The Carbon tax on the ballot is very right wing, and that’s OK

In an earlier post, I said that I-732, the proposal on the Washington State Ballot to create a revenue-neutral carbon tax, is “a very right-wing policy (which doesn’t necessarily make it bad)”. Since I wrote that, I bumped into the author of I-732, economist Yoram Bauman, while taking a walk in Fremont. He said something that I found interesting, that he thinks I-732 is a moderate proposal, halfway between the right and the left. I disagree, and I’ll explain why here.

I’m going to assume that the folks on the right and left are basing their ideas and policies on the best available science. That leads to an acceptance that climate change is real and not a right/left issue, just a right/wrong one. There are few people on the right in the US who actually acknowledge the best available science, but that’s a bigger problem than I’m addressing here. I also assume that people on the right want to help poor people improve their lot in life, they’re just more skeptical of the government’s ability to do that. Hence, helping the poor isn’t inherently right or left either. I can’t defend the accuracy of this assumption either.

Also, I need to be clear that by “right” I don’t mean Republican. Starting in the Reagan era the Republican party  became a subsidiary of the fossil fuel industry. I’m thinking closer to the Libertarian Ron Paul. “Right” is the philosophy the Republicans claim to follow, but don’t in practice.

By “left” I don’t mean the Democrats either, though they’re a lot closer. Bernie Sanders, a democratic socialist inspired by the Scandinavian economies, is a great example of what I mean by “left”.

What is “Right” and “Left”?

So what makes something right versus left? My definition is that when in doubt, folks on the right are more likely to trust the market, while folks on the left are more likely to trust the government. That’s not to say that people on the left don’t think the market ever does anything useful or the people on the right are anarchists, it’s just a matter of degree. There’s little argument in the US that the market should provide most people with most of their food, housing, entertainment, and consumer goods and that the government should provide protection (military, police, fire) and basic education.

On the left, we look to the government to solve problems by doing something: Medicare; public housing; homeless shelters; health inspectors; workplace safety and environmental regulations. The goal is to allow the market to solve most problems for most people, but the government intervenes in the market to protect the vulnerable. People on the right worry that these interventions in the market make it less efficient and more susceptible to corruption.

Market Failures

The thing is, the market breaks down a lot. The most famous market failure is The Tragedy of the Commons, first described by William Forster Lloyd in 1833. The concept is that if every farmer in a village has access to a common field, it will be in every individual’s best interest to graze more cattle, which will lead to overgrazing and destroy the commons, hurting everyone. Most environmental challenges are extensions of this. In thinking about climate change, the atmosphere is our commons and burning fossil fuels the cattle.

In writing about this issue in 1968 Garrett Hardin wrote that there are two solutions to this problem: privatize the land (a solution on the right) and government regulation (a solution on the left).

Why do I think the I-732 is right wing?

I don’t think there’s anyone talking about privatizing the atmosphere, so there are no solutions to reducing climate emissions that don’t involve government regulation. The traditional way we’ve approached reducing air pollution, starting with the Clean Air Act in 1970, is to regulate the emissions: lead removed from gasoline; catalytic converters added to cars; scrubbers added to smokes stakes. There was no market, just the government creating the rules we all needed to follow to clean the air. This is referred to as “Command and Control” regulation.

In 1995 the US tried a market based solution to reduce acid rain in the most cost effective way possible. A fixed amount of pollution would be allowed to be emitted, but a factory that could easily reduce pollution could sell their share of the pollution to a factory that couldn’t easily clean up their act. This successfully reduced emissions at a much lower cost than was predicted. This policy is known as cap and trade: the government creates a cap on the amount of pollution and polluters trade the rights in a way that minimizes overall costs. When someone who understands economics says that they believe in a “market-based solution”, this is an example of what they mean.  Some say they want a “market-based solution” and mean they believe the market will solve the problem without government intervention. These people are totally clueless.

Another market based solution is a Pigovian tax (like a carbon tax) that aims to include the negative cost of an activity (e.g. rising waters, dying ecosystems, drought) and include them in the market cost of an activity. By increasing the cost of of an activity, you’ll get less of it. This is also a market based solution. In cap and trade, you get a known amount of reduction. In a tax, you get a known cost, but the amount that pollution will be reduced is unknown.

So what are some non-market based (i.e. command and control) policies that can reduce carbon emission?

  • Car efficiency standards (CAFE)
  • Rebates for electric cars
  • Production Tax Credit (PTC) for Wind and Solar providers
  • Government funded insurance and research for nuclear power
  • Ethanol fuel requirement for gasoline
  • Subsidies for mass transit
  • Renewable portfolio standards, requiring a percentage of electricity to be generated by renewable sources
  • Efficiency standards for lighting, appliances, and industrial equipment
  • The government directly funding energy-efficiency or research
  • Requirements for utilities to fund energy efficiency programs

I’m a fan of most of these programs, though if we had a good market-based solution, the PTC and the renewable portfolio standards wouldn’t be necessary. When debating between which dishwashers or light bulb or refrigerator to buy most people look at the purchase price rather than the total cost of ownership. For that reason, I believe the efficiency programs would still be needed.

So I-732 just relies on the market to reduce carbon emissions, making it a right-wing solution. I’m not the only one who thinks so: the libertarian Niksanen also supports a carbon tax as a conservative policy for the same reasons. Again, that doesn’t make it bad or ineffective.

I-732 will also fund the Working Families Rebate, which will provide up to $1500 a year for 400,000 low-income working households. This is also a right-wing way to help the poor. Rather than build public housing, fund job-training programs, or increase access to childcare, the working families rebate allows the low-income families to decide in the market how to spend the money.

None of this is a reason to vote against I-732, but to appreciate the irony that a policy designed to be as right wing as possible has received almost no support from the right. We talk about the lack of support on the left, but the real story is elsewhere.

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