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Climate Hustle

The Grand Oil Party: House Republicans denounce a carbon tax

Posted on 13 June 2016 by dana1981

On Friday, the US House of Representatives voted on a Resolution condemning a carbon tax. As The Hill reported:

Lawmakers passed, by a 237-163 vote, a GOP-backed resolution listing pitfalls from a tax on carbon dioxide emissions and concluding that such a policy “would be detrimental to American families and businesses, and is not in the best interest of the United States.”

Six Democrats voted with the GOP for the resolution. No Republicans dissented.

The oil industry is scared of a carbon tax

ExxonMobil officially supports a carbon tax, but the company did not comment on the House Resolution prior to the vote. Meanwhile, the American Petroleum Institute, which is a key lobbying group of the oil industry, including ExxonMobil, publicly supported the anti-carbon tax resolution, as did Koch Companies Public Sector, LLC. Senator Sheldon Whitehouse (D-RI) suspects that the Resolution itself originated from the oil industry:

And it’s not just a matter of lobbying by Big Oil and the Koch operation on how Republicans ought to vote; given their control over the Republican Party, it is very likely that the vote itself was brought up at their behest.

Since 2009, ExxonMobil has contributed at least $1.7 million to members of Congress who voted in favor of the resolution, according to an analysis by ClimateTruth.org.

There are some indications that GOP leadership pressured House Republicans to vote for the Resolution. They certainly succeeded: of the 8 Republicans who are members of the bipartisan Climate Solutions Caucus, whose purpose is to craft optimal climate change policies, 7 voted for the Resolution. Only Rep. David Jolly (R-FL) withstood the pressure, voting “Present.” 

Ultimately, 231 of the 246 Republican members of the House (94%) expressed their unwillingness to consider a carbon tax by voting for the Resolution.

Why the House Republicans are wrong

It’s odd that not a single House Republican voted against the Resolution, because as long as the revenue is returned to taxpayers (also known as “revenue neutrality”), many conservatives support a carbon tax. This concept is supported by free market, libertarian, and conservative think tanks like the R Street Institutethe Niskanen Center, and the American Enterprise Institute (AEI). AEI resident scholar Aparna Mathur said of the vote:

It is worrying to me that the House would consider legislation to oppose a common-sense approach to addressing climate change. Instead of relying on dozens of federal and state regulations that themselves are costly, a carbon tax would be transparent and cost-effective.

Polls show that about half of Republican voters support a carbon tax if revenues are rebated to taxpayers. It’s also supported by the non-partisan grassroots organization Citizens’ Climate Lobby (CCL), whose advisory board includes Ronald Reagan’s former Secretary of State, George Shultz. CCL issued a point-by-point response to the carbon tax “pitfalls” listed in the House resolution.

For example, the Resolution noted that a carbon tax would cause energy prices to rise, which would particularly impact the poor, who spend a larger fraction of their income on energy. However, a study found that if the revenue were returned equally to individual taxpayers, rebate checks would more than offset increased energy prices for 58% of individuals, including 82% of low-income families. In other words, most poor households would actually benefit from this policy.

British Columbia provides a real-world example of a revenue-neutral carbon tax (offset by cutting income taxes) that’s proven successful in cutting carbon pollution, while its economy has continued to grow faster than the province’s neighbors. 61% of British Columbia residents support the policy, and businesses think the tax should be even higher.

In short, while a carbon tax could indeed have adverse economic impacts, these can be overcome by crafting smart policies that will instead benefit the economy while simultaneously tackling the risks posed by climate change. 

Crafting that type of policy is purportedly the purpose of the Climate Solutions Caucus, 88% of whose Republican members voted for the anti-carbon tax Resolution. Either the Caucus isn’t serious, or the oil industry’s influence over the GOP is tremendously strong.

A vote against a carbon tax is a vote for EPA regulations

In 2007, the US Supreme Court ruled that carbon dioxide qualifies as pollution. As a result, legally the EPA must regulate carbon pollution, and is in the process of creating rules as part of the Clean Power Plan. While conservatives can take actionto slow that process, they can’t stop it.

