Episode 5: The Conservative Case for Carbon Pricing [Full Transcript]

Carbon pricing as a fundamentally conservative idea and the future of the Republican party's action on climate

[Intro music]

Casey: Welcome to Pricing Nature from The Yale Center for Business and the Environment, and the Yale Carbon Charge. I’m Casey Pickett.

Maria: I’m Maria Jiang. A graduate student at Yale who has researched and worked for U.S. cap-and-trade systems. 

Naomi: And I’m Naomi Shimberg. I’m a Junior at Yale, where I study the economics of climate change.

Casey: If you’re just joining us, Welcome. We recommend listening sequentially from Episode 1 because of the way our series builds. In Episodes 4, 5 and 6, we’re focusing on the politics and history of carbon pricing in the United States.  

Over the last two decades, the American electorate has become polarized over climate change, with the Democratic Party generally in favor of action to stop climate change, and the Republican Party generally not. As a result of this polarization, the United States lags most of the world in responding to this existential threat, which has slowed global progress. Despite the stance of the Republican Party as a whole, there is a growing cohort of conservatives who not only support bold climate action, but are advocating fiercely within their party for legislative solutions. And carbon pricing is a leading ask. Those conservatives are the focus for this episode.

In the U.S., it’s hard to make big, lasting policy changes without support from both major political parties.  And building that kind of support takes political work. Now, lots of people dislike politics.  It’s argumentative, messy, often crude.  But it’s how groups of people work things out.  Watching political processes can be uncomfortable-- a little like watching a bickering couple.  But, as in a relationship between two people, when we really work out our differences, it's rewarding.  To have that kind of tough, productive discussion, we have to truly listen to one another, to understand the humanity and values behind each of our stances.

In this episode and the next, we are going to do exactly that, try and see clearly the different sides of the climate policy debate in the U.S. I think there are at least four sides: Republicans generally on one side and Democrats generally on the other.  And then, within the Republican party, climate-concerned conservatives are debating with the climate-unconcerned over whether to act on climate; and within the Democratic party, the center-left is debating with the progressive left over how to act most effectively.  

[Music]

In this episode, we’ll aim to understand the conservative case for carbon pricing. Who are these climate-concerned Republicans?  Why are they advocating for carbon pricing?  And what kinds of carbon pricing policy are they looking for? We’ll do it in four acts.

Casey - Act I: Pricing Harm

Casey: When it comes to putting a price on the harm pollution causes, Republicans were actually the first in the U.S. to champion the idea. Maria, what’s the history there?

Maria: We spoke with Dan Esty, a professor of environmental law at Yale, about when Republicans introduced the idea of pricing pollution into climate policy debates. 

Dan Esty: Well, the truth of the matter is that… at least the idea of pricing a harm, making people pay for the environmental damage they're doing, that idea has been around for more than a hundred years. It goes back to an economist named Pigou who in 1918 put forward an argument, put forward an article in which he said if people are spilling harm over onto their neighbors or society more broadly, they should be made to pay for it or as economists say, they should forced to internalize the externalities that they’re causing. So the idea has been around a very long time, it wasn't either Democrat or Republican for much of the last century and frankly the idea really was a Republican-advanced alternative to command [and] control regulation when it first began to get real traction as part of the U.S. policy framework in the early 1990s.

Casey: Dan Esty points out that Republicans embraced putting a price on pollution as an alternative to more direct government restrictions, rules, and standards:

Dan: So by you know the late 1980s you had president H.W. Bush in office and you had the idea of a price on harm being put forward by Republicans in the executive branch supported by Republicans in the Congress and accepted at the time with some hesitation from the Democrats who were much more at that time the party of command and control approaches to regulation where the government dictated to everyone what would be done 

Naomi: So pricing harm is seen as a market mechanism, meaning that marketplace forces would do the necessary work to remove the harmful substance from society. For most conservatives, limiting the size and scope of government is an important requisite for economic growth. A price on pollution gives companies control over their own strategies for cutting emissions, which is an attractive idea to conservative advocates. 

Many conservatives echo the classic economic argument: pricing harm across the economy, rather than controlling it with direct forms of government regulation, is the most efficient way to cut pollution.

Maria: Now, here’s where things start to get politically interesting. In the late 80s, when Republicans introduced the idea of pricing the harm from acid rain, Democrats were hesitant because they thought this type of market-based policy was too flexible. As Dan Esty mentioned, Democrats preferred regulation that specified the amount of reductions and the types of technologies companies should use, on the theory that such reductions were more guaranteed.

Casey: Looking back to the 1990s, the idea of Republican and Democratic leaders debating HOW to fix a pollution problem, rather than WHETHER to fix it...it sounds almost cute.  Like a couple debating the best way to load the dishwasher. 

Naomi: Right! Now it’s like we’ve got dishes in the sink, dishes on the counters, dishes on the floor. And now we’re arguing over whether we should wash the dishes or just find a new house.

Maria: Or we’re even arguing if dishes exist at all.  But let’s put the dishes away for a moment, for some Conservatives, “pricing harm” isn’t based on a mere preference for market mechanisms. It also has deep philosophical and ethical roots. We spoke to Bob Inglis, a former Republican U.S. Representative from South Carolina, about why putting a price on harm is important to him:

Bob Inglis: I think that the reason that it's so conservative to price the harm from carbon pollution, from burning fossil fuels is all about accountability. Because conservatives, particularly conservatives of faith, understand that it's really important to have accountability -- that blessings flow from accountability. Havoc results from the lack of accountability, climate change is that havoc. 

So, you know, if I'm “Inglis Industries” and I'm belting out CO2 and also dumping on my neighbors with pollution, either water and air pollution, let's say - my neighbors, typically poor because right around my plant is probably cheap real estate for residential purposes and many of them are people of color. I just dump on them. And I get away with it. And it's just wrong. And so at a moral level, conservatives, especially again, conservatives of faith, should be able to realize no, that’s not right.

