Conservatives

This new page (begun April 2012) will compile statements by conservative elected officials, commentators and other public personages that express support for carbon taxing or, at least, potential openness to considering a carbon pollution tax as a revenue mechanism to help address the U.S. fiscal crisis. It is one of half-a-dozen pages compiling expressions of support for carbon taxes (or more targeted taxes, e.g., on gasoline) by notable individuals and organizations. Use Navigation Bar at top of page to access other pages.

Writers and Pundits

Peter Van Doren, Cato Institute: “The one concept that all students, even those sleeping in the back of the lecture hall, learn from an introductory economics class is that prices matter. And more particularly, students learn that as prices increase, the quantity consumed goes down. So if fossil fuel combustion produces byproducts that cause negative health effects on third parties as well as changes in the temperature of the atmosphere, the obvious lesson from economics is to increase fossil fuel prices enough through taxation to account for these effects. Then firms and consumers will react to these prices in thousands of different ways, the net result of which is less aggregate fossil fuel combustion… [Yet] voters and their elected officials resist this simple insight and instead prefer to impose only energy efficiency standards on manufacturers of consumer appliances and automobiles. A singular emphasis on energy efficiency rather than prices has two important drawbacks. First, more efficient appliances and automobiles cost much more to achieve equivalent energy savings than a tax on fossil fuel consumption. This occurs because higher prices encourage all possible avenues of reducing energy consumption — which efficiency standards do not. Excerpted from “When Prices Are Wrong, Markets Don’t Work,” in NY Times, “Room for Debate,” The Siren Song of Energy Efficiency, March 19, 2012.

Economists

Gregory Mankiw (Harvard): Perhaps the most widely published advocate for higher fuel taxes in the economics profession is Gregory Mankiw, Harvard professor and chair of the President’s Council of Economic Advisers, 2003-2005, and, since 2010, senior advisor to Republican presidential candidate Mitt Romney.

Mankiw powerfully made the case for a carbon tax in an op-ed, One Answer to Global Warming, in the Sept. 16, 2007 NY Times Sunday Business Section (see our blog for excerpts and discussion). His 2006 Wall Street Journal op-ed pieces (Jan. 3 and Oct. 20) are among the many lively pieces available on Mankiw’s pro-fuel-tax blog, The Pigou Club Manifesto. (Economist Arthur Pigou, 1877-1959, developed the concept of economic externalities along with corrective “Pigovian” taxes.) On the last day of 2006 Mankiw reiterated his 2006 New Year’s Resolutions from his Jan. 3, 2006 WSJ piece, including:

I will tell the American people that a higher tax on gasoline is better at encouraging conservation than are heavy-handed CAFE regulations. It would not only encourage people to buy more fuel-efficient cars, but it would encourage them to drive less, such as by living closer to where they work. I will tell people that tolls are a good way to reduce traffic congestion — and with new technologies they are getting easier to collect. I will advocate a carbon tax as the best way to control global warming.

In a Sept. 16, 2006 post to his blog, Rogoff Joins the Pigou Club, Mankiw listed some three dozen other economists and pundits who have publicly advocated higher Pigovian taxes, such as gasoline taxes or carbon taxes. The list includes, in addition to several individuals mentioned here, such notables from economics, finance and journalism as Alan Greenspan, Gary Becker, William Nordhaus, Richard Posner, Anthony Lake, Martin Feldstein, Gregg Easterbrook and Lawrence Summers. (Links are included.)

In a June 1, 2008 NY Times column, The Problem With the Corporate Tax, Mankiw wrote:

I have a back-up plan for [Sen. McCain]: increase the gasoline tax. With Americans consuming about 140 billion gallons of gasoline a year, a gas-tax increase of about 40 cents a gallon could fund a corporate rate cut, fostering economic growth and reducing a variety of driving-related problems. Indeed, if we increased the tax on gasoline to the level that many experts consider optimal, we could raise enough revenue to eliminate the corporate income tax. And the price at the pump would still be far lower in the United States than in much of Europe.

More recently, Mankiw wrote in his Times column, A Better Tax System (Instructions Included):

Tax Bads Rather Than Goods: A good rule of thumb is that when you tax something, you get less of it. That means that taxes on hard work, saving and entrepreneurial risk-taking impede these fundamental drivers of economic growth. The alternative is to tax those things we would like to get less of. Consider the tax on gasoline. Driving your car is associated with various adverse side effects, which economists call externalities. These include traffic congestion, accidents, local pollution and global climate change. If the tax on gasoline were higher, people would alter their behavior to drive less. They would be more likely to take public transportation, use car pools or live closer to work. The incentives they face when deciding how much to drive would more closely match the true social costs and benefits. Economists who have added up all the externalities associated with driving conclude that a tax exceeding $2 a gallon makes sense. That would provide substantial revenue that could be used to reduce other taxes. By taxing bad things more, we could tax good things less. (Jan. 22, 2012)

Although this and some other pronouncements by Mankiw concern gasoline taxes rather than carbon taxes, they could be considered bold by a close adviser to the Romney for President campaign.