That is, unless US Congress passes legislation to replace government regulations with some other process to cut carbon pollution, for example with a free market system like a carbon tax. In short, conservatives must choose between government regulation or a carbon tax, and thus a vote against a carbon tax is essentially a vote for EPA regulations.

Silver lining: the oil industry is scared

Despite the vote, CCL Legislative Director Danny Richter sees reason for optimism:

Click here to read the rest

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Comments

Comments 1 to 19:

  1. A Few Questions: Did the resolution distinguish the difference between revenue-neutral & non-revenue neutral tax? And, thus leave a door open for the GOP to accept a revenue-neutral tax?

    If no distinction was made, then was this 1) by accident (maybe not knowing the difference) or 2) was this detail proposely left 'in the dark' so to cleverly lump rev-neu taxes in with the same anti-tax politics as the non-rev neu taxes? And, thus cleverly poison rev-neu tax initiatives from gaining any further ground.

    Regardless of this resolution, do you think the GOP members will still have enough political freedom to move toward the 'light' of the rev-neu initiatives, OR do you think this resolution will have enough political grip to stall both CCL lobby attempts & the growth of the BCSC for at least the next 12 months (next congress)?

    The article questions if the BCSC members who are GOP are not really serious and may only be members to put on a show, so to pick up more middle-ground voters in districts where CC sensitivities may be above average. ... The realism of politics can be so depressing.

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  2. Sauerj - I'm afraid given the sponsorship by fossil fuel interested that the push is against any pricing of externalities whatsoever. And given the current influence of big money on US politics, I don't see any forthcoming effort by Congressional Republicans to do anything sensible.

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  3. One more question: Do you know if there was any discussion (in session) to tailor the wording of this resolution (by either party member) so to ONLY target NON-revenue neutral taxes? Hopefully so.

    It would be heartening to know if at least an attempt was made (by someone) to specifically keep the rev-neu option available. If the ratified resolution had been worded like this, then this would have been a nod of acceptance toward the rev-neu option.

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  4. KR @2, Thanks! ... But, ExxonMobil has publicly unequivocally stated they support a carbon tax (not sure if they distinguish between rev-neu or not). My assumption was that they would support anything that puts the economic burden, by all industries, on a level playing field (which a carbon tax would). Why would they care if FF products are burdened? Could they not invest in renewables as much as the next guy? Heck they could maybe buy out the entire renewable industry if they wanted.

    Is ExxonMobil saying one thing, but secretly telling politicians the opposite? I know I'm naive, but I have trouble believing that ExxonMobil execs would purposely lie boldly that much. Something tells me to give them more credit than that.

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  5. Sauerj - Exxon talks a great talk, but they don't walk the walk. I suspect much of their underemphasized position on carbon taxes boils down to PR, rather than actual intention.

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  6. KR @5, Thanks again! ... Well put! Hansen calls it 'greenwashing'. With some of their shareholders publicly speaking up, there are some signs of hope.

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  7. This was just a blanket anti-carbon tax Resolution.  I think many have long suspected that Exxon's carbon tax support is just lip service while they work against the policy behind the scenes. 

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  8. I've been trying to make the case for a carbon tax to conservatives and libertarians for a dozen years now. See here. It's an uphill battle. Groupthink has set in. Methinks it would take a new green-conservative party to open minds.

    Given how the Republican Party is experiencing a hostile takeover from what was the Reform Party (and earlier, the American Party), a conservative realignment may well happen.

    Some kind of greening of the political right needs to happen before the Too Old to Care Generation dies off. Single party government is not good.

    By the way, the commentary about Exxon's endorsement of a carbon tax is the same type of argument I hear on the Right about government scientists and global warming: scientists get paid to stir up panic, so they do. Ignore evidence. It's all about class consciousness and incentives.

    Be careful.

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  9. One of the best arguments I've ever heard for a carbon tax (and so many of its benefits*) is from Rex Tillerson, CEO of ExxonMobil. He even calls it a "refundable GHG emissions fee."