Maria: For Bob Inglis, it’s a matter of taking responsibility for the social costs of pollution.  Pricing harm is about personal accountability and clear sense of right and wrong. He puts people at the center of policy making—and notes that the impacts of pollution fall hardest on low-income communities and communities of color.

Casey: Even if conservatives and liberals can agree on the importance of taking responsibility for pollution, including greenhouse gas emissions, there is typically a difference in how each party approaches policymaking. Remember, Republicans have historically favored market-based government interventions, and Democrats have historically favored prescriptive and standards-based regulatory approaches, such as requiring certain scrubbers on smokestacks or explicit targets for vehicle fuel efficiency. 

Naomi: Bob Inglis supports market-based intervention in general, on the premise that the private sector can deliver solutions more effectively than more directive government regulation:

Bob Inglis: If you believe in the goodness of government and the effectiveness of regulation, that's not really us. We're conservatives at republicEN.org....

Dr. Milton Friedman would be proud to say if he were still alive, just tax it, just tax the negative effects of carbon pollution, build it into the prices of products and then watch the free enterprise system deliver innovation faster than government regulations or mandates or federal tax incentives could ever imagine.

Casey: Ok, so if pricing harm, or, putting a price on carbon is such a fundamentally conservative idea, and historically, the political left was willing to support it… Maria, can you remind us why we haven’t been able to pass carbon pricing legislation?

Maria: Welll, despite the conservative roots of carbon pricing policy, Republicans have never really rallied around the idea. 

Naomi: There’s been a lot of conservative opposition to climate action in the last twenty years, including special resistance to carbon pricing in recent years. For example, every year from 2013 to 2019, House Republican Whip Steve Scalise and Congressman David McKinley introduced a resolution condemning carbon taxes.  Here’s Steve Scalise:

Steve Scalise: It would be devastating to our manufacturing base, it would kill jobs, and I think most devastating, Mr. Speaker, it would rise in increased costs for families all across this country… A carbon tax would be detrimental to American families and businesses and is not in the best interest of the United States.

Casey: Right. That clip matches the recent stance of party leaders.  Even as we record this episode, Republican Kevin McCarthy, the House Minority Leader, is planning an event to counter the Biden Administration’s Earth Day climate announcements, at which Congressman McCarthy plans to make clear the Republican Party’s opposition to a carbon tax.  So why does Bob Inglis think about it differently?

Maria: It’s important to note that Bob Inglis wasn’t always a proponent of carbon pricing. In fact, for a while he was a full-blown climate denier. He supports climate action now, but he admits that it took some convincing to bring him around on the issue. During his initial term in Congress, he says he really didn’t think much about climate change for a reason that Carlos Curbelo mentioned in our last episode: Al Gore. Bob Inglis figured if Al Gore was talking about it, then he didn’t want anything to do with it. 

Casey: So what changed?

Maria: A number of things -- we’ll let him explain:

Bob Inglis: I was six years in Congress saying that climate change is nonsense. Then I was out of Congress six years doing commercial real estate law - had the opportunity to run for the same seat again, in 2004... That year, my son came to me as he was voting for the first time having just turned 18...

And he said to me, Dad, I'll vote for ya. But you are going to clean up your act on the environment. His four sisters agreed, his mother agreed, this is a new constituency. You know, these people can change the locks on the doors to your house...

Maria: Bob Inglis says for him, the importance of acting occurred to him in three steps.

Bob Inglis: Step two is going to Antarctica with a science committee, the House science committee and seeing the evidence in the ice core drillings and then step three… this Aussie climate scientist was showing me his, we were snorkeling together the glories of the great barrier reef, and I could see that he was worshiping God in what he was showing me.

Casey: I can see how Bob Inglis had a revelation: When your son asks you to consider the environment, when you can see ice core evidence of rapid climate change for yourself, and when you can see a climate scientist worshipping God through his research, metaphorically-- this is the stuff of epiphany.  But Congressman Inglis is still a conservative, right?

Maria:  Absolutely. And his Conservative ideals have led him to see carbon pricing as an economic opportunity, rather than a burden. 

Bob Inglis: I think we're going to be uniquely competitive because America is less energy intensive than say China.

We, we got an ace in the hole here. So we're actually going to be favored in a priced environment.

Casey: Bob Inglis argues the U.S. can actually come out ahead if countries around the world adopt carbon pricing, creating what he refers to as “a priced environment.” The United States economy wields certain advantages. It is less energy intensive than that of China, for example, which means low-emitting industries in the U.S. economy allow for more GDP growth per unit of energy consumption. So universal carbon pricing could benefit the U.S. economy in the global marketplace.

Naomi: We also spoke to Carlos Curbelo, a former Republican Congressman from Florida. He agrees with Bob Inglis that carbon pricing can create economic opportunity for American households, in addition to creating benefits for U.S. industry. Congressman Curbelo explained how carbon taxes can be designed to benefit low-income households.

Carlos Curbelo: Look - any major policy is going to be disruptive to the economy.

When we reformed the tax code in 2017... that was extremely disruptive. The question is whether the country is going to be better off or not. And without a doubt, legislation to tax carbon pollution can be designed in ways that leave the most vulnerable people better off.

If you have a dividend component, which almost every carbon pricing bill I've seen has a dividend component, you can actually deliver relief for those families. Power bills will go up in a lot of parts of the country, but the dividend that you can deliver to those families is going to more than make up for that difference and they will be better off, and we can show that in black and white, you know on paper.

Maria: The dividend is an important feature of carbon pricing policies because it’s a redistribution of carbon pricing revenue back to U.S. taxpayers, in order to offset the rising costs associated with a carbon tax. Remember what Representative Scalise was saying about rising costs for families all across the United States? 

