Last year, the progressive left unveiled a $95 trillion green new deal to address climate change. Thankfully, no one on the right took it seriously.
More recently, Democrats on the House Select Committee on the Climate Crisis unveiled “Solving the Climate Crisis: The Congressional Action Plan for a Clean Energy Economy and a Healthy and Just America,” a 500-page partisan staff report outlining goals and strategies to address climate change.
Republicans who want to mitigate greenhouse gas emissions and tackle adaptation should take this seriously, as it is a road map for Democrats should they maintain the House majority and win control of the Senate and White House this fall.
The Democrats’ plan is problematic for several reasons. In short, it is a wish list of executive actions, subsidies, and regulations. The authors assume that a future president will use “his or her existing statutory authorities to take executive action to cut carbon pollution and strengthen federal climate resilience policy”—a tactic that has failed in the past. For example, the executive action by President Obama to enact the Clean Power Plan (CPP) was not implemented, but it prompted lawsuits from 26 states and organizations. A review of the litigation timeline from introduction in 2014 to 2017 should be a warning for lawmakers who think they can dictate terms of energy markets through executive fiat. Similarly, attempts by the Trump Administration to replace CPP with the Affordable Clean Energy rule was a windfall for lawyers and continues to delay meaningful emissions reduction. And no matter when it happens, no one should be surprised that if Democrats take control of Congress and the White House that a CPP 2.0 will likely be more ambitious then the first and more costly as command-and-control advocates feel the need to make up for lost time.
The plan also mandates the establishment of a clean energy standard, an innocuous legislative term that dictates how businesses must operate. While this approach has been established in many states, often with support from Republicans and Democrats, it is very costly and hides the true price tag from consumers. In fact, research conducted by economists at the University of Chicago found that renewable requirements not only increased prices but that the effective price per ton of carbon dioxide emissions reduced ranges from $130 to $460 per ton—unnecessarily high costs.
Finally, the plan is peppered with subsidies for favored technologies, such as wind and solar energy, batteries, and electric vehicles. Yet problems with subsidies are well known. Once established, they are nearly impossible to phase out. Not to mention, rulemaking often results in awkward or delayed implementation. (Think the ballyhooed Section 45Q carbon capture credit, which from passage to rulemaking took more than two years). And of course the next Solyndra gaming the system should be considered.
Extreme examples aside, according to the Congressional Research Service, in 2017 the value of federal tax-related subsidies for the energy sector was estimated to be nearly $18 billion. With the American Reinvestment and Recovery Act clean energy initiatives costing over $90 billion, former Vice President Joe Biden now proposes spending $2 trillion over four years to subsidize clean energy technologies, which will substantially increase existing debt and deficits.
So far, no Republican has embraced the Democrats’ plan, which is good. Republicans recognize that it ignores the most basic market-based principles, does not install commonsense permitting reforms, and is not a template for lasting policy. However, if they do not realize that there is an alternative, they risk supporting watered-down versions of Democratic proposals under a banner of “innovation” through expanded subsidies.
Republicans need an effective alternative. It is time for them to fall in love with a carbon tax. But not a carbon tax that just raises prices, one that insists that the proposal is offset by cuts to other taxes that are a drag to the economy—conservatives’ age-old goal of reducing taxes on income.
This can set the stage for something that has eluded Republicans for many years: bold, necessary pro-growth tax reform. Why tax income, savings, and investments when we can use a carbon tax to offset the cost of making business expensing permanent, keep current Tax Cuts and Jobs Act rates permanent, or reduce payroll taxes?
For decades, economists have touted the use of price signals to change markets. Today, a growing number of businesses are seeing the wisdom of a carbon tax as existing subsidies and regulations provide no certainty and require a team of lawyers and compliance officers to wade through the many rules. And it is critical to leverage the full breadth and depth of American innovation.
Democrats have made it clear that they want it all—regulations, subsidies, and executive actions. So, now is the time for Republicans to embrace a plan that matches climate stewardship with economic stewardship.