Charles Komanoff – Page 15

Carbon Tax Center

Pricing carbon efficiently and equitably

Australia’s Brief, Shining Carbon Tax

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I was there to catch a man
I thought I had him by the hand
I only had him by the glove
The War on Drugs, I Was There, 2011

Australia, engulfed in flames, choking in smoke, a billion animals perished, once had a powerful climate solution by the hand: a carbon tax. The nationwide tax on fossil fuels was in effect for just two years, but what an impact it had, helping the country cut its carbon emissions while economic activity climbed unimpeded. During the carbon tax’s middle year, 2013, Australia’s CO2 to GDP ratio had its sharpest drop ever (see graph below).

Lake Conjola in New South Wales on the last day of 2019. Photo by Matthew Abbott, courtesy NY Times.

Australia stands apart, then, not just in the magnitude of its climate-charged horror but in deploying a climate-change antidote, only to lose it to a right-wing, coal-financed backlash. Not even Trump’s dismantling of the Obama pro-climate Clean Power Plan and auto-mileage standards, unsettling as it has been, stands out as cruelly as Australia’s renunciation of its carbon tax.

Unwanted child, stepchild, bastard child … Australia’s carbon tax was all of that. It took effect on July 1, 2012, the keystone of a deal between the Labor Party headed by incoming prime minister Julia Gillard and the pro-carbon tax Green Party, whose votes Labor needed to attain a majority.

As Australian journalist Julia Baird noted in a 2014 NY Times op-ed, Gillard’s earlier pledge to not tax carbon emissions and her “perceived lack of conviction in the policy itself” damaged the tax’s credibility and her own viability. The subsequent electoral victory of a “Liberal” (read: right-wing) government committed to repealing the tax led to its rescission on July 17, 2014.

Yet the tax appears to have performed brilliantly. With just two years of data, we can’t draw sweeping conclusions. Nevertheless, we have these ineluctable facts about the 24 months in which Australia taxed carbon emissions from all major sources except petrol-fueled transport:

  • CO2 emissions from burning fossil fuels in Australia fell 2.4 percent in 2013 and 1.1 percent in 2014 — the two steepest year-on-year declines since 1990, when modern record-keeping began.
  • Emissions in 2014 were 14 million metric tons less than in 2012. The decline was powered by a 19 million metric ton drop in the electricity sector, which is highly carbon-intensive and thus the most responsive to carbon pricing. (Increases in mining and manufacturing emissions somewhat offset that downturn.)
  • Economic activity was unaffected by the carbon tax, as indicated by the minimal difference between the 3.01% average annual rise in GDP for the years 2012, 2013 and 2014 vs. the 3.07% average rise for the remainder of the 1990-2017 period for which we had data.

As each day brings new stories of suffering from the terrifying temperatures (including a continent-wide average 107.4ᵒF on Dec. 18) supercharged by climate change, we can only speculate what might have turned out differently if the country hadn’t abolished its carbon tax in 2014.

Calculations by author, from data posted by Australian Greenhouse Emissions Information System, Department of the Environment and Energy. CO2 figures include all sectors except Agriculture, Forestry & Fishing. GDP data are from World Bank and in constant US dollars.

For one thing, the 18 million metric ton rise in nationwide emissions since 2014 (to 2017, the last year for which the government has issued data) might have been averted if the carbon price signal had stayed in place. Emissions might even have shrunk if the tax had risen from its roughly $20 per ton level — and if the national government had embarked on a New Deal-style project to harvest the country’s vast solar and wind resources.

Even more, Australia’s action might have rippled through the world. The example of a proudly macho and avowedly hedonistic society explicitly pricing its carbon emissions could have turned heads, particularly in the United States, with its many cultural resemblances to Down Under. The fantasy of a land that produced Mad Max and Crocodile Dundee serving as a global role model for carbon taxing and reduction is delicious, though alas, no more than that.

Had Australia continued taxing carbon, British Columbia, the other English-speaking jurisdiction with an explicit carbon tax, wouldn’t have been dismissible as a unicorn. Carbon tax campaigners in, say, Washington state, whose voters considered but rejected a carbon tax in 2016, would have had more than one drum to pound.

Stark difference in CO2 emissions between three years in which Australia’s carbon tax was in effect and rest of 1991-2017.