Steve Scalise: “I think most devastating, Mr. Speaker it would rise in increased costs for families all across this country”]

Maria: His anti-carbon pricing bill is built on the claim that a carbon tax could increase household expenses by about $1900 per year. But that increase ignores the impact of a dividend. In fact, a study by the Columbia University Center on Global Energy Policy found that Carlos Curbelo’s bill would actually improve the lot of households in the bottom 20% of income, thanks to its use of a dividend.  

Carlos Curbelo: And then, for the rest of the population, it's a consumption tax for sure... Those who consume the least will be taxed the least... And especially for a lot of people who come from the conservative side of the ledger, that's a good thing because it gives consumers, citizens, people, the ability to control how much they pay in taxes, to be more in control of their personal economies, and to make choices that will be good for their personal economies and good for the environment

[short music]

Casey:  Okay, so we’ve heard some arguments for why carbon pricing could represent an economic opportunity for the U.S., both in the global marketplace and in lifting up low-income households within the United States. But how does carbon pricing policy square with conservative opposition to government intervention in the free marketplace? After all, revenue from a carbon tax has to be collected—and in some cases redistributed—by a government. Is that contradictory to Bob Inglis’ claim that pricing harm is a free market mechanism?

Maria: Not according to him:

Bob Inglis: You know if I'm Inglis industries and I'm belting out CO2 and also dumping on my neighbors with pollution, water and air pollution let’s say ... and so across town, there's somebody that makes a similar widget to mine. Both of us are making useful stuff to society, it's just that their widget doesn't dump on their neighbors. But their cost is, therefore, is a little bit higher. And so I keep on beating them in the marketplace, selling my cheap widgets cheap because I'm dumping my costs onto my poor neighbors. At some point what you realize is, wait a minute, that's not right. That's what Milton Friedman would say is a market distortion. You gotta have the government step in and it is the government's role to step in and say no more of that Inglis.

Sequester your CO2, clean up your stack, clean up that effluent. Yeah, you gotta buy new equipment! And then I do, so I put all that in the price of our product with the competitor across town beats me. Well, good for them, stinks for me. And isn't that what we as conservatives really believe is the power of the free enterprise system. It’s creative destructionism.

Maria: Bob Inglis is saying that the government does have a role in correcting a broken free market system, especially one that isn’t pricing the harm it’s causing to people. While Conservative ideology typically favors minimal government intervention, we have to remember that there are certain cases where conservatives feel intervention is appropriate… Bob Inglis says, carbon emissions is one of those cases.

[short music] 

Casey: What have we learned so far?  Our guests have made the case that putting a price on carbon aligns with conservative values because it supports a robust economy by correcting a market failure, and Bob Inglis believes the Federal government has an important role to play in correcting market failures.  

We’ve also heard how carbon pricing would benefit the U.S. by tilting the global economy toward low-carbon industries, where the U.S. could excel.  And in addition to these, we could argue that carbon pricing aligns with several other conservative values: Personal responsibility--you make a mess; you clean it up--or you pay to clean it up.  And caring about what we were given so we can pass it onto the next generation.

Understanding how conservative values align with carbon pricing helps explain why a small, but growing group of conservatives are pushing for carbon pricing legislation.  Now let’s look at how these values translate into reality by exploring the carbon pricing legislation Republicans have supported... this brings us to—

Casey - Act II: Republican Carbon Pricing Legislation: The Meat and Potatoes

Naomi: The meat and potatoes? What happened to nitty gritty?

Casey: Yeah, we use “nitty gritty” so often I was trying to shake it up. My kids got me a thesaurus for Father’s Day, I think they were trying to tell me something... 

Maria: Besides “Rate and Review, Like and Subscribe”?

Naomi: [serious voice] *Pricing Nature*

Casey: Exactly.  I could’ve gone with the bottom line, the brass tacks, the nuts and bolts, or the cold facts.  I went with the meat and potatoes.  Alright back to it -- Act II: Republican Carbon Pricing Legislation. 

Naomi: [serious voice] The cold brass nuts and bolts.

[laughter]

Casey: In 2003, Republican Senator John McCain sponsored the Climate Stewardship Act, a cap-and-trade system that would have covered 85% of U.S. carbon emissions. And Senator McCain wasn’t alone in proposing conservative carbon pricing legislation. Since 2003, Republicans including Senator Jeff Flake and Congressmen Bob Inglis, Carlos Curbelo, Francis Rooney, and Brian Fitzpatrick have led carbon pricing legislation, that’s not even to mention Republican co-sponsors. 

Naomi, can you tell us what their legislation has looked like?

Naomi: Yes - so Senator McCain’s bill proposed a cap-and-trade mechanism, but since then, the majority of Republican-led carbon pricing bills have proposed carbon taxes. 

Carlos Curbelo: In terms of simplicity, in terms of transparency, in terms of just explaining the policy to people, we thought that it would just be easier to have a simple tax on pollution. With cap and trade there's at least a perception that big polluters can get around it. And that can afford to trade their way out of it. We just thought, and I still think that, the more simple the policy, the better.

Casey: Congressman Curbelo points to a perception that cap-and-trade systems are easier for big industries to manipulate than carbon taxes are.  Let me try to explain why this perception might exist.  

In a cap-and-trade system, if the cap is high--that is, if it allows a large amount of emissions from the capped industries, the price on carbon will be low because there’s an oversupply of permits. Since there’s low competition to acquire the permits, there’s nothing driving up the permit price. And without the pressure of a high price, there’s no market signal to push the economy away from carbon. 

Only when a company’s cost of polluting becomes greater than its cost of preventing pollution will there be economic pressure to decarbonize. Unfortunately, due to political pressure from industry, when cap-and-trade systems get written into law, the caps often end up quite high. That’s why, from Carlos Curbelo’s point of view, creating a tax would be a simpler policy, and one that could be harder for big industry to manipulate. 

