NASA’s James Hansen can be a bit unhinged when he talks about climate change. Although one of the world’s more prominent climate scientists, he has a penchant for selectively presenting only the most apocalyptic global warming scenarios and adopting unduly inflammatory rhetoric, as when he compared coal-laden trains, aka “death trains,” to the railcars carrying Jews to Nazi concentration camps or suggested that energy company CEOs are guilty of “crimes against humanity.”
Yet whatever his faults, James Hansen’s central climate policy recommendation is a sound one. For years he has called for a simple and straightforward approach: A revenue-neutral carbon tax and an end to fossil energy subsidies. As he writes in today’s NT:
We need to start reducing emissions significantly, not create new ways to increase them. We should impose a gradually rising carbon fee, collected from fossil fuel companies, then distribute 100 percent of the collections to all Americans on a per-capita basis every month. The government would not get a penny. This market-based approach would stimulate innovation, jobs and economic growth, avoid enlarging government or having it pick winners or losers. Most Americans, except the heaviest energy users, would get more back than they paid in increased prices. Not only that, the reduction in oil use resulting from the carbon price would be nearly six times as great as the oil supply from the proposed pipeline from Canada, rendering the pipeline superfluous, according to economic models driven by a slowly rising carbon price.
But instead of placing a rising fee on carbon emissions to make fossil fuels pay their true costs, leveling the energy playing field, the world’s governments are forcing the public to subsidize fossil fuels with hundreds of billions of dollars per year. This encourages a frantic stampede to extract every fossil fuel through mountaintop removal, longwall mining, hydraulic fracturing, tar sands and tar shale extraction, and deep ocean and Arctic drilling.
This is the sort of policy that could reduce greenhouse gas emissions and provide incentives for innovation (particularly if combined with things like prizes) without requiring the erection of a vast new bureaucracy or imposing substantial new burdens on the economy.
Conservatives have called for shifting the tax burden from labor and wealth creation to consumption, and that is precisely what Hansen’s proposal would do. Further, as shown by the experience of other jurisdictions, implementing a carbon tax of this sort is far less complicated than trying to erect a Waxman-Markey-type cap-and-trade scheme. A basic carbon tax would also be less susceptible (on the margin) to special interest rent-seeking than a cap-and-trade scheme, particularly if emissions allowances are to be doled out to reduce the economic impact of the regime. For a variety of reasons, excise taxes tend not to be carved up by interest groups the way income tax schemes are.
I’ve also argued that a revenue-neutral carbon tax would be easier — or at least no less difficult — to enact than a cap-and-trade scheme. Both involve increasing the cost of energy, but the revenue-neutral carbon tax would do so in a simpler, less-regressive, more transparent, and less economically burdensome way, and could not be characterized (a la Waxman-Markey) as implementing expansive government control over the energy sector for the benefit of special interests. Of course, we won’t know whether this is true until political leaders have the guts to push for this sort of policy.
I wish that environmental activists would follow Hansen’s lead (rather than, say, Krugman’s) and embrace this approach as a superior alternative to increased regulation or Waxman-Markey-style cap-and-trade. Alas, many Greens seem more interested in expanding government power than reducing greenhouse gas emissions. I also wish more forward-looking Republican leaders would embrace this sort of policy and recognize how it’s consistent with limited government principles. Alas, few on the right take environmental policy seriously enough to do more than bash bureaucrats. So I guess I’ll be wishing for awhile.