whitehouse.senate.gov/news/release/sens-whitehouse-and-schatz-unveil-carbon-fee-proposal-at-american-enterprise-institute , albeit as  complementary carbon policy instrument , with all of the existing array of regulations and mandates at state and federal levels intact. And no explicit  linkage to tax reform.  But such initiatives had no material legislative consequence, at least to date.
  • In early 2017, George Schultz, Henry Paulsen etal tabled a  significant proposal for a pre-eminent carbon tax, with the explicit  condition that all other regulations for dealing with the climate risk would end. https://www.washingtonpost.com/news/energy-environment/wp/2017/02/07/senior-republican-leaders-propose-replacing-obamas-climate-plans-with-a-carbon-tax/?utm_term=.5b34d984c253  Unfortunately, their proposal was framed more as stand alone proposal with the proceeds of the tax collection being returned to  every Americans as a “green dividend” rather  than in the context of fundamental tax reform,  carbon emitters pay setting off taxes from the economically productive.
  • Their  proposal received no public support from the environmental movement or any other political elements on the left As for reaction from the right, the usual elements rejected it out of hand as it would represent an additional unneeded cost on Americans, based on presumably their view that climate change was a non-issue , undeserving of any policy response. http://www.heritage.org/environment/report/consequences-paris-protocol-devastating-economic-costs-essentially-zero?_ga=1.30343737.722820593.1492450156#_ftn5
  • So where is the Trump administration on  carbon taxes generally as part of tax reform?  Recent reports suggest that the Trump continues to consider it as a basic option , perhaps in conjunction with some  national sales tax , and in lieu of any dubious border adjustment tax alternative. http://www.chicagotribune.com/news/nationworld/politics/ct-trump-tax-code-overhaul-20170404-story.html
  • So at this point, where are the hydrocarbon elites in this debate?  Who would dispute that this opportunity if the best ever available to materially  progress carbon taxes on terms that would make it pre-eminent that thereby deconstruct a  web of existing and future carbon regulation and mandates?  Moreover, if the US were to actually proceed on a national carbon tax it generate  credibility to face the UN process with  a real fundamental  alternative to re-invent its current course from that laid at Paris in 2015 , essentially disingenuous commitments coupled with promises of foreign aid.  When if not now to advance a policy instrument that could provide transparency, uniformity , gradualism and administrative efficiency?  To not advocate with real terms at this time would only leave one to deduce that the hydrocarbons elites are basically disingenuous about ever dealing with the risk of climate change with tangible policy. Implicitly climate denialists?
  • Serious advocacy of revenue neutral carbon taxes would also materially compromise  the intellectual credibility of those of on left , but especially those Democratic legislators who have long advocated for them.  The Trump administration is committed to deconstructing the regulatory legacy of Obama in any case.  Seizing on this opportunity to advance carbon taxes at least would fill the void with a policy instrument that has  the potential of bi-partisan support.  At the very least, by accepting the concept of carbon taxes, the Democrats gain some leverage to negotiate what  existing regulations and tax preferences may persist.  And even more importantly, to contribute to the debate on what terms the  tax  will change over time.  Putting  carbon taxes in play forces the Democrats to come terms with whether they are prepared to compromise or simply insist on endless regulated constraints on how the economy will be l allowed to use and produce energy regardless of the cost of such intervention, as most of American militants would insist on. http://www.vox.com/2016/4/22/11446232/price-on-carbon-fine  One would expect those  hydrocarbon elites to identify with all of that.
  • I believe that for  the Trump administration to have the political leverage  to have  carbon taxes at the center of tax reform ,and its  carbon policy for that matter,  those hydrocarbon elites will have to come forward vigorously and publicly to support the concept, table terms they would actually support and   insist  on  the Congress seizing this opportunity in genuine bi-partisanship. No sector has more impact than those hydrocarbon elites in creating the legitimacy of carbon taxes, and thereby blunt those elements of right wing intelligentsia and their congressional operatives that  prefer outright  climate denialism and no functional carbon policy.
  • For those elites, better to perfect the terms of revenue neutrality, stringency and pre-eminence  and progress needed tax reform.  Otherwise settle for ever more gridlock , growing deficits, and a void on policy that the left may eventually fill at much higher cost and economic dysfunction.