Naomi: Okay, but a tax is also subject to political pressure… we’d expect there to be industry pressure on the price of a tax itself.

Casey: Strong point, Naomi, thank you. Okay, so this is an episode about the Conservative Case for Carbon Pricing. We’re asking why some conservatives support carbon pricing, and why more might do so?  And within that question, we’ve come up with another one, about which carbon pricing policies are more attractive to conservatives--carbon taxes or cap-and-trade systems. Maria, is there an inherent ideological reason for the Republican Party to support one over the other?

Maria: We spoke to Jerry Taylor, the president of the Niskanen Center, a libertarian think tank that advocates for market-based environmental policy, about the Conservative ideological divide between cap-and-trade and carbon taxes:

Jerry: Even though cap and trade was a policy idea that was a given birth by conservative economists and first given major lease on life through the 1990 Clean Air Act amendments that were supported and passed with the strong support of George Herbert Walker Bush, a Republican president. Since that time, cap-and-trade has been associated with Democrats and the political left. California has a cap-and-trade program. Northeastern States primarily under Democratic control have cap-and-trade programs…

Casey: Okay, let’s take the sirens as an indication we should examine that opinion. Jerry Taylor says that in the political realm, Democrats are associated with cap-and-trade because of existing regional cap-and-trade programs in the United States. Maria, what do you think? 

Maria: I think what Jerry Taylor’s saying is true, at least regionally. California is a primarily Democratic state with the nation’s largest regional cap-and-trade program. And the Regional Greenhouse Gas Initiative, or RGGI, in the Northeast became controversial amongst some Republican governors. Chris Christie, for example, pulled out of RGGI’s market in 2012. And in recent years, when Democratic legislators in Oregon proposed using cap-and-trade, their Republican Senators and House Representatives literally walked out of the entire legislative session.

Casey: And Naomi, how ‘bout you?

Naomi: I would argue that cap-and-trade isn’t inherently a partisan policy. At least nationally, over the last decade, most Democratic carbon pricing proposals have actually been carbon taxes. Plus, California cap-and-trade passed with the support of Republican governor, Arnold Schwarzenegger. Mitt Romney and George Pataki helped Massachusetts and New York join RGGI. 

Casey: Alright, sounds like we’ve got one vote from Maria for cap-and-trade as a policy more attractive to Democrats today, and one vote from Naomi for cap-and-trade as non-partisan. But a lot of this discussion about partisan opinion on cap-and-trade is political, not so much ideological. Let’s hear from Jerry Taylor again about why some conservatives see Cap-and-Trade as ideologically left-leaning:

Jerry: If you look at what was required to make a cap and trade system work, it requires a lot of government. You're setting up one of the largest commodity markets in the world. I mean, if we were to have a national cap-and-trade regime for climate policy, it would be a massive commodity market, which requires a lot of governance and a lot of regulatory supervision. It requires a lot of bureaucratic engagement. A carbon tax doesn't require any of those things. 

Casey: So Jerry Taylor is saying not only is there a political association between Democrats and cap-and-trade, he also argues that the regulatory structure of a cap-and-trade mechanism conflicts with conservative values. You need systems to monitor allowance auctions, allowance trading, emissions accounting, and so on… Jerry Taylor, like Carlos Curbelo, thinks that conservatives who support carbon pricing favor a carbon tax because of its simplicity.  

Naomi: Hm, I think a carbon tax is also more conservative because of how it regulates the economy. The price is set by the government and then the market adjusts accordingly. There’s no explicit regulation of the number of emissions permits like in a cap-and-trade system. If you can afford to pollute, you can continue to do so under a carbon tax without specific restrictions. In a sense, it’s just a correction of the externalities of carbon emissions, a market failure. But then it’s hands-off from then on out. Or… invisible hands-on. *laughs* Whatever you want.

Maria: Okay, but it’s also interesting to note the conservative ideas that lie at the heart of cap-and-trade systems where the price of carbon is literally set by supply and demand in a marketplace.

[short pause] 

Casey: I have to say, in the grand Republican-Democratic debate about carbon pricing, I find this limited conservative embrace of carbon taxes a little surprising.  The way I learned climate policy, in the 1990s and 2000s, one of the chief selling points of cap-and-trade was that it wasn’t a tax.  The wisdom being that a tax would never pass Congress because Republicans oppose taxes.  With some conservatives now advocating for carbon taxes, it’s a little bit of a head-scratcher. Naomi,  how much of the embrace of carbon taxes (by a small group of Republicans) is in reaction to Democratic support for the other kind of carbon pricing, cap-and-trade? 

Naomi: Mm, I see what you mean.  But as you said, Casey, there are at least four different sides to this issue. There are divides within each party, so it’s not easy to put carbon pricing policies in a political or ideological box. 

[music]

Casey: Let’s continue with our analysis of conservative carbon pricing legislation. In 2009 and 2010, cap-and-trade policy was pretty much abandoned by Republican lawmakers. This was the era of the Waxman-Markey cap-and-trade bill, the infamous failed legislation that would have set up a nationwide cap-and-trade system in the United States. During this time, Republicans united in opposition to President Obama and sank the bill in the process. This marked the end of Republican support  for cap-and-trade… but around that same time, Bob Inglis had introduced his own plan for carbon pricing legislation.

Maria: In 2009, Bob Inglis introduced the “Raise Wages, Cut Carbon Act” where he proposed a $15 tax per ton of carbon emissions for anything extracted, manufactured, or produced in the U.S., and any goods imported into the United States, too. While about a decade passed before there was another Republican-led carbon pricing proposal, Bob Inglis’ bill included a number of conservative policy strategies that we’re seeing reappear today in other Republican carbon pricing bills. One such strategy was the concept of a border adjustment, which helps retain the competitiveness of U.S. goods in a global marketplace where a carbon tax isn’t universal.

