Republicans Blow Their Chance to Pass a Carbon Tax

The Republican tax-reform bill, which passed Congress Wednesday, makes some big changes to the federal government. It repeals Obamacare’s health-insurance mandate, temporarily expands the child tax credit, and permanently cuts taxes on corporations and the wealthiest Americans.

What it doesn’t do: impose a new tax on carbon dioxide, the heat-trapping gas that warms the globe and acidifies the oceans.

This might not come as a surprise, as only some GOP politicians accept that global warming—which a carbon tax is meant to slow—is real. But passage of the tax bill will end a year of prodding, cajoling, and storytelling from leaders in both parties—including sitting senators and Reagan-administration alumni—that tried to force senior Republican leadership into considering some kind of plan to soften the blow of global warming.

As the GOP passes its largest legislative package in years, with no carbon price to be found, it’s clear that those rhetorical efforts have failed. Even as wildfires and hurricanes ransack the coasts, and record-breaking temperatures stack up, there’s still little appetite among the party’s leaders to address climate change through tax policy.

By rejecting a carbon tax without proposing an alternative, Republicans may have relinquished their best chance to shape climate policy this decade, continuing to cede the issue to Democrats at a national level.

Some background: A carbon tax is one of several ways that economists have proposed dealing with climate change. Right now, it costs nothing for American polluters to release carbon dioxide and other greenhouse gases into the atmosphere. Those gases trap heat and aggravate global warming, leading to hotter days, rising seas, more intense storms, and a host of other environmental problems.

A carbon tax aims to make it expensive to release carbon pollution. Under a carbon tax—also called a “carbon fee” or “price”—the federal government would charge companies for each ton of carbon dioxide they release into the atmosphere. Economists and politicians disagree about how to spend the cash raised by such a policy: Some want to rebate it directly back to Americans; others say it should be used to help out-of-work coal miners and renewable-energy development.

Economic models of the idea have made big promises. If the United States imposed a tax of $25 per ton of carbon pollution, it could raise $1.1 trillion over 10 years while preventing 12.4 billion tons of carbon emissions by 2030, according to Resources for the Future, an independent economics research group. A $50 tax could raise $1.9 trillion and prevent almost 20 billion tons.

A carbon tax of $15 would allow the United States meet its goals under the Paris Agreement, according to Resources for the Future. In those negotiations, President Obama promised that the United States would reduce its annual carbon emissions by about 1.6 billion tons by 2030.

At this time last year, Republican opposition to carbon taxes seemed like a sure thing. In May 2016, as he was securing the party’s presidential nomination, Donald Trump tweeted: “I will not support or endorse a carbon tax!” One month later, House Republicans unanimously voted for a nonbinding resolution that rejected the idea of a carbon tax.

But it seemed possible that the party’s stated goal of bringing the U.S. corporate income tax in line with other countries’ revenue schemes could have pushed them to adopt a carbon tax had things gone a little differently. Ireland, which boasts famously low corporate tax rates, also imposes a carbon price of roughly $23 per ton. France, Japan, Ukraine, and more than 35 other countries have either implemented or passed a carbon price, according to the World Bank.

After Trump’s victory and inauguration, some of the Republican Party’s elder statesmen said it was time for a conservative climate policy.

In February, a group of GOP-affiliated economists and former Reagan cabinet officials announced a plan to gut EPA regulations while imposing a a new tax of $40 per ton of carbon pollution. The proposal’s supporters included James A. Baker III and George P. Shultz, secretaries of state to Presidents George H.W. Bush and Ronald Reagan. (In the interest of disclosure: Laurene Powell Jobs, a co-owner of The Atlantic, was also a founding supporter of the plan.)

“Crazy as it may sound, this is the perfect time to enact a sensible policy to address the dangerous threat of climate change,” wrote the economists Martin Feldstein and Gregory Mankiw in The New York Times in February. “Republicans are in charge of both Congress and the White House. If they do nothing other than reverse regulations from the Obama administration, they will squander the opportunity to show the full power of the conservative canon, and its core principles of free markets, limited government, and stewardship.”

Both men brought solid Republican bonafides: Feldstein spent three years as President Reagan’s chief economic adviser; Mankiw played the same role for George W. Bush. They warned that “a repeal-only climate strategy would prove quite unpopular,” citing polling that shows six out of 10 Americans are worried about global warming.

Mitt Romney tweeted approvingly about the plan, its leaders had a press conference in D.C., and some of them even met with the White House economic adviser Gary Cohn—and that was about as far as it got. Congressional Republicans never took up the proposal. President Trump withdrew the United States from the Paris Agreement in June, and he revoked the bulk of President Obama’s climate regulations in October.

Speaking by email on Tuesday, Feldstein did not sound contrite about the work he did to support the Republican carbon-tax plan. “I wouldn’t have done it if I didn't think it might be legislation,” he said.

But the carbon tax’s failure didn’t cloud his view of the overall Republican tax bill. “On balance,” he told me, “I like it.”