    * Benefits he covers:
    ► revenue-neutral; does not grow deficit
    ► transparency and predictablility are good for business (uncertainty is bad for business)
    ► simpler and more transparent (and thus more 'honest') than cap & trade
    ► refund protects low-income Americans
    ► border adjustment protects American industry (This also helps proliferate similar plans, which is CRUCIAL. Just remember, "America is not a Planet." Thx, little Marco!)
    ► small-government / reduces need for regulations
    ► zeroing-out subsidies will eliminate picking winners and losers (consistent w/conservative economic principles)
    ► much more efficient than complicated gov't regulation
    ► less expensive because it's more direct, eliminates transactional costs


    I might be missing something but I think he pretty much covers the bases. 

    Let me just put it another way. Anybody who supports the status-quo of big, top-down gov't regulations, subsidies (gov't picking winners & losers), and the complex game of tax incentives — Band-Aids to make up for a broken market, simply DOES NOT get to call himself/herself a PRINCIPLED CONSERVATIVE.  What they are is a fair-weather socialist, perfectly fine with privatizing profits but socializing costs when it works in their favor. They're an unprincipled, dishonest, opportunist — a thief who is stealing from the future, selling in the present, and calling it GDP. 

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  10. Those are very good arguments Greg. Border adjustment is a bit of an administrative nightmare (and cost) but I agree that if USA did it, then it would force rest of world along that route as well.

    If you want simple, administrative cost-free however, then two regulations would do it;

    1/ No new CO2-emitting power plant to be built from now on.

    2/ No new CO2-emitting vehicles to be allowed from 2030.

    While free of an bureaucratic costs, they do not address the issue of imported emissions (and international competitiveness) so I still think you need the border adjustment.

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  11. To be really effective, you want the tax to be returned in equal portion to every citizen.  Since that may be difficult, send it to every registered tax payer instead but not by cheque.  Send it by virtually free electronic transfer to the same account that you would send a tax rebate.  Do not use it to reduce income tax.  It is far more impressive to actually get a positive entry in your bank account. 

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  12. scaddenp, your proposal is the sort of bad environmentalism that makes the economically literate go anti-green. What you propose will cause electric companies to hold on to old inefficient power plants and for people to hold onto old cars.

    It is cheap and easy to build a car that cuts CO2 emissions by 70% right now. Look at the Elio Motors commuter vehicle as an example. Your proposal gives zero incentive for such quick and easy solutions. A carbon tax encourages both quick fixes now and research into better long term solutions.

    We do not need to eliminate hydrocarbon fueled vehicles. We need to reduce the need for hydrocarbon fuels to the point that biofuels suffice. Economically, this is a HUGE difference. Diminishing returns and all that.

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  13. CSM, those are all good points. I am actually in favour in carbon tax, and your argument further convinces me of its merit.

    In my defense, I will say that NZ had a 10-year moritorium on building new thermal generation from 1998-2008, during which geothermal and wind generation capacity significantly expanded. Investment in new generation (of any kind) has slowed since it was removed but other factors are at play as well.

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  14. Regarding #1

    It's off topic, but "revenue neutral" is to me more a policy decision to appease those who prefer to avoid sound budgeting and oppose most taxes in general and on principle.  Considering that sound budgeting takes into account how much the government needs to spend and where it gets the money, locking down the argument like this paints the government into a corner where it cannot really raise revenue, nor can it cut spending.

    What is on topic is that carbon taxes and cap-&-trade have worked in other arenas (like Acid Rain) and it confounds me why suddenly these are so very off the table within USA conservative dogma.

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  15. knaugle @14, IMO the opposite is the case.

    Carbon taxes should be imposed on the fee and dividend basis because, by their nature, they are intended to dry up over time.  Ideally, within 34 years, a carbon tax will provide zero revenue to government because we will have zero net emissions.  If the carbon tax is not distributed back to the populace on a fee and dividend basis, that means the service it funds will have had its revenue dry up.  In a worst case scenario, the tax will have been used to widely replace income and/or sales taxes which would then of necessity need to be reimposed gradually over time to replace the diminishing return from the carbon tax, with the consequent political battles to do so, both in elections and in the legislature.  The most likely outcome would be a dimishment of general revenue, and hence of government services.