Bob Inglis: The challenge is in a regulatory system, you don't get China and India and the rest of the world in on it. You only have America. And that means you're cleaning up local air, which is great. But you're not solving climate change...

Carbon pricing has the shot at getting the world in on it, because if you make it border adjustable, apply the tax at our borders, on goods coming from countries that don't have that same price in carbon dioxide, then you get the world in on it... Some may challenge this, for example, China may say, listen, you can't do that. That's an impermissible tariff. You can't impose your American carbon tax on our goods. We think they lose that case in the World Trade Organization based on precedents in the chemical industry that say you can tax stuff coming in based on its content.

And this would be an American carbon content tax. It would be collected here on their goods, and what they’d figure out, if we’re right that we’ve won that case in the World Trade Organization, China would very quickly adopt their own because otherwise they're paying in American ports an American carbon tax that’s being remitted to Washington. If they'd collected the same tax, you know, equivalent tax in China, the money would have ended up in Beijing. So pretty soon they've got the same price on carbon dioxide. Cause it’s in their interest to do so. And then you've got the whole world following. Now you're solving for climate change, not just local air. 

Casey: Congressman Inglis is assuming other countries will behave as rational actors, but there are political complexities in those countries just like in the U.S., and I want to make sure we keep that in mind. Let’s make sure we understand what Bob Inglis is talking about, in theory. A country with a price on carbon could create a border adjustment to apply its carbon price to imported goods, so that within the domestic economy it’s as if all goods have the same carbon price.  This protects domestic industry while encouraging other countries to put their own price on carbon. But let’s do one more wrinkle: what about exports? For a country with a carbon price, would increased prices of goods disadvantage that country in the global marketplace? 

Maria: Not necessarily, Casey. A border adjustment on carbon can actually work in the reverse. In the case of exports, the U.S. government could actually rebate the U.S. carbon price to companies exporting to countries without a carbon price.

Casey: For more information on border adjustment mechanisms, see our website: pricingnature.substack.com.

So to continue explaining Bob Inglis’s vision here: in a perfect world—and by perfect world I mean a world of rational actors not influenced by local politics—the U.S. creates a high enough carbon price so that it's in the economic interest of other countries to follow suit. And if other countries don’t have a carbon price in place, the U.S. government can give a rebate to companies exporting their goods to those countries.

Naomi, do you want to take us on from here?

Naomi: Yeah, let’s talk about revenue neutrality. Another conservative strategy Bob Inglis introduced in his bill is the idea of revenue neutrality. Remember, revenue neutrality means every dollar collected through the tax is given back to taxpayers. For example, Bob Inglis’s bill reduced the amount of social security taxes by an amount equal to the carbon tax. This is well-aligned with the conservative ideology of minimizing government presence and regulation, even with the creation of a new tax.

Now, as we’ll discuss in a minute, advocating for carbon pricing didn’t work out well for Bob Inglis’s political career.  And nearly ten years passed before a Republican introduced major carbon pricing legislation again. In 2018, Carlos Curbelo, Brian Fitzpatrick, Ileana Ros-Lehtinen, and Francis Rooney, all Republicans, introduced the Market Choice Act, a carbon tax set at $24 per ton. The Market CHOICE Act contained many of the conservative policy strategies that Bob Inglis’ bill had employed, such as a border adjustment mechanism and roll-back of other taxes.  It sought to eliminate the federal gas tax to account for a broader tax on carbon emissions. Here’s Carlos Curbelo: 

Carlos Curbelo: We understood… that Americans are very sensitive to hikes at the gas pump, whenever there's a dramatic increase in gasoline prices that usually leads the evening news…

Casey: And how did they settle on a $24/ton price?

Curbelo: Why did we choose $24 per metric ton? Number one… because we didn't want too big a number that would have shocked Republicans as we were trying to build bipartisan legislation. 

And then we also wanted to make sure that we could beat the goals of the Paris Agreement for the United States and modeling that Columbia University Center on Global Energy Policy produced for us showed that even at $24 per metric ton, increasing by $2 per year plus inflation, we could beat the Paris Agreement or the goals, the greenhouse gas reduction goals, in the Paris Agreement.

So that's why we chose the number.

Maria: Carlos Curbelo lost his re-election to a Democratic challenger in 2018, but the Market CHOICE act was reintroduced in 2019, and though it didn’t pass, it gained more co-sponsors than it had originally. 

Casey: [thoughtful] Maria, does it seem like Carlos Curbelo’s climate advocacy harmed his reelection campaign?

Maria: We don’t know for certain. It’s possible that Congressman Curbelo’s climate action might actually have helped him in his district, which historically leans blue. But in Bob Inglis’ case, it’s pretty clear that his stance on climate action did play a role in the loss of his congressional seat:

Bob Inglis: Note to self, probably not a good idea to introduce a carbon tax in the midst of the great recession when you represent perhaps the most conservative district in the most conservative state in America. It didn't go well. After 12 years in Congress and a Republican runoff, I got 29% of the vote. And the other guy got the other 71% of the vote. So rather spectacular face plant, I should say.

Casey: Not a faceplant per se, Congressman Inglis! I would call it: A bold swan dive into a pool without regard for its water content... though not everyone saw this public-spirited bravery as I do. I love how self-effacing Congressman Inglis is… I find that work to be just incredibly brave.

Clearly, we are speaking to two former legislators here, because, well, it’s not so easy to find sitting Republican congresspeople who support carbon pricing. Naomi, is it possible that the Republican movement for carbon pricing is waiting in the wings while the party leadership goes in another direction?

