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Politics of Global Warming
by Gar W. Lipow
Political consensus within the environmental movement is that fighting global warming requires putting a price on carbon. (For “carbon,” read “all greenhouse gases.”) Indeed the argument is nearly irrefutable; if at least some of the social costs of burning carbon are not included in its price the level of micromanagement required to lower its use would be staggering. But we need to avoid the leap from “this must be done” to “this is all or almost all we need to do.” Putting a price on carbon won’t work if not accompanied by a program of strong rule-based regulation and public initiatives.
Won’t the law of supply and demand ensure that as prices rise, demand drops? Unfortunately, due to inelasticity, we can expect carbon taxes as a primary means of reducing emission to cost 60% more [1] than if we give public initiatives and rule based regulation equal weight. Doubling energy prices only reduces use 40%, long term. Short term inelasticity is even worse. (For various reasons, emission trading results in even smaller reductions than carbon taxes. [2]) When the price tag is in the trillions of dollars, a 60% cost increase is not a trivial obstacle to feasibility.
Putting a price on carbon won’t work if not accompanied by a program of strong rule-based regulation and public initiatives.
Doesn’t political realism require a market-based approach to accommodate powerful corporations — even if carbon taxes and trading aren’t the optimum solution? Can’t clever wonkery craft a solution that bypasses politics, that (as our President puts it) “makes the pie higher,” so that right and left can come together in a glorious consensus?
Coal, oil, and gas companies will oppose any solution that phases out fossil fuels. Dead dinosaurs are what they sell; no business wants to see use of their main product gradually reduced, then eliminated.
Among US corporations, this is obvious. Global warming denial is mostly kept alive in this country by money from the big coal companies and Exxon. In Britain, BP takes a better stand — recognizing the reality of global warming, spending hundreds of millions on feel-good warm and fuzzy ads explaining how green and pro-Kyoto BP has become.
However, despite greenwashing, British Petroleum has continued to donate to organizations opposing Kyoto, to drill in environmentally sensitive spots (often at the expense of locals) — in short, to behave like an oil company. [3]
To solve global warming we are going to have to take on the dead dinosaur purveyors. I know some environmentalists think we can buy them off by letting them handle renewables. It is true that as both a hedge and for public relations purposes most of the solar technology, and a great deal of wind as well has been bought by oil companies. But getting a fraction of a percent of your business from a competing technology is not the same thing as being ready to see a drastic sales reduction in your main product. Similarly, the automobile industry (which doesn’t even like CAFÉ regulations) won’t be in any great hurry to see increased use of mass transit or a switch to the electric and plug-in hybrid cars. You’ll find similar responses in most of the energy intensive “brown” industries.
“All right,” say those who hope for a great compromise. “We are not shocked to have the oil companies and other brown industries as opponents. But more and more of the business community realizes that global warming will cost them huge sums of money. The insurance companies are already starting to get on board. We can expect banks and other financial institutions to follow. Global warming hurts agribusiness a lot; we should be able to get them into a coalition.
“Because green technology tends to be computer and electronics intensive, these industries could follow too. Offer to use emissions trading, carbon taxes and other market oriented solutions. Get them on our side and keep them there, and we can beat the oil companies and other brown industries. That’s worth adapting a less than optimum solution.”
… making energy more expensive… is the least popular green option available.
The politics of this don’t work. Inelasticity aside, taxes, emissions trading, and other “market oriented” solutions work by making energy more expensive — a lot more expensive. This is the least popular green option available. For example, a NY Times/CBS poll in February 2006 showed 15% of Americans supported an increased gas tax. [4]
The good news was that 55% supported one if it would reduce purchases of foreign oil and help fight global warming (as opposed to 75%–86% who supported higher CAFÉ standards[5]). But notice the “if.” Usually when people support a tax increase in return for results they want quick results, or a small tax. Carbon taxes yield very slow results unless they are raised very high very quickly. Given the choice of high taxes or slow results, underlying support for carbon taxes is likely closer to 15% than 55%.