Arthur Laffer (former economic adviser to President Reagan): In a New Hampshire Public Radio interview (10/19/11), and in “Economist Arthur Laffer proposes taxing pollution instead of income” (Vanderbilt Univ., 2/20/12), Laffer recommends a carbon tax with revenue used to cut income taxes, a swap which he argues would create jobs, improve economic output and reduce pollution. As Laffer and (then) Rep. Bob Inglis (R-SC) wrote in the New York Times (12/27/08):

Conservatives do not have to agree that humans are causing climate change to recognize a sensible energy solution. All we need to assume is that burning less fossil fuels would be a good thing. Based on the current scientific consensus and the potential environmental benefits, it’s prudent to do what we can to reduce global carbon emissions. When you add the national security concerns, reducing our reliance on fossil fuels becomes a no-brainer.

Yet the costs of reducing carbon emissions are not trivial. Climate change may be a serious problem, but a higher overall tax rate would devastate the long-term growth of America and the world.

It is essential, therefore, that any taxes on carbon emissions be accompanied by equal, pro-growth tax cuts. A carbon tax that isn’t accompanied by a reduction in other taxes is a nonstarter. Fiscal conservatives would gladly trade a carbon tax for a reduction in payroll or income taxes, but we can’t go along with an overall tax increase.

Douglas Holtz-Eakin (American Action Forum): Holtz-Eakin, a senior policy adviser to the 2008 McCain campaign, is now president of the American Action Forum. In “Make a carbon tax part of reform effort” (Concord Monitor, 9/19/11), Holtz-Eakin argues for comprehensive tax reform to include a carbon tax so that more of the “true cost of burning a fossil fuel… in the form of air pollution, a negative impact on human health, harm to the environment or climate change [is a] component in economic decisions [such as] include whether to invest in a coal-fired power plant or a wind farm.” He suggests that carbon tax revenue be used to reduce the payroll tax, income tax and corporate tax rate. His organization, AAF, criticizes EPA regulation of greenhouse gases as costly and largely ineffective.

Irwin Stelzer (Hudson Institute): In “Carbon Taxes, An Opportunity For Conservatives” (2011) Irwin Stelzer, Senior Fellow and Director of Hudson Institute’s economic policy studies group wrote:

A tax on carbon… would reduce the security threat posed by the increasing possibility that crude oil reserves will fall under the control of those who would do us harm, either by cutting off supplies, as happened when American policy towards Israel displeased the Arab world, or by using the proceeds of their oil sales to fund the spread of radical Islam and attacks by jihadists.

A tax on carbon…  need not swell the government’s coffers — if we pursue a second, long-held conservative objective: reducing the tax on work. It would be a relatively simple matter to arrange a dollar-for-dollar, simultaneous reduction in payroll taxes… Anyone interested in jobs, jobs, jobs should find this an attractive proposition, with growth-minded conservatives leading the applause.

Kevin Hassett, Director of Economic Policy Studies at the American Enterprise Institute: Conservative economist (and McCain presidential campaign adviser) Kevin Hassett has long advocated a carbon tax as vastly preferable to costly regulations, subsidies or cap-and-trade schemes that induce energy price volatility and provide opportunities for manipulation and gaming by emissions traders.

Along with AEI colleagues Steven Hayward and Kenneth P. Green, Hassett authored “Climate Change: Caps vs. Taxes” (2007), a short and very readable article that deftly and systematically demolishes the myths surrounding cap-and-trade with offsets while sketching the structure of a simple, effective carbon tax “shift.”  The authors point out that many of the supposed advantages of emissions caps are based on assumptions about the success of EPA’s SO2 emissions trading program for power plants which is orders of magnitude smaller and simpler than the market that would need to be established for CO2 emissions. They argue that much of the EPA program’s apparent success in reducing SO2 emissions from power plants was due to simultaneous railroad deregulation which reduced the cost of delivering low sulfur coal strip-mined in the west. And they caution that a CO2 cap-and-trade program would induce price volatility, feeding speculators while starving legitimate investors in alternative energy.

The article neatly describes the potential for a “double dividend” obtained by tax shifting:  imposing taxes on CO2 pollution while using the revenue to reduce other distortionary taxes such as payroll, individual and corporate income taxes that dampen desirable economic activity. Hassett and colleagues suggest that such a carbon tax “shift” can improve the overall output of the economy even without considering climate benefits and thus represents a “no regrets” policy for conservatives who aren’t convinced of the danger of global warming. The article cites authoritative works by a range of leading economists including Yale’s William Nordhaus and Stanford’s Lawrence Goulder who also support carbon taxes.


Last updated: September 04, 2012