Naomi: It does seem like that could be the case.And around the time of the Market CHOICE Acts, there were also other formerly-serving Republicans putting forward carbon pricing proposals outside of Congress.  In 2019, James Baker and George Shultz, each a former Republican Secretary of Treasury and Secretary of State, developed the Baker-Shultz plan, which proposed a price of $40/ton on carbon emissions, increasing annually. 

Maria: The Baker-Shultz plan was released by the Climate Leadership Council, a coalition of former government officials and industry leaders advocating for a carbon tax. -- It was supported by 4 former chairs of the Federal Reserve, 15 former chairs of the Council of Economic Advisers, 28 Nobel laureates, and 3,000 U.S. economists. 

Naomi: Hey Maria, ask me who collected the contact info for the economists in Louisiana and Rhode Island.

Maria: Hey Naomi, who—

Naomi: Me, it was me. If you couldn’t tell. 

Casey: Whoa!  Economist-contact-info-collecting celebrity in the house! No, but, Naomi, thank you. From all of us.  Well done.

[pause]

Maria: The Baker-Shultz plan is built on the idea that a carbon tax is the most cost-effective policy tool to reduce emissions. The proposal has also been backed by oil companies, such as ExxonMobil, which has led to some skepticism from people on the left. 

Casey: How many times have we seen this dynamic with carbon pricing proposals--Well if the other side is into it, then our side must be against it.  It’s a banal truism, but it bears repeating: polarization is just terrible for progress.

Naomi: I know - we should be able to find common ground, and I think the Baker-Shultz plan is one attempt to do this.  It’s based on four policy ideas that seemed, at least in 2019, like they could be a basis of a consensus. First, the carbon price should increase every year until we meet emissions reductions goals. Second, a carbon tax should replace environmental regulations—this is called “regulatory rollback.” Third, we should build in a border adjustment to protect trade competitiveness. And finally, the tax should be revenue neutral, requiring all revenue to be returned to U.S. citizens in equal-sized checks.

Casey: A growing movement of young people is also rallying around this four-part plan. Students for Carbon Dividends, a bipartisan group of students dedicated to a market-based climate solution, was founded a few years ago to bring attention to the Baker-Shultz proposal.

Maria: We spoke to Kiera O’Brien, then a senior at Harvard, who co-founded Students for Carbon Dividends, or S4CD. And after she graduated, she founded Young Conservatives for Carbon Dividends.

Kiera O’Brien: I grew up in Alaska with the permanent fund dividend off oil revenue, and I've seen the difference it can make to have a couple extra thousand dollars in your pocket. So I think that's absolutely important for sticking power politically…

For me, that’s what's paying for my college. My parents have been saving it for me since I was born, so I’ve got a little over 18 years of it saved up now. For other people it's paying rent, it's keeping the lights on, it's paying for the extraordinary cost of living in Alaska. And it has been very politically powerful…

Naomi: As an Alaskan, Kiera O’Brien was a recipient of Alaska’s oil revenue dividend, which is provided for all Alaskans using revenue generated by the state’s vast oil reserves.  

Casey: So the Baker-Shultz plan, which Students for Carbon Dividends supports, proposes a similar universal carbon dividend, meaning an equal check for everyone with a social security number. Your dentist, your kids, they all get a carbon dividend.

Maria: Exactly - sounds pretty great, right? Kiera’s pointing out that the dividend component could play a huge political role in winning public support -- because she’s seen firsthand how popular a similar policy has been in her home state.  But when we asked Carlos Curbelo if he thought the universal dividend would be feasible, he wasn’t exactly convinced:

Carlos Curbelo: So, I have no opposition to the idea of a universal dividend for every American, but, I remind people that in order for a bill to become law, it has to be as attractive as possible to the members of Congress who are going to be asked to vote for it. And you’re going to need both Republicans and Democrats.

So I think that the tax and dividend concept, while transparent, clear, easy to understand, potentially popular with the public, also has some drawbacks when it comes to building coalitions of support inside the Congress 

Casey: And why isn’t a universal dividend attractive to members of Congress?

Carlos Curbelo: Members of Congress like to spend money. Okay. And, that includes members of both parties. Uh, I remind my friends that the fiscally responsible political party is always the minority party in Congress. And that's ‘cause they don't get to make a lot of the decisions…

So by creating a pass through system where members of Congress have no say, I think that inhibits your ability to build a coalition in Congress. 

Casey: Carlos Curbelo is saying this system of universal carbon dividends -- collecting revenue and sending it directly to all taxpayers -- may struggle to garner bipartisan support because members of Congress like to call the shots on how tax revenue is spent.  Now I don’t quite get this.  Isn’t creating a system that sends checks directly to people likely to be a popular way to spend money?  I mean, co-sponsor that, vote for it, brag about it to your constituents, and watch the appreciation roll in, no?

Naomi: I hear you.  But Congressman Curbelo seems to disagree.  He thinks investments in infrastructure will garner more public support, because spending on infrastructure allows legislators to deliver for their districts in ways that benefit them politically.

Casey: Fascinating. Carlos Curbelo thinks it’s easier for legislators to vote for infrastructure spending than for sending people checks. This could explain a lot. Still, I wonder if in a highly polarized environment, it’s also hard for legislators to take credit for infrastructure spending pushed by the opposing political party. But to be perfectly frank, we’re speculating here… We don’t know what would be the most popular way to distribute carbon tax revenue, since we’ve never achieved a carbon price at a national scale. 

[music] 

Casey: So Congressman Curbelo has concerns about how the design of these various carbon tax bills could impact efforts to build bipartisan coalitions. Last episode, we talked about the ground Democrats lost trying to find a bipartisan cap-and-trade solution for climate change through the Waxman-Markey bill. And it seems as if the Biden Administration recognizes that holding out for bipartisan solutions can be a fool’s errand.  They’re crafting an approach to climate change, based on infrastructure and regulating specific sectors of the economy, that could probably only pass along party lines, and then, only if there’s enough enthusiasm within the Democratic Party.  

