The Grand Old Party has a reputation of denial and evasion in the face of climate change science and policy. But that reputation is largely based on the actions and beliefs of certain, more vocal party members, as five years of polarization and political stalemate have gripped Washington. It might be hard to believe given the current political climate, but as recently as seven years ago there were bipartisan and Republican-led efforts to reduce carbon emissions.
Now, a new proposal from a coalition of eight distinguished Republicans harkens back to a time before climate policy seemed an untouchable issue for the party. Last week, a team of seasoned conservative politicians and economists proposed a nationwide carbon tax to chief White House staff. The tax would make companies pay for their carbon pollution, and in doing so encourage them to reduce their emissions and combat climate change. In exchange, the proposal would repeal many of President Obama’s efforts to cut emissions, including the Clean Power Plan—a “repeal-and-replace” effort for climate policy.
Policy experts say that by bringing Republicans to the table the tax plan could alleviate the liberal stigma of climate action. “It’s a very positive step,” says Rachel Cleetus, climate policy manager and economist for the Union of Concerned Scientists. “It’s a very mainstream economic solution, not just a lefty solution.”
The new plan—known as the Baker-Shultz proposal after two of its authors, James Baker and George Shultz, who served as cabinet secretaries under Presidents Ronald Reagan and George H.W. Bush—is not the first federal carbon-pricing plan with conservative backing. Senator John McCain (R-AZ) co-sponsored a series of Climate Stewardship Acts in the mid-aught’s, and Senator Lindsey Graham (R-SC) co-sponsored a climate bill in 2009. Both efforts would have put a price on carbon pollution through a mechanism known as cap-and-trade. And former Representative Bob Inglis (R-SC) proposed a carbon tax in 2009, before he lost his seat in the 2010 midterm elections. As of now, the Baker-Shultz proposal has not received formal backing from current Congressional members on either side of the aisle.
All these carbon-pricing plans have a shared goal: to force carbon-emitting companies to pay for their pollution and its adverse effects. But where they disagree is how the collected monies should be spent. And indeed, that question—what do we do with the tax revenue?—is the main crux with the Baker-Shultz plan, too.
The new proposal is relatively simple: It would charge a tax of $40 for every metric ton of carbon dioxide produced, increasing the tax at a predictable rate over time. (A typical car emits about 4.7 metric tons of carbon dioxide per year.) It is a tax on U.S. industry, not on homeowners or businesses outside the fossil-fuel sector, applied to the coal mine, oil well, shipping port, or wherever fossil fuels enter our power systems. It would also tax imports from countries that don’t have their own carbon-pricing plans in place.
A tax of $40 per ton is “pretty strong,” and is a higher starting rate than most carbon tax proposals, says conservative economist Yoram Bauman, who led an effort to instate a $15-per-ton statewide carbon tax in Washington last year. The $40 figure is based on a widely used estimate of the societal costs of carbon pollution, known as the social cost of carbon. (Some scientists suggest this estimate is too conservative.) That price per ton would then increase at a steady rate over time, which serves two ends. Economists usually prefer a fixed rate change to map out future spending. And as climate change intensifies and causes more damage, emitters will have to pay more if they want to pollute.
The collected revenues would then be distributed evenly to Americans across the country; the proposal authors estimate an annual dividend of $2,000 for a family of four. Redistribution would help assuage any rising power costs for middle- and lower-income families that result from the tax, says Justin Gundlach, a fellow at Columbia University’s Sabin Center for Climate Change Law. While individuals wouldn’t be taxed themselves, polluting companies would likely increase prices to make up for money they’re losing, and that price increase would hurt the poor disproportionately.
“People who make millions a year won’t feel it the same way someone who make $20,000 a year,” Gundlach says. “A dividend softens the blow; it puts the pressure on the production and services sector, and not on the public.”
This redistribution model makes the Baker-Shultz plan a revenue-neutral carbon tax, meaning one that doesn’t generate revenues to fund new programs. It’s a model that’s often seen as a necessary compromise for bipartisan climate action because it addresses carbon emissions without increasing the budget, a common conservative sticking point.
But the approach has earned critics on the left, who think the money could be better spent. For instance, carbon tax revenues could fund efforts that help society cope with and adapt to the changing climate, Cleetus says. Or, they could be redistributed exclusively to communities that will be heavily affected by the tax, like in coal country. A tax will not only affect companies, but also hurt the workers and communities surrounding them, says analyst Uday Varadarajan from the nonpartisan Climate Policy Initiative.
“There are many, many potentially worthy needs,” Varadarajan says. “You just can’t have a bill that won’t be realistic about the regulatory change you’re enacting.”
Meanwhile, leaders on the right debate whether revenues would be best spent to lower existing costs. Senator Inglis’s 2009 carbon tax aimed to spend revenues to support Medicare and Social Security, for instance. Still others would prefer the revenues be used to cut taxes, like the corporate income tax. While a carbon tax will push corporations to change in positive ways, it could also restrict economic growth, says Catrina Rorke, energy policy director at the conservative think tank R Street Institute. Adding a carbon tax while cutting the corporate tax could be a “pretty straightforward swap,” she says.
The debate over how to spend carbon tax revenues played out live this past November, when Washington State voted on a ballot measure that would have instated the nation’s first state-wide carbon tax. The tax, proposed by Bauman, was revenue-neutral, like the Baker-Shultz proposal. But environmental groups wanted to see the money fund green initiatives, and ultimately the measure failed. (Audubon Washington supported the initiative, as birds threatened by climate change don’t have time to wait for the perfect policy.)
The Baker-Shultz proposal includes other measures that will give “strong heartburn for some environmentalists,” Bauman says. For one, it calls for the repeal of emissions regulations from the U.S. Environmental Protection Agency, including the Clean Power Plan and a series of executive orders signed by President Obama, in exchange for the carbon tax. As written, the proposal does not explain how or when this rollback would occur. It’s likely that the authors left this vague purposefully, Cleetus says, to allow for future debate and negotiation as such repeals will probably be a sticking point for many Democrats.
Emissions regulations made under the Obama Administration have received heavy criticism from President Trump and many Republican leaders, who feel that the federal government (and especially the EPA) has overstepped in regulating emissions. “We want the market to decide,” R Street’s Rorke says. The market, by favoring natural gas over coal, is slow-stepping the country towards cleaner energy sources, she says, and it will do the same in the future under a carbon tax—and better than command-and-control regulations like the Clean Power Plan.
The Baker-Shultz proposal also includes a controversial provision that would prevent lawsuits against polluting companies for the effects of their emissions. Such a provision was likely added to garner support from Congressional members with ties to the fossil fuel industry, Columbia’s Gundlach says.
Despite all of the concessions made in the proposal to appeal to Republican leaders and encourage bipartisan dialogue, it’s unlikely to succeed anytime soon. There are too many points of disagreement intrinsic to carbon pricing. And the current political atmosphere—including a former Exxon CEO as Secretary of State, oil industry defender Scott Pruitt as nominated head of the EPA, and a climate skeptic as President—suggests that climate action is not a top priority for the current administration.
“The politics are complicated; there’s no question about it,” Cleetus says. “It’s not an overnight, quick legislative deal. But the conversation has been joined.”