It could be said, of course, that Australia’s rescission of its carbon tax is merely one of a number of missed opportunities around the world to tackle climate change by transparently pricing carbon emissions. In an alternative U.S., influential left-greens like Van Jones, Naomi Klein and Food & Water Watch might have backed that Washington carbon tax referendum — or, at least, not lent their voices to the opposition. Earlier, at the start of the Obama presidency in 2009, U.S. “big green” groups could have thrown their weight behind straight-up carbon taxing rather than try to muscle the convoluted, Wall Street-friendly Waxman-Markey cap-and-trade bill through Congress.

But Australia’s fateful choice is harder to bear. A country of 26 million people didn’t merely pass up a potential opening six years ago; it turned its back on an actual, promising beginning by bringing to power a confirmed climate denier, Tony Abbott, who axed the tax in 2014 and just a month ago, as his country was becoming a cauldron, complained to an Israeli radio audience that the world was “in the grip of a climate cult.”

When summer ebbs and the fires and smoke recede, Australians should consider how and why they disarmed themselves in the fight to stop climate change; and then make a new start by reinstating a policy that, in the brief time granted, appears to have worked wonders.

For more on Australia’s carbon tax history, click here (the Australia section of CTC’s “Where Carbon is Taxed” page).

How Our 2019 Reading Led Us to Broaden CTC’s Mission

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Among the gazillion articles, posts and books I read this year, three stand out.

Together, the three reads helped spark the Carbon Tax Center’s transformation from single-minded focus on carbon taxing and toward our new synthesis of taxing both carbon and inequality in support of a Green New Deal. As the year draws to a close, I want to share these pieces with CTC subscribers and visitors.

These shaped our thinking in 2019: Reporting on the ecological roots of the New Deal and the Gilets Jaunes protests, and a book on U.S. tax inequality.

Two of them, long-form journalism published in Harper’s magazine, plumbed the yellow vest protests in France and the ecological roots of Franklin Roosevelt’s New Deal. The third, a searing, book-length exposé of tax inequality in the United States, is already reverberating in the current presidential campaign.

1. A Play With No End: What the Gilets Jaunes Really Want, by Christopher Ketcham, Harper’s, August 2019

(Full disclosure: Christopher and I are longtime friends, close enough that I wrote a eulogy to his stepmother, who died last month, and for us to have had several long conversations about his Gilets Jaunes story as he was setting it to paper last spring.)

The Gilets Jaunes movement, named for the yellow vests that French motorists are required to keep on hand for emergencies, rocketed to public attention last December when their largely rural protests against fiscal austerity reached the capital.

Ketcham drew on his direct observations of three tumultuous yellow vest marches in Paris last winter, in which he talked with hundreds of protesters — working and unemployed people and pensioners whose lives have teetered as their communities have been hollowed out by deindustrialization and megastores. He discovered that the Gilets Jaunes weren’t, as the mainstream media insisted, protesting climate action; they were rising up against the yawning gap separating them from the super-rich, a gap widened by President Macron’s rescission of French wealth taxes just weeks before he pushed through a modest carbon levy that raised prices of gasoline and diesel fuel but left aviation fuel untouched.

“The new carbon tax — nine cents more per liter of diesel, four cents more per liter of gasoline — ­may have been the proximate cause that galvanized the Gilets,” Ketcham wrote, “but the worsening conditions of what the protesters called “l’injustice fiscale” [fiscal injustice] provided the powder for an explosion.”

Journalist Chris Ketcham on Paris’s Champs-Élysées. March 2019 photo by Agnes Dherbeys.

My conversations with Ketcham helped me appreciate the taint of unjustness that has come to surround stand-alone carbon taxing. That a carbon tax can, in theory, be made income-progressive — something this site has trumpeted for a decade — dissolves into irrelevance so long as the ultra-wealthy can consume fossil fuels with impunity while dominating discourse about our dependence on them.

One passage in particular in Ketcham’s article points to a possible escape from this dilemma — a passage I helped him craft on the roof of my apartment building in lower Manhattan, under the thwack-thwack of helicopters whisking the richest of the 1% to their weekend redoubts:

The war of the Gilets Jaunes against the rich, in the age of climate change, is one driven by an understanding unique to protest movements in France: that the privilege to lord and the privilege to pollute are one and the same.

If that is so — if the privilege to pollute is indeed the privilege to lord — shouldn’t we seek to tax both carbon and the super-rich?