But what might be the cost of one party going it alone on climate? Historically, some of our strongest environmental laws have stood the test of time because members of both parties supported their passage. In Episode 4, we talked about the Democratic case for bipartisanship. Now that everyone’s getting used to the shift of Congressional and Executive power to Democratic hands... Let's hear the Conservative case for bipartisanship.  

Casey: That brings us to Act III - The Conservative Case for bipartisanship

Casey: Our most durable environmental legislative achievements have been supported by both Republicans and Democrats. 

Naomi: For example, in 1990, we reduced the ozone depletion problem and established sulfur dioxide cap-and-trade with a bipartisan vote to approve amendments to the Clean Air Act.

Casey: And market mechanisms, along with other regulatory approaches, were effective. We made major progress restoring the ozone layer and we curbed acid rain— with support from both parties.

So we’ve got this history of environmental bipartisanship--admittedly, more bipartisan the further back you go.  But still, the prospect of acting on climate across party lines is tantalizing.  

Maria: It really is - and even more so now that big corporate interest groups, such as the American Petroleum Institute and U.S. Chamber of Commerce--which have both been powerful forces against climate action--are doing a kind of head nod in support of carbon pricing--

Casey: Is it a head nod or a head fake?

Maria: Who can say, Casey… regardless, like you said, it is an attractive proposal. 

Casey: It is.  And Bob Inglis, Carlos Curbelo, and Jerry Taylor are all staunch supporters of this idea.  Here’s Bob Inglis again:

Bob Inglis: I believe that the way to make climate action durable is to make it bipartisan. And if it's not bi-partisan it's not durable… Look at the example of Australia, they did a carbon tax and undid it, they did it, they undid it...

If you take that low percentage shot and it is such a low percentage shot of doing it just on one side of the aisle… you got to make sure to keep the White House, the Senate, the House, and the majority on the Supreme court. Now, what are the chances of that? If you just go back in history, they're not really great…

...So meanwhile though, the Clean Water Act has been pretty stable, the Clean Air Act, it's been pretty stable. These are the things that were bipartisan and therefore durable.

Naomi: Carlos Curbelo also believes in the power of bipartisanship. In 2016, he co-founded the Climate Solutions Caucus with Democratic Congressman Ted Deutch, also of Florida. In 2019, a similar caucus was founded in the Senate by Mike Braun (R-IN) and Chris Coons (D-DE).  In our last episode on Climate Stories, Congressman Curbelo told us about a presentation from the National Oceanic and Atmospheric Administration, after which, climate change became one of his primary concerns:

Carlos Curbelo:  I realized we had a secondary problem or an additional problem to what the NOAA scientists had told me, which is that one political party was just completely absent when it came to, to this issue. So that triggered an effort inside the Congress to, to start closing that partisan divide.

And we established together with my colleague from the Palm Beach area, Ted Deutsch, a Democrat, the House Climate Solutions Caucus, and that became the first ever internal organization in Congress to address climate change in a bipartisan way…

Maria: Carlos Curbelo saw the practical importance of bipartisanship from his time as a legislator. Jerry Taylor, on the other hand, sees a theoretical and historical argument that puts bipartisanship at the heart of successful climate action...

Jerry Taylor: As far as our theory of change, I think it's critical to remember that it's virtually impossible to pass meaningful legislation that will stay in place over any, any extended period of time without broad bipartisan support. There's been a lot of, a lot of work that's been done looking at past legislative change experiences.

And this fantasy, that one party is simply going to build up enough political strength, to ram its agenda down the throat of the other party and that that agenda will stay in place over an extended period of time, that's a fantasy.

Casey:  Bipartisanship could be a key to the success of swift climate action -- and we do need swift climate action-- but could we actually achieve it?

The political history of carbon pricing in the U.S. reads a bit like a ‘90s rom-com.  First, he has a crush on pricing harm at camp, but she’s too cool for him.  Then in college, she realizes they could be amazing together if they avoid the word “tax,” but he can’t stomach the cost of emissions permits, so he gives up, but she wishes he didn’t.  Then he realizes he needs to pursue her with a carbon tax after all, on the day she’s getting married—to sectoral regulation and infrastructure spending!  It’s like, will someone please just make a mad rush to the airport and bear their soul in front of hundreds of strangers so we can have a passionate bipartisan kiss and a priced externality and end this thing?! [“Kiss Me” plays]

Okay, stick with me on this analogy, though it may be hard. Where is this distinctly non-romantic, non-comedy going?  If the Republican Party at large isn’t talking about climate change and carbon pricing today, is this the moment to bet that a demonstration of passion--or bipartisanship in this case--will finally be requited? And if not, where do we go from here?? If we’re going to answer that question, we need to understand what the future might look like for climate advocates who come at this issue with a conservative bent.  Lucky for you, there’s an act for that. We call it:

Casey: ACT IV: The Future of Conservative Climate Action

Maria: While climate action has not proven to be a high priority of the Republican Party historically, there is a growing movement of climate conscious conservatives, led by young Republican activists. Bob Inglis noted that he came to support climate action in part because of the persuasive efforts of his own children. And his kids represent a changing demographic within the Republican party...  here’s Kiera O’Brien:

Kiera O’Brien: As a conservative, I never really had a policy that I felt I could support that was consistent with both my principles and my care for the environment.

But then learning about carbon pricing, it became very clear that this was the policy for me. 

Maria: As we mentioned earlier, Kiera helped launch Students for Carbon Dividends in 2018.

Kiera O’Brien: I originally got involved as Vice President, because I was President of the Harvard Republican club... so our original launch included 23 college Republican organizations, six Democratic organizations, and five environmental groups across the country.

And it was the first time that any college Republicans coalition had spoken out with a solution for climate change. And it was the first time by extension that a bipartisan group had spoken in favor of a policy. And so our theory of change is that the young people who are on campus today have a capability to captivate the American mind.

