For decades, the U.S. government has sought to curb carbon pollution and mandate energy efficiency standards through a host of regulations and tax subsidies. Today, conservatives and economists alike recognize that taxes are the most efficient solution to addressing climate change. But is a carbon tax a conservative solution?
Below are three key conservative principles of a carbon tax.
It is market-based. Most approaches to addressing climate change include burdensome government regulations or expensive subsidies. Both solutions distort the marketplace, which inevitably stifles innovation and hampers economic growth.
A carbon tax, however, addresses a clear market failure. Currently, the environmental cost of climate change is not taken into account when products and services are produced. These social costs are real, and putting a price on carbon emissions makes those costs more transparent, allowing the market to adjust accordingly.
A carbon tax would also directly affect far fewer economic factors and keep government officials from interfering with private-sector decision-making.
It is pro-economic growth. The net effective of a more efficient tax system is economic growth, which is a priority for Republican elected officials as well as voters. A revenue-neutral carbon tax, unlike subsidies or regulations, can make taxes more efficient by using the revenue collected to reduce other, more distortionary taxes that hinder economic growth, such as the income tax. Environmental regulations on the other hand burden job creators and middle-class families, which reduces economic growth.
An EY analysis found that there are significant economic benefits from a revenue-neutral, emissions-equivalent carbon tax when income tax rates are reduced. In particular, if the revenues are used to reduce the corporate income tax rate, the U.S. economy would be 2.1 percent larger, or $2,940 per household.
It could help us meet our financial obligations. The national debt has long been a concern of conservatives who understand that it will need to either be paid or, consequently, passed on to the next generation. With a carbon tax we could reduce taxes on earnings and income while maintaining enough federal revenues to meet our obligations, ensuring that future generations are prosperous.
Addressing climate change is not just critical to the economy, but also to the future of the Republican Party. A report we released last year showed that nearly 9 out of 10 millennials believe climate change is happening, and the vast majority of those believe that change is being driven by human activity.
As public opinion and demographics on the issue of climate change shift, Republican policymakers must identify responsible solutions while preserving the conservative values of the party. Thankfully, a carbon tax is a climate change solution that Republicans would not have to sacrifice their conservative principles to support.