This is not unique to the US. Poor nations that try to reduce fuel subsidies often face riots. In Europe, with extensive rail systems in place, governments can increase gasoline taxes — but electricity or heating fuel is another question. Much of the EU still subsidizes home heating coal — which produces worse greenhouse emission, and greater lung damage too.
There are ways around this. We can rebate green taxes to try to buy off political resistance, and in some cases increase effectiveness.
First, there is the Al Gore proposal to replace Social Security taxes with revenue from carbon taxes. The problem here is that you are replacing payroll taxes (a comparatively stable and predictable revenue stream) with carbon taxes which are designed to be a declining source, and (as part of the feedback loop) will have even more “noise” and even less predictability than SSI taxes. Proposals to use green taxes for schools and other state and local services would cause similar problems.
Peter Barnes’s Sky Trust would return carbon taxes to individuals or households on a per capita basis. This would certainly eliminate the regressivity problem. Since carbon taxes hit the rich slightly harder in absolute terms (though less as a percentage of income), most people would receive a higher rebate than they would pay in increased taxes.
But without accompanying regulations and public spending on energy, you have increased energy costs, then increased income to match it. It is a temptation to simply use it to pay your energy bill, breaking even or even coming out a few cents ahead, rather than invest in capital improvements (insulation, new refrigerators, solar heaters and such) that will pay in the long run but put you into debt now
… a pure green tax approach draws battle lines where oil companies and brown industry allied with working people and the poor oppose green industry and a middle class environmental movement.
Daphne Wysham of the Institute for Policy Studies advocates putting money from carbon taxes into a clean energy fund — spending collectively rather than relying on consumer rationality to substitute efficiency and clean energy for fossil fuels. The problem here is that you are dedicating a declining revenue stream to funding capital investments. At minimum you will need to include general funds as well. Better to simply rebate green taxes to the public, and fund public spending from income and wealth taxation.
Look at the battle you would face if this type of “great compromise” was the main path to a green economy. Brown industry fights green industry and green politicos. But that battle is for a policy that goes against the public’s instincts. Those instincts will strengthen, as it sinks in just how costly the policy will be. Nor will this occur in a vacuum.
Oil companies fighting for their lives won’t ignore an obvious opportunity. Even if the media stayed neutral and presented both sides, they would have a better case to make. Because of the extreme inefficiency of carbon taxes, they will be able to correctly present the results as disastrous for the poor, for working people, and even for many of the middle classes. In short, a pure (or nearly pure) green tax approach draws battle lines where oil companies and brown industry allied with working people and the poor oppose green industry and a middle class environmental movement. That sounds a lot like a classic Democratic Leadership Council-style political campaign — a setup for the progressive side to lose.
Carbon taxes as the sole or main means of reducing emissions are bad politics for another reason. It assumes a serious environmentalist/green-industry coalition. Think of how Hillary Clinton was betrayed by her business supporters over her health care reform package. She made major concessions to get a portion of the insurance companies on board. What happened? Insurance companies that saw her plan as a threat launched a full-bore attack against it (along, of course, with the “moderate” Republicans she counted on for support). Her insurance company supporters put zero energy into helping her; their “contribution” was refraining from putting money into the Harry and Louise ads or portraying her as the anti-Christ.
Even if green-industry supports environmentalists, what makes anyone think they will put large amounts of money or political capital into the fight? There is an excellent chance such a coalition would end up as a death match between environmentalists and brown-industry — with green-industry holding the environmentalists coats and offering moral support.
Fighting global warming requires a complete rebuilding of the infrastructure of the United States.
Assume such a coalition passes a substantial carbon tax, and not much else. How stable would the coalition prove over the 20 to 30 years that phasing out emissions require? Won’t green-industry grow tired of ever increasing green taxes which produce frustratingly slow reductions? At some point won’t they conclude that reduced emissions just are not achievable? After all, if a coalition is built around market fundamentalism, why should they conclude after 10 years of discouragingly slow progress that you need regulations and even public initiatives, instead? “Ick! ‘Command and Control!’ If business can’t do it, why imagine the (shudder) government can?”
