John D. Sutter visits Washington and British Columbia to learn why a carbon tax is the cheapest, smartest way to fight global warming. Why isn't it catching on?
Voters in Washington will decide this fall on a carbon tax that could have far-reaching implications, he writes
Yoram Bauman learned about the idea that would change his life, and the course of the world, as a nerdy undergraduate at Reed College.
The economics professor’s pitch was so simple he couldn’t shake it.
We should make bad stuff more expensive.
And, by doing that, make good stuff cheaper.
“I remember thinking that it was such an intellectually beautiful idea,” he told me.
It is beautiful. And, as it turns out, this old theory, which dates back at least to the 1920s and an economist named Arthur Pigou, is essential to fixing one of the world’s biggest problems.
Bauman, who now is a PhD economist and stand-up comedian (more on that later; and, yes, he does jokes on the Laffer curve), is the force behind a proposal on the ballot this fall in Washington state that would turn this old, elegant concept into what could be the country’s smartest climate change policy.
It’s thought to be the first time a proposal like this has gone before U.S. voters.
Washington’s Initiative-732 would make a bad thing – pollution – more expensive by putting a tax on each ton of carbon dioxide created by cars, power plants and the like.
More importantly, doing so would throw economic muscle behind clean energy, shorter commutes, cleaner air and smarter cities. It would use the market, not regulations, to choose winners and losers in the clean tech race. It would help Washington state, in the apt words of the initiative’s promoters, fulfill its moral responsibility to leave a livable planet for future generations. And it plans do so without wrecking the economy or growing government.
That’s because Bauman’s carbon-tax proposal aims to be “revenue neutral,” meaning all of the money the state collects from the tax on carbon will be returned to the people and businesses as tax breaks. So this shouldn’t be seen as an additional tax. It’s a different tax – a pollution tax.
It helps account for the very real social costs of burning carbon.
The fee is levied on each ton of CO2-equivalent gases that are emitted. So the tax would show up at the gas pump and also on electric bills for businesses and homes. To avoid the tax, businesses and people gradually would shift to cleaner-energy sources that don’t pollute.
Because of the accompanying tax breaks, many families would save money.
The concept has broad support from intellectuals on the right and left. Economists, environmentalists, climate scientists – even oil execs at Exxon Mobil – back the theory.
They prefer it to other methods of eliminating carbon emissions, which include passing strict environmental rules for industrial polluters or subsidizing renewable energy. The latter is seen as less economically efficient than a tax. Subsidies ask the government to pick technologies that are most deserving of support. Technologies are always evolving, though, and a carbon tax lets the market decide which climate solutions are best suited for the problem.
The tax may seem like an economic wash – taxes increases here, tax breaks there – but it’s not. Fossil fuels would get more expensive under the plan. While businesses and people, particularly those in poverty, will see tax breaks, there’s no reason to assume they would spend those savings on high-polluting activities. Using cleaner energy gets cheaper by comparison.
Plus, this isn’t just theory. It’s been proven to work.
After meeting Bauman in Seattle, I drove three hours north to British Columbia, which implemented a similar carbon tax in 2008. The economy there has grown, clean-tech jobs are booming and pollution is way down.
“The thing about a carbon tax is it’s a pure price signal,” Christy Clark, British Columbia’s premier, told me on that visit.
Nearly everyone who studies climate change agrees governments should put a price on carbon if we’re going to meet the terms of the Paris Agreement. That treaty, which more than 100 countries, including the United States, are expected to sign at a U.N. ceremony on Earth Day, sets the goal of limiting warming to 2 degrees Celsius above pre-industrial levels.
Basically, that means getting off fossil fuels this century.
A price on pollution would help accomplish that.
Yet the Washington initiative faces a steep uphill battle.
Bauman has become a political pariah in the state. Some mainstream environmental groups, including one ironically named Climate Solutions, are opposing the plan. The state has raised questions about the initiative’s claim of “revenue neutrality.” And some labor unions and business groups are either ignoring or opposing this scary-smart concept.
That’s the paradox of the proposal in Washington and carbon taxes more broadly: Why is something so simple, cost-effective and smart seen as a political nonstarter?
“That’s the puzzle,” Bauman told me. “How do you crack the code?”
No one knows exactly.
But Bauman is trying to figure it out – by November.
’I believe in the Laffer curve’
I met Yoram Bauman and his team at a church in northeast Seattle.
He founded a group called Carbon Washington to try to support I-732.
Already the group had collected the 246,372 signatures needed to get this on the ballot. Now, it was time to figure out how to sell an unpopular tax to the public. They’d gathered about 45 volunteers in a church meeting room. Maybe half of them were wearing plaid.
Bauman warmed up the audience with some jokes.
“We have serious business to attend to, but I do appear before you this morning as the world’s first and only stand-up economist,” he said. “It’s a niche market.”