Stories from a Blue Planet: Bob Kihslinger-June 2021
Everyone Loves the Carbon Tax
In February of 2017 two venerable old Republicans were ushered into the new President’s office to have a sit down about climate change and the best way to stop it. George Shultz and James Baker were carrying with them the blueprint for what Fortune magazine called the “most ambitious climate plan in history” – the Baker-Shultz Carbon Tax Plan. One of the Republicans' few ventures into the climate change war.
The concept of a tax on carbon production 'promised' to be the most effective action that could be taken to stop the use of fossil fuels. How did it work? Simple. Charge oil companies for every btu of carbon energy they produce and use the money to support clean energy, climate mitigation and restoration or give it back to the consumers to help cover increased energy costs. The more businesses and consumers pay for a product, the less they will use it. The tax would increase over time thus accelerating the process.
However, there was concern that it might impede the economy and have a negative effect on lower income families? The work-a-round was the carbon dividend, long proposed by the CCL (Citizens Climate Lobby). Instead of a tax that went to government coffers there would be a dividend that would go directly to taxpayers thus offsetting the increased cost of fuels to the end user. A dividend also avoided the use of the dreaded “tax” word. No one seemed concerned that people might get used to the dividend and start rooting for the oil companies.
The Baker-Shultz Plan was loved by practically everyone. All the stakeholders were on board; businesses, politicians, and organizations. “This is the broadest coalition in U.S. history to come together in support of a concrete federal climate solution, and it continues to grow.” Fortune Magazine. Even climate justice advocates were impressed with a dividend approach that would pay each American back for any increased costs caused by the tax. Lower income families might even get more than they had to spend. Believe it or not, companies like BP and Exxon could also support it if it meant that they would not be targeted by new regulations and lawsuits. Bernie Sanders and Exxon, together at last.
All the ducks were in row and the carbon tax (or dividend) was about to have its day. Getting the President on board was the last step.
Death of the Carbon Tax
The meeting with Trump and the Baker-Shultz plan garnered big headlines.
Then the whole thing died.
Republicans eventually stopped talking about it and even the staunchest of left-wing climate radicals wanted nothing to do with it. The carbon tax had vanished! The oil giants celebrated. How had the simplest, most potentially effective weapon against the emissions of fossil fuel greenhouse gases into the atmosphere disappeared?
What happened is quite clear. Donald Trump marshalled his minions against the cause of climate change. He stamped it a hoax and any Republican who said differently would pay the price. Republican Bob Inglis of South Carolina lost his Senate seat by supporting environmental legislation just like the Baker-Shultz bill. Soon, supporting an environmental bill of any kind became so toxic to Republicans that the Republicans of the Oregon State legislature literally fled in terror at the thought of having to vote on a very popular bill that would have imposed a carbon tax in the State of Oregon. No one wanted to be “primaried” out of power. The herd was stampeding.
So, Democrats had to go it alone on the carbon tax, a concept more Republican in nature. Efforts at resuscitation were fruitless and time consuming. The left became disenchanted with the notion that a dividend was an adequate social justice tool and bristled at the idea of giving oil companies a pass on regulation and litigation. The Sunrise Movement weighed in and made its demands clear pushing the Democrats further to the left on climate change. No oil – period. Let’s move on. The concept had sunk into the muck of political tribalism.
Republicans were fearful and Democrats arrogant. The carbon tax didn’t fit either scenario.
A new approach emerged for the Democrats. Couple the need to fight climate change with issues like minimum wage, climate justice, and jobs. They were encouraged as polls showed that the approach resonated with the public. However, it didn’t resonate with Republicans who vilified the Green New Deal.
Today, with the election of Joe Biden, the narrative has changed in the White House. However, while he has made significant progress in the first few months on climate issues the carbon tax lies dormant. It appears abandoned by the new administration much like a Charles Dicken’s orphan. In the meantime, the Biden infrastructure plan flounders along with the causes of climate justice, jobs, and minimum wage.
But Democrats were not alone in their desire to rein in big oil. Massive financial houses like BlackRock (and their 7 trillion in assets) unsheathed their new flaming sword against the behemoths of greenhouse gas - ESG (Environmental, Social and Governance). They threatened a “significant reallocation of capital” if corporations in their mega-portfolio were not attentive to sustainability and energy use. The crusade to strip big oil of their investors was on. Who needs a carbon tax? We’ll just starve the oil companies of the cash they need to grow and survive.
So, how is that all working?
A recent article published by the Bulletin of the Atomic Scientists indicated that “green investing” will not get the results most are hoping for. Why? It is more costly for businesses to “green up”. Tariq Fancy, former chief investment officer for sustainable investing at BlackRock, has arrived at this conclusion: The climate crisis can never be solved by today’s free markets (video). “It’s not because corporations are evil, it’s because the system is built to extract profits,”
While green investing will continue and even skyrocket, that doesn’t mean that companies that profit from fossil fuel related products and services will change their behavior. That’s because they will still be able to find financial backers even in the age of ESG. Of 250 senior executives, 64% said that operating as a net-zero carbon emissions company didn’t make economic sense for them. “Green washing” was much easier and more profitable. The bottom line still rules.
Maybe we could use this carbon tax thing after all.
The Future of a Carbon Tax/Dividend
The carbon tax may be an essential component of any plan to reduce the use of fossil fuels. We must increase the cost of oil especially as the price per barrel drops. A carbon tax does just that. It isn’t the only tool we need but it is the one sure fire way to get businesses and consumers to change their behavior. Yet to get this political football in the air we will, apparently, have to let oil companies off the hook by easing regulations and protecting them from litigation. That may be too high a price to pay for many.
So, today the headlines on environment trumpet renewable energy and scientific breakthroughs in the battle against a rapidly changing climate while the carbon tax languishes.
Is there any hope for a carbon tax/dividend going forward? Perhaps. The future of the carbon tax, like many other political conundrums, lies in the Republican Party’s ability to shake the stink of Donald Trump off their shoes and move forward. Good luck with that. It also demands a degree of pragmatism from the Democrats that they often find elusive.
On the other hand, drought in the West and floods in the East and South are alarming conservative Republicans and their constituencies. Panic can produce surprising results. Others are still working hard behind the scenes like The Citizens Climate Lobby and polls show that a solid majority of the public is receptive to the idea of a carbon tax/dividend.
As I write this, the Save Our Future Act (the 10th attempt to introduce some form of a carbon tax/dividend) is quietly making its way through Congress. It has some bipartisan support. Whether this carbon tax/dividend bill will finally produce the needed price increase on the production of fossil fuels is unknown. I wouldn’t hold your breath. We are at least 3 or 4 more devastating hurricanes away from any real legislative action.