Instead, green the US economy with a plan that relies on carbon pricing, and public initiatives, and regulation — financed by an increase in progressive taxation and war spending cuts. You can offer ordinary people a switch to renewable energy at a cost no higher than the current cost of fossil fuels — both because regulation and public initiatives will cost less than green taxes alone, and because progressive taxation makes sure much of the costs are borne by people who won’t support you anyway.
The jobs provided by a massive public works program would appeal to working and middle class people and to the union movement. The same jobs and the reduction in pollution (which tends to hit women and people of color hardest) would appeal to civil rights and the feminist movement. The Apollo Alliance is already demonstrating this can be the basis for a successful coalition[6] — even including businesses willing to move beyond market solutions.
Global warming is a corporate failure. Fixing it will require less market fundamentalism, not more.
Fighting global warming requires a complete rebuilding of the infrastructure of the United States. We are not going to win support for that large a change just for the purposes of fighting global warming. But many of the things we want to do have larger benefits and will fit other progressive agendas. Economically we can provide a jobs program with an urgent purpose and point to a major market failure which justifies increased taxes, public works, and regulations.
Physically we can point to all sorts of secondary benefits over and above reductions in greenhouse gases — reduced air pollution, cleaner water, healthier food, less toxic waste, fewer sick buildings, fewer sick children. This would certainly be a significant contribution to a progressive agenda which included single payer health care, free post-high school education, child care, increased social security, fewer wars and less war spending, various types of civil rights (women, people of color, GLBT, disability) and so on.
Global warming is a corporate failure. Fixing it will require less market fundamentalism, not more. There is no “grand compromise” between the left and the right that can fix the problem, let alone prove politically feasible. Neither the old tradition-based conservatism of Burke, nor the free market fundamentalism of Mises and Hayek, nor the March Hare conservatism of modern Republicans can offer useful insights to this problem. If you are serious about global warming, you are going to have to work to move the US and the world left.
Gar Lipow is a long-time environmental activist and sometime journalist living in Olympia, Washington.
References
1. Dermot Gately & Hillard G. Huntington, RR#: 2001–01:The Asymmetric Effects of Changes in Price and Income on Energy and Oil Demand — Economic Research Reports; January 200, 23. Tables 6 & 7. Note that elasticity of efficiency improvements is about 30%. This means that doubling the price of energy tends to reduce demand by only 30%.
2. Larry Lohmann, Carbon Trading: A Critical Conversation on Climate Change, Privatization and Power. Development Dialogue, No. 48. Sep 2006. The Dag Hammarskjöld Centre, Dec 12, 2006. http://www.thecornerhouse.org.uk/pdf/document/trouble.pdf. For something shorter than a book length PDF, try Gar Lipow, Carbon Trading: A Carbon Tax, Blindfolded and Handcuffed, with Its Shoelaces Tied Together, GristMill, Dec 2, 2006, Grist Magazine, Dec 2, 2006, http://gristmill.grist.org/story/2006/12/3/13597/2556
3. BP SourceWatch. 9/Nov 2006, Sourcewatch, Center For Media and Democracy, Jan 2, 2007, http://www.sourcewatch.org/index.php?title=BP
4. The New York Times/CBS News Poll Feb 22–26 2006, New York Times Feb 28, 2006, New York Times Publishing, Dec 2, 2006, http://www.nytimes.com/packages/pdf/national/20060228_poll_results.pdf
5. World Public Opinion: US Public Favors Raising Auto Fuel Efficiency (CAFE) Standards, World Public Opinion, 11/May 2006, Program on International Policy Attitudes, Jan 7, 2007, http://www.worldpublicopinion.org/pipa/articles/btenvironmentra/193.php
6. Apollo Alliance: About the Apollo Alliance. 2006, The Apollo Alliance for Good Jobs and Clean Energy, Jan 7, 2007, http://www.apolloalliance.org/about_the_alliance/
[5 apr 07]