Passing the Coal Hat at the Church of Greta Thunberg
Another year of the Davos World Economic Forum has come and gone. One notable inclusion this year was “green” pope and teenage firebrand Greta Thunberg. Speaking at the conference, Thunberg admonished heathen world leaders for not doing more to stop the ruination of her childhood. She later joined the ongoing climate strike outside the forum. In response, economic elites venturing home from their luxurious digs in Switzerland are now calling for a carbon tax to kickstart the U.S. on a path to a “green” future.
But this green ideal is in fact a dystopia marred by high prices and greater government control. Future Davos conferences should focus on practical reforms, not pipe dreams fueled by emotion that threaten to quash the American dream.
By now, the church of carbon “pricing” has plenty of zealous converts and a well-worn gospel. If only the entire world could find the “right” price for carbon, they preach, the planet’s catastrophic warming could be reversed and Florida could be spared its fate as a tacky Atlantis. There is, of course, one small problem that these dystopian disciples choose to ignore: inevitable, catastrophic costs for consumers. The price of gasoline and electricity is an input to, well, virtually all goods, and making the lifeblood of the economy more costly won’t be good for anybody. A 2010 analysis by University of Wisconsin and Stanford University found that “just” imposing a $15-per-ton carbon tax in the U.S. would cost the poorest fifth of households more than $300 annually.
Meanwhile, a team from Columbia University’s Center on Global Energy Policy found that, with the $24-per-ton carbon tax plan proposed by ousted former congressman Carlos Curbelo, electricity prices would spike by 8 percent overnight and increase energy spending by $275 annually per person.
These troubling revelations have not stopped church devotees who hold out faith that any tax can be “revenue-neutral” by returning money to taxpayers via cuts in other taxes. Never mind the inevitably high costs of tax bureaucracy in administering such a program. The main purported example of this is British Columbia, which supposedly instituted a revenue-neutral C$10-per-ton carbon tax. That tax is now C$45 (roughly $30 U.S.). But according to budgetary research by the Fraser Institute, that nudge stopped being neutral a long time ago. Official budgetary claims notwithstanding, the tax ceased to be neutral in 2013, and now amounts to a net increase totaling more than C$700 (about $530 U.S.) for a family of four.
For all this pain, a carbon tax had better work wonders to save the world. Yet America’s share of global carbon emissions is only around 16 percent, and taxes by themselves are unlikely to lead to “deep decarbonization.” A forthcoming paper in the American Economic Journal finds, “After implementation of a carbon tax and VAT [value-added tax] on transport fuels in Sweden, CO2 emissions from transport declined almost 11 percent in an average year, with 6 percent from the carbon tax alone.”
This finding is nothing short of astounding. Sweden, which has a per-ton carbon tax rate of more than $130, can only manage an 11 percent annual reduction in its emissions. And apparently this is an outlier finding, since “earlier empirical studies…find little to no effect on emissions from carbon taxes.” In other words, people seem to mainly respond to gas price hikes by shelling out more dollars (or kronas) and not switching to “green” fuels and technologies. Even if America can muster up Sweden’s discipline and somehow tack on exorbitant prices to gas and electricity, global carbon emissions would likely decline by less than 2 percent as a result. Meanwhile, China and other developing countries would continue to darken the skies with new coal plants while the U.S. shoots itself in the foot by making its industries uncompetitive. But don’t expect facts to get in the way of the ongoing climate crusade for runaway taxation and government spending.
Ross Marchand is the director of policy for the Taxpayers Protection Alliance.