Concerning the “Price Carbon Campaign/Lame Duck Initiative” meeting of center-right and ‘progressive’ pols, wonks, and activists yesterday at the American Enterprise Institute (AEI), herewith a few additional thoughts.
Today’s Greenwire quotes AEI economic policy director Kevin Hassett saying that AEI was just playing host and the meeting was just information sharing. Well, okay, let’s assume he experienced it that way, but what about the ‘progressives’ who set the agenda? They must really be into sharing, because this was their fifth meeting. Whatever the AEI folks thought the event was about, the agenda clearly outlines a strategy meeting to develop the PR/legislative campaign to promote and enact carbon taxes.
During the cap-and-trade debate in the last Congress, there was something of a consensus among economists that EPA regulation of greenhouse gases (GHGs) is the worst option, a ‘comprehensive legislative solution’ (i.e. cap-and-trade) has less economic risk, and a carbon tax is the most efficient option. But the ‘progressives’ in the “Price Carbon Campaign” are pushing for carbon taxes on top of EPA regulation.
Because the meeting was non-public and hush-hush, we may never know who said what. Here are some points the ‘conservative’ economists should have made:
(1) With unemployment still above 8%, the last thing the U.S. economy needs is a massive new tax on energy. (2) The EPA’s UMACT Rule and GHG Standard Rule each effectively bans the construction of new coal-fired power plants. (3) The GHG Standard Rule is a slippery slope that sooner or later will constrain gas-fired generation. (4) Adding carbon taxes to the GHG Rule could snuff out the shale gas revolution, especially if lifecycle analysis demonstrates that natural gas is actually as carbon intensive as coal or more so. (5) The UMACT/GHG Standard/Carbon Tax Combo could play havoc with electricity prices and reliability almost as much as Al Gore’s goofy plan to ‘repower America‘ with ‘zero carbon’ energy sources in 10 years.
In short, the only defensible reason for ‘conservative’ economists to discuss carbon taxes is as a TOTAL replacement for ALL EPA greenhouse gas regulations. But that ‘progressives’ would agree to any such swap is unimaginable. So what really is there to talk about?
Another pre-condition for any ‘conservative’ worthy of the name is that the carbon tax be ‘revenue neutral.’ That is, whatever revenues the carbon tax generates should be offset by reductions in other taxes. But how likely is it that ‘progressives’ would agree to apply Grover Norquist’s no-net-increase Taxpayer Protection Pledge to their beloved carbon tax? Again, unless ‘conservatives’ are willing to sell out, there’s no point in forming a left-right coalition on carbon taxes.
Finally, whatever policy objectives the ‘conservative’ participants might have had in mind, the timing of the AEI-hosted pow-wow was all wrong. Any GOP expression of interest in carbon taxes at this time can only muddy the election-year battle lines between what may loosely be called the pro-tax/anti-energy party and anti-tax/pro-energy party. It is also entirely unclear at this point what kinds of concessions might have to be made in 2013 to rein in the EPA. For example, a clean sweep in the November elections might make the GOP strong enough to limit the regulatory fallout from Massachusetts v. EPA without endorsing carbon taxes.