Republicans were not the only ones to make a pitch. In August, Senators Brian Schatz of Hawaii and Sheldon Whitehouse of Rhode Island, both Democrats, proposed their own carbon-tax compromise. They hoped to impose a new price of $49 per ton of carbon pollution, using the trillions of dollars in new revenue to cut the top corporate income tax rate. Their plan also went nowhere.

“I don’t think there was a serious prospect of it happening, seeing as how the whole tax package is mostly a way to reward the rich—and especially campaign contributors, a significant portion of whom are in the fossil-fuel business,” says Michael Gerrard, the director of the Sabin Center for Climate Change Law at Columbia University.

“If the Republican leadership was actually serious about the deficit, a carbon tax would’ve been a marvelous opportunity,” he adds. “But obviously there were several things going against it, mostly the words ‘carbon’ and ‘tax’ ... and ‘Trump.’”

“It’s clear that much of the sales pitch for a carbon tax that has been aimed at Republicans has fallen flat,” says Joseph Majkut, a geoscientist and the director of climate policy at the Niskanen Center, a libertarian think tank that supports a carbon tax. He says it’s time to focus on “bring[ing] Republicans toward the mainstream on climate science” while still advocating for a hands-off carbon price.

Oren Cass, a senior fellow at the Manhattan Institute and the domestic policy director of Mitt Romney’s 2012 presidential campaign, said he was grateful that a carbon tax never made it into the bill.

“The long and the short of it is, I don’t think a carbon tax is either good climate policy or good fiscal policy,” he told me. “Even the pretty strong proponents of the carbon tax, they don’t try to assert that it will do anything about climate change. And if you ask them to provide any benefit estimate that they could put into analysis, they won’t—you’ll get vague talk about leadership, or how it’s going to spur innovation.”

But he also resented that the Republican tax bill in its final form increased the deficit by more than $1 trillion. “I dislike strongly that the tax cut is not revenue neutral,” he told me. “I think if you want to cut taxes, you should find other taxes you want to have to pay for it. But if you were to plot out a list of all the revenue raisers you could have, I think a carbon tax should be very far down the list.”

Why? Because carbon-dioxide emissions make for a “terrible tax base,” he said. If a carbon tax succeeded in reducing the use of fossil fuels, or forcing people to move to renewable energy, then it would erode its own tax base over time. “You’ve shifted onto an unstable tax base that you’re hoping will go away, and you’ll wind up having to raise other taxes up anyway” He also said a carbon tax imposed regressive penalties on sectors and regions already struggling in the current economy—such as energy-intensive manufacturing in the Midwest—while rewarding “higher-income coastal knowledge work.”

The massive unpopularity of the Republican plan—41 percent of Americans believe it is a “bad idea,” according to a Wall Street Journal/NBC News poll—may now give Democrats the opportunity to pass their own tax bill. Adam Looney, who led tax analysis at the U.S. Treasury Department for the last three years of the Obama administration, predicted at an event last month that the tax code would continue to change in the years to come.

“It also seems like this is not going to be the last word on tax reform. There will be a lot of changes yet to come in the tax system,” he said. “The carbon tax will always be right there on the shelf ready for the right moment.”

Gerrard, the Columbia University professor, agreed, saying that the Republican carbon-tax plan from February isn’t dead yet. “If, for instance, we have Democratic control of Congress [in 2020 or 2024], then that proposal could attract the moderate Republicans who are now keeping their heads down in the foxhole,” he told me. (Though that assumes that Democrats would reintroduce a Republican-invented plan.)

But even if the pipe dream of a bipartisan carbon tax has ended for now, the effort to bring Republicans over to the fold will never die. The Climate Solutions Caucus, a bipartisan group of House legislators, recognizes the existence of global warming and “explores policy options” to research it, slow it, and prepare for it. Membership must be kept even between Democrats and Republicans—meaning, in essence, that a Democrat can only join when they woo a Republican to hop in, too.

The caucus’s membership has swelled this year; there are now 31 House Republicans who belong to the group. Their votes alone could have nixed the GOP tax bill: Only 23 House Republicans would have needed to vote no to kill the bill (or at least force changes to it).

Carlos Curbelo, the cochair of the Climate Solutions Caucus and a Republican whose district includes the Florida Keys, seemed to exemplify the tensions faced by moderate, climate-concerned Republicans this week as he voted “yes” for the tax bill—right after calling President Trump’s refusal to recognize global warming as a national-security threat “unacceptable.”

Six Republicans in the Climate Solutions Caucus did vote against the tax bill; they made up half of all GOP House dissenters.

On Tuesday afternoon, I contacted all 31 Republicans in the Climate Solutions Caucus, asking them if they had threatened to withhold their support for the bill for its lack of a carbon tax. I also asked them whether they anticipated this Congress, led by Speaker Paul Ryan and Senate Majority Leader Mitch McConnell, ever passing climate legislation.

None of them got back to me.