    Ergo, to keep government services well funded, carbon taxes should be revenue neutral on a fee and dividend basis, or at worst used for short term, non-ongoing measures that will accelerate ending carbon dependence in the economy.  (Note that ongoing subsidies of renewables does not fall into this category, for the funding of such subsidies must be drawn from general revenue as the carbon tax dries up, again creating a potential budget crisis.) 

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  16. @Tom Curtis: I respectfully disagree. We have 19 TRILLION dollars in debt and the Baby Boomers are starting to retire! If a carbon tax produces a temporary surge in revenue, so be it. We need some temporary surpluses to offset 80+ years of crises. I would use some of the revenues as a citizen dividend just to keep a carbon tax from being too regressive.

    And for the record I am a smaller government guy. I usually vote Libertarian. But I do believe in paying for the government we have, and the government we had. Even with a half trillion dollar cut in annual spending, we still could use some tax increases.

    General environmental note: if you desire a future where progress means more leisure vs. more environmentally degrading stuff, you want an economy that doesn't require ongoing artificial stimulus. This means balancing the budget on average; i.e., surpluses during boom years and balanced budgets on average years.

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  17. "This means balancing the budget on average; i.e., surpluses during boom years and balanced budgets on average years."

    Here in NZ, this is called the Fiscal Responsibility Act 1994

    I think a lot of nations should try it. *smug*. Cant help myself.

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  18. CSM @16, with respect, the US does not have a significant debt crisis.  The measure of whether or not your debt is unmanagable is your ability to pay of the interest, which is currently 223 billion US dollars (6% of the Federal budget).  That is an affordable amount, and just paying of the interest will result in a 2-3% decrease in the debt/GDP ratio per annum on average based on economic growth.  If most of the debt is in US dollars, inflation will decrease the real value of the debt even quicker.

    The US is portrayed as having a debt crisis by comparing its national debt to its national income.  However, for private corporations and individuals, the comparisons made are total debts to total assets (the later typically being ten times the value of income); or of repayments to income (where the former need only include interest repayments).  The use of debt to GDP comparisons represents a double standard.  If applied to industry, for example, it would require that businesses by wound up if their debt exceeds their income, which would be ridiculous.

    The US does need to balance its budget, but it needs to do so in a way that will keep the budget balanced in the long term and over the course of the economic cycle.  Temporary budget measures are not the way to achieve that, and certainly a measure which is designed to decrease its revenue to zero over time will not achieve that except temporarilly.  Further, if it is revenue neutral, it will not accomplish that in any event.

    What using such a measure to balance the budget would achieve, however, is to generate a long term structural need to decrease revenue or reimpose other taxes.  As we can see the US Congress's inability to do either, it achieves a structural pressure generating future deficits.

    If you want to pay down US government debt quickly, you would be far better of imposing a temporary Tobin tax, (or as a tobin tax is a good idea in any event, a temporary Tobin tax surcharge).  

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  19. Just throwing in my two-penn'th worth.

    Cap and Trade has one really good feature and one really bad feature.

    Cap is good because it is directly targetting what we need to do - capping emissions. Carbon taxes in contrast don't actually target that. They put a price on emissions and basically hoe that will achieve the effect of a cap.

    Trade, not so good. In the simplistic world of economists, trade, markets etc produce 'efficiency'. Often this efficiency doesn't actually translate to social utility. And there is one key problem. A lot of very smart people get up every day to strive as hard as they possibly can to subborn the market, twist it, break it to their advantage. Trade is probably just a huge 'employment opportunity' for financial engineers.

    The idea of making any approach revenue neutral is sounc. Cap and Dividend, conceptually seems the right approach. Cap gives certainty and Dividen makes it revenue neutral.

    As to using regulation, there are good arguments for regulations, highly targetted, in very specific contexts. They actually need to be simple regulations, targetting key industry sectors. Two key ones:

    • Electricity generation. We don't need masses of regulations, just some simple rules and clarity.
    • Fuel Efficiency standards. By simply saying that vehicle efficiency standards need to rise steadily, ultimately they are saying a switch to non fossil fuels is needed. Petrol to Hybrid to Electric delivered via an indirect measure. Unleash the California Air Resources Board (CARB) to set standards for California, and that becomes the defacto standard for the US, which then becomes a defacto standard for the world. CARB has done this before.
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