Casey: And young conservatives are, in fact, captivating public attention. In the last year alone, NPR, Newsweek, the Hill, CNN, Greentech Media, Scientific American, Gimlet, and more, have all covered the changing voice of the Conservative party on climate change.

Maria: More seasoned Republicans, such as Jerry Taylor and Bob Inglis, are doing the work, too, through their organizations, the Niskanen Center and RepublicEn.

Naomi: And all of these efforts may be making a difference. In February of this year, 25 House Republicans met at a secret climate summit in Utah to discuss the future of the Republican party’s role in climate action.

Casey: “Secret” climate summit, Naomi? If it was secret, then how did we find out? 

Naomi: I’veee got my sources. And anyway, everyone found out a week later. But back to the conference itself, both outspoken climate advocates and climate curious Republicans attended.

Maria: Prominent Republican leaders, even those who didn’t attend the conference, are also deeply considering the future of the party. Kevin McCarthy, who we’ve mentioned, House Minority leader, has long been a climate skeptic. But in 2019, he proclaimed to the Washington Examiner that “For a 28-year-old, the environment is the No. 1 and No. 2 issue.”

Casey: Still, Kevin McCarthy’s most recent proposals have not matched the depth and scope of John McCain’s cap-and-trade proposals in 2008 and have mostly focused on smaller actions, such as tree planting, plastic waste, and clean energy R&D.  I know journalist David Roberts worries this is just posturing to soften the media’s perception of Republicans on climate. After so much denial, it would be hard for Republicans to change their stance on climate change all at once. Here’s Jerry Taylor on where the majority of Republican leaders find themselves:

Jerry Taylor: What we find when we talk to Republicans, elected members of the House and the Senate and their senior staff, what they say privately is very different from what they say publicly. For the most part, there is an awareness that climate change is real... and that it's a serious problem that we need to address. And there's also an awareness that politically, denialism, uh, is not long for this world given the changing demographics of the American electorate. 

And they like to act, but they like to act in a way that is consistent with their political DNA, which is an embrace of free markets and capitalism and that sort of thing. And there's also a reluctance to just come straight out and say, we were wrong all along.

And yeah, what the Democrats are talking about is worth embracing. I mean, nobody in politics who wants to do that. Right? That would be a huge blow to the Republican party... So what they need is a Republican answer to climate policy that looks somewhat different from the Democratic answer to climate policy.

And one that is at least broadly speaking, copacetic with what Republicans say about the role of government. Which is why for a lot of Republicans, carbon pricing, simply fixing price signals and using that as the main mechanism by which we drive de-carbonization to something that's reasonably attractive.

Casey: Changing your mind is hard enough when you’re in conversation with yourself.  How much harder to do in public?  Jerry Taylor was a climate change denier for decades, and now his life is focused on climate action. [Listen to our bonus episode, Climate Stories, to hear his account of how he came around on Climate Science.] And Bob Inglis made a similar, public about-face on climate:

Bob Inglis: I don't expect many conservative elected officials to do what I did in terms of saying, listen, I'm sorry. I was just wrong before… Truth be known in politics, there's not a whole lot of grace... in a faith context, one can admit one’s faults and come forward and receive forgiveness and grace and redemption… but in politics, you step out into that hour to go forward to repentance and people stab you in the back and then they step over your dead body and go get what you were going to get.

Okay, so it's a different situation when in politics… we can't expect everybody to say, listen, I was just wrong before now I see the light. But I think we can say, see people doing this. Saving face by saying, this solution you were talking about before just wouldn’t work, but now you're talking about a new solution, a small government solution.

And again, it's one that actually Al Gore has been for for 30 years, but it's just price carbon dioxide, do what Dr. Milton Friedman would say to do if he were still alive… And then conservatives can say, oh, well now you're talking a much better solution. One that will create innovation in the free enterprise system, and yeah, I can be for that.

Casey: Let’s keep thinking about the partisan dynamics at play. If what Bob Inglis is talking about happens--if Republican voters and leaders--and more conservative think tanks and more big industry trade groups--change their position on climate action, how will the Democratic Party and left-leaning think tanks, non-profits, and media organizations react? Audience, how would you react if someone you’ve been arguing with for decades said, “You know, let’s do the thing you’ve been saying we should do for a long time.”  What would you say?

On my best day, I still worry I would say some version of, “I told you so.”  And on my worst day?  I shudder to think.  But if it’s our future in the balance, how should people on the political left be ready to respond?  Sometimes it seems like the U.S. will need something like a truth and reconciliation commission to get past the rancor and come together on climate, if we’re ever going to find a lasting legislative solution. Here’s a last word from Jerry Taylor—

Jerry Taylor: I think sometimes the vocabulary and the framing is different, but there's not a, there's no conservative case for saving the planet or a liberal case for saving the planet from potential destruction. There's simply a case for saving the planet from, from destruction, and nobody gains from watching the planet burn to a crisp.

Casey: As we’ve just heard, Republican attitudes on climate appear to be starting to change.  And so are views on the left.  Next episode, we’ll look at carbon pricing from a progressive lens and we’ll see that my rom-com analogy continues to hold.  Please join us. And if you want to help spread the word on this series, remember that podcast platform algorithms react powerfully when listeners like you,

Kids: Um - well like and subscribe, rate and review!

Casey: This episode was written by Maria Jiang with help from Casey Pickett, Jacob Miller, and Naomi Shimberg.  Sound engineering by Jacob Miller.  Original music by Katie Sawicki. Special thanks to the Carbon Pricing Leadership Coalition, and a final thanks to Ryan McEvoy, Stuart DeCew and Heather Fitzgerald for making this episode possible.

Email us with questions and comments at carbon@yale.edu. Thanks for listening.