Rampell: Inslee, others ignoring best carbon-fighting tool

Those presidential candidates with climate policies avoid the most-effective method: a carbon tax.

By Catherine Rampell

The Washington Post

Sen. Elizabeth Warren, D-Massachusetts, has a big, bold, multitrillion-dollar plan for addressing climate change. So does her rival Joe Biden. Likewise former Texas congressman Beto O’Rourke. And, of course, Gov. Jay Inslee, D-Washington, whose entire campaign is structured around the climate crisis.

These candidates, to their credit, have offered thoughtful solutions for addressing the most pressing policy challenge of our time. Their proposals are highly detailed and thorough, often running to dozens of pages in length.

And it’s precisely because they’re so detailed and thorough that it’s so bizarre none of them explicitly mentions the obvious, no-brainer tool for curbing carbon emissions: putting a price on carbon.

A carbon tax (or its cousin, a cap-and-trade system) is almost universally embraced by economists on both the left and the right. With good reason, too. Taxing carbon means pricing in, upfront, the implicit costs that come from using fossil fuels; especially, though not exclusively, the cost of warming our planet.

This approach has two main benefits.

The first is that it immediately nudges consumers and businesses away from purchasing carbon-intensive products, because (duh) those products get more expensive.

The second is that, over the longer run, it motivates entrepreneurs and investors to develop new green technologies, because they know they can make money as customers seek out cheaper, lower-carbon-footprint alternatives. Capital organically moves to wherever scientists and investors actually believe the most promising technologies lie, which might be ones that haven’t even been invented yet.

“Pollution pricing policies bring out great American ingenuity,” says University of Illinois economist Don Fullerton.

That’s in stark contrast to a more top-down approach, in which the government requires or subsidizes the use of specific clean technologies. These kinds of mandates can distort demand toward technologies that were promising yesterday but will be bested by other (cheaper, more efficient) technologies tomorrow; or they might just benefit the producers that have the most persuasive lobbyists and valuable voting blocs (for example: ethanol).

To be clear, the candidates’ proposals include many other good ideas. They all say we should eliminate subsidies for fossil-fuel companies. They all boost federal investment in and incentives for R&D in clean technology. This is critically necessary, especially for basic research, which private companies might not be sufficiently incentivized to undertake on their own.

But then things go off the rails.

The plans devote a lot of verbiage to talking about the magical properties of government procurement; that is, using the deep pockets of the government to purchase more energy-efficient products. Warren, for instance, analogizes her own plan, which includes a $1.5 trillion federal procurement commitment, to the industrial policy America previously undertook for the space race and our mobilization against Nazi aggression.

But in both of those historical comparisons, “The goal wasn’t to create a commercial product,” points out David Popp, a Syracuse University professor who specializes in environmental economics. “The government was the consumer.”

Just because the public sector buys more energy-efficient lightbulbs, electric cars or solar panels doesn’t mean the (much larger) private sector will, absent price incentives. Especially if we add conditions to the production of those green goods that actually increase their costs to consumers, as some of these plans do.

Warren requires that any green technologies that come out of her taxpayer-financed R&D be manufactured in America, even if they can be made more efficiently elsewhere. But other green technologies have achieved lower costs and more widespread adoption precisely because of the relatively free movement of ideas, people and production, as University of Wisconsin-Madison professor Gregory F. Nemet notes in his new book, “How Solar Energy Became Cheap.”

So why is a carbon tax MIA in these big, splashy plans that somehow found room for so many tangential provisions?

Presumably, one reason is that raising taxes is unpopular, as Inslee learned the hard way when he unsuccessfully backed a carbon tax in Washington state. Especially if that tax appears regressive, though it needn’t be.

Perhaps the biggest issue is that these candidates (and the many supporters of the well-intended Green New Deal) are trying to solve multiple social problems with the same blunt policy instrument. But by mashing two separate problems together, we become less effective — or in any event, slower — at solving either.

We get only one crack at curbing climate change. If we truly believe it’s an existential crisis, that means we don’t have the luxury of abandoning the most effective policy tool available for solving it; or piggybacking a bunch of other social objectives onto the solution.

Catherine Rampell’s email address is crampell@washpost.com. Follow her on Twitter @crampell.

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