A Modest Proposal, Conservative Climate Change Style

By | 2017/02/08

The Wall Street Journal (who else?) ran an op-ed titled, “A Conservative Answer to Climate Change”. The good news is that George Schultz and James Baker III are taking climate change seriously enough to propose doing something about it. The bad news is that the proposal is about as close to doing nothing as is feasible.

They structure their proposal as having four pillars:

(1) A carbon tax

(2) A carbon ‘dividend’

(3) ‘Adjustment’ of foreign trade

(4) Profit! No, wait, repeal of regulations… leading to profit.

Yes, Pillar #4 is the baby-eating part of the proposal.

I will make a summary of my response and then go on at length.

A carbon tax is not a new proposal. It was not something conservatives had any enthusiasm for when Al Gore advocated the notion. But some climate change scientists back the notion of the combined Pillars 1 & 2, a carbon tax and dividend system, so while I have some reservations, it looks like those parts, if implemented well, could be a good thing for getting the ball rolling on a response to climate change. Carbon tax and dividend isn’t a solution, but rather is supposed to be an inducement to seek a solution.

Pillar 3, adjustment of foreign trade, is introduced as a way to make foreign countries pay for their backward non-response to climate change, so that our self-sacrifice in meeting the challenge of climate change doesn’t put us at a competitive disadvantage. These adjustments, though, look to me to simply be tariffs, and we know that does not directly penalize the foreign country. Our consumers would bear higher prices for the foreign imports, and the foreign country either would have reduced US demand, sell where they are not under tariff, or (the hoped-for result) they would get with the program and implement their own carbon tax. A large hole is that middle option, where as long as a substantial part of the global market is not coordinated in enforcing these tariffs, there is likely to be outlets that will take up demand. As such, I don’t think Pillar 3 is an effective policy for its intended purpose.

Pillar 4, the removal of regulations to include removing tort liabilities, is, I guess, the part of this proposal that makes it a conservative proposal. I have no respect for it; it appears to be a tacked-on element of no relevance to achieving the goal of reduced consequences of climate change, but of supreme relevance to the goal of making corporations unaccountable to the people and governments whom they harm.

OK, now for some more detail.

Change slow enough to be comfortable is way too little, too late. The proposal of the article offers no remedies, simply things that might make remedies more likely if implemented well and the corporate entities don’t simply write off the minor tax burden as an operating loss. Removing the regulations means that the write-off approach becomes more likely.

On Pillars 1 & 2: A carbon tax, as noted above, is not itself a remedy. It is supposed to offer an inducement to achieve a remedy. Wikipedia notes that carbon tax implementation can be regressive, that its weight may fall preponderantly on the economically disadvantaged. This is the more likely because for a carbon tax to be effective, it would have to be large. Starting points I’ve seen indicate somewhere between $10 and $16 per ton of carbon-based fuel. That seems arbitrarily low. The cost of remediation would appear to be scrubbing the projected weight of CO2 from the atmosphere that burning the fuel will release. That’s about $1,000/ton currently. (The cost of scrubbing exhausts instead is about 1/10th of that, which is still about 10x what the proposed starting tax amount would do.) There do appear to be some well-known climate scientists who advocate a carbon tax/dividend approach, so it has some backing from the science side for policy. I’m myself leery of laissez-faire proposals that claim that science will determine policy; that was tried with fishing stock management, with the predictable outcome that scientific recommendations for catch limits were routinely “adjusted” for “economic factors”, leading to worldwide fisheries collapses and a realization that fishing is a strong enough selector that it is driving evolutionary change (to smaller, slower-growing fish) and not just population dynamics. The notion that science will alter the quantitative part of how a carbon tax would be implemented seems a weak link in this operation. Once established, the political approach is going to be to “soften” what the science indicates; this is exactly what has happened in other places where science is supposed to modulate policy, like fishing and logging. I’m not sure how a carbon tax/dividend makes for more “certainty” in markets than a well-defined schedule like Obama’s Clean Power Plan. I know which of the two seems more “certain” to me.

Pillar 3 of the article, “adjustment for carbon content”, is simply a tariff, and like other tariffs, fails to leverage the burden onto the desired party and simply makes goods and services more costly for consumers in the entity levying the tariff.

This claim from the article on Pillar 4 requires a response: “Robust carbon taxes would also justify ending federal and state tort liability for emitters.” That does not seem to be defensible. The liability is established for those who transgress the law, and certainly cheaters evading a carbon tax are to be expected, with no limit to the potential damage they might cause, which means that effective punishment to discourage such cheating from becoming rampant is an ongoing requirement. Pillar 4 is the apparently the spoonful of sugar for conservatives so that they will go for acceptance on the other three. Wiping out accountability has been the corporate wet dream for decades now, and they hope to simply incorporate it into a “climate change” bill. I don’t know how to express how strongly I feel that giving this part a pass would be a horrible, lethal error. As in, it is likely to result in lots of painful human deaths with no recourse to go after the bastards who will be causing them.

That’s a revisit of the various pillars. I mentioned that these are almost nothing in the way of addressing climate change. How do I justify that statement?

If the atmospheric scrubbing cost I found is accurate ($1000/ton of CO2), a spreadsheet with conversions of 2016 daily oil usage, fuel to CO2, etc., shows we have a scrubbing debt of some $33.7 billion per day for our global oil fuel use. That’s not including natural gas, coal, and any other sources of combusted carbon. At the low end of carbon tax of $10/ton of fuel, that would be about $147 million per day, about 1/230th the cost of a known effective response to the problem. The proposed carbon tax is over two orders of magnitude too low. Plus, we not only have to deal with what we are adding, we need to deal with the bulk of what we have already added. The proposed carbon tax at $10/ton of fuel amounts to about $1.50/barrel cost addition. The cost of atmospheric scrubbing per barrel would be $349. If fuel costs reflected true, inclusive costs, renewable energy is already far and away a better bargain. But because we have neglected to account for the distributed damage carbon fuel use does, we falsely claim that burning carbon fuels is cheap. If cheaper remediation were available, it would change the calculation. But at the moment, carbon fuels should be outrageously pricey. The proposed carbon tax at $10/ton of fuel amounts to about a 3% tax hike when you use a 2016 average price per barrel. I think this is well below the variability one finds in pricing on this commodity. The market can readily ignore that level of taxation. In order for a carbon tax and dividend to do what it needs to, it would need to come out much closer to accounting for the remediation cost. That would actually shift the balance to prompt transitions to renewable energy sources. The proposed rates are likely to prompt only minimal and exceedingly gradual transition to renewables on that score.

For Pillar 3, it’s not just me who thinks carbon tariffs are ineffective to the purpose of punishing holdouts. A Nature blog lays out the case for ineffectiveness of tariffs. There are publications pointing out that tariff effectiveness is not expected to scale with implementation. It sounds like something is happening, but it seems optimistic at best to expect it will drive the desired outcome of enforcing compliance to a shared global goal of adopting a carbon tax. (As noted above, an effective carbon tax is another matter entirely.)

And Pillar 4 has nothing to do with addressing climate change, and everything to do with making corporate management happy (and putting the rest of us at risk without recourse).

More Politics

Stuff I am seeing on social media indicates that this WSJ op-ed is the public unveil of a strategy to implement exactly this four-pillar policy as our national policy, and this could happen quickly. I’m also seeing various people saying we ought to go ahead and support it as proposed, on the grounds that nothing better is likely to happen.

Maybe that is the case. But I think at least getting the likely drawbacks of the plan into the record is a worthwhile endeavor.

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