2. Where Our New World Begins: Politics, Power and the Green New Deal, by Kevin Baker, Harper’s, May 2019

If Ketcham’s story put the lie to the media image of the yellow vests as know-nothing French trumpistas, Baker’s article resuscitated the Depression-era New Deal as an ecological project, not just an employment-creating and wealth-creating one. Indeed, in Baker’s telling, the New Deal’s three elements of jobs, production and care for the land were so intertwined as to have been one and the same.

Baker’s article begins in two disaster areas: the pre-TVA, flood-prone, impoverished Tennessee Valley, and the mid-thirties mid-American Dust Bowl:

In their desperation, the people of the Tennessee Valley had begun to cut or burn down more and more of the area’s once copious forests every year, seeking to clear more marginal land for farming, to sell the timber, or simply to heat their homes and cook their meals. Deforestation only further drained the soil, and what little land they had kept slipping away.

And this, about the high plains of eastern Montana, Wyoming and Colorado, across Nebraska, Kansas, Oklahoma and Arkansas:

The dust storms were not merely blown dirt, frightening as that might seem, but entire weird weather systems marching across the land. The static electricity they generated made fire dance along barbed wire and shorted car ignitions. It electrocuted farm animals and those few crops the blowing dirt had not already smothered — literally blackening vegetables in the patches where they lay. The people in the paths of these storms huddled in the darkness, unable to see their hands before their faces for hours, choking — sometimes choking to death — on the “dust pneumonia” that scarred their lungs as badly as if they had contracted tuberculosis.

Baker reminds us that the dust storms were human-made. Nineteenth-century warnings from the likes of John Wesley Powell — Colorado Plateau explorer and founder of the U.S. Geological Survey — that large-scale farming of the dry lands “beyond the hundredth meridian” was unsustainable, were plowed under by propaganda from mercenary railroads and their government enablers:

Much as the Trump Administration and corporate America react today to the idea of climate change or anything else they don’t want to hear by making stuff up, the government and the railroads … promoted quack theories to serve their purposes. No water? Don’t worry: there was always “dry farming,” “dust mulching,” and the imperishable notion that “rain follows the plow”— or civilization in general.

Office of War Information poster, artist unknown, c1942-1945, courtesy Harper’s magazine.

Linking Trump and today’s corporate America to their rapacious forebears is a constant refrain in Baker’s article. Another is pearl-clutching by mainstream gatekeepers such as The New York Times’ editorial board, both in 1933, opposing FDR’s fast-tracking of TVA authorization and funding (“enactment of any such bill at this time would mark the ‘low’ of Congressional folly”) and in 2019, decrying the sweeping ambition of the Green New Deal resolution from Rep. Alexandria Ocasio-Cortez and Sen. Ed Markey (“the resolution wants not only to achieve a carbon-neutral energy system but also to transform the economy itself”).

To be fair, that 2019 Times editorial, The Green New Deal Is Better Than Our Climate Nightmare, offered some positives about the resolution. Yet The Times’ tunnel vision is on full display in the passage excerpted by Baker:

Read literally, the resolution wants not only to achieve a carbon-neutral energy system but also to transform the economy itself. As Mr. Markey can tell you from past experience, the first goal is going to be hard enough. Tackling climate change in a big way is in itself likely to be transformative. We should get on with it.

What Markey and AOC grasp, and, The Times may come to understand, though perhaps too late, is that, in Baker’s words, “We must address climate change, and we must transform the way our political and economic systems work in this country — just as we did during the Great Depression. There is no way to do one vital thing without doing the other.” While TVA, the Soil Conservation Service and many other New Deal initiatives were imperfect, as Baker notes, they pulled the land, and the country, together.

3. The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay, by Emmanuel Saez & Gabriel Zucman.

Saez and Zucman may not have intended it, but their new book — our third and final 2019 read — goes a long way to fulfilling Kevin Baker’s commandment to simultaneously address climate change and transform America’s political and economic systems.

That’s a high compliment for any book, and a particularly startling one for a book whose nominal subject is taxation. But reading “The Triumph of Injustice” is a revelatory experience, making clear just how much has been and is being stolen from working- and middle-class Americans to bloat the already criminally swollen coffers of the super-wealthy.

Graphic from “The Triumph of Injustice” by Emmanuel Saez and Gabriel Zucman.

In 2018, for the first time in at least a century, and perhaps ever, Saez and Zucman report, billionaires — the 400 wealthiest U.S. families — paid lower tax rates than the working class, which the authors define as the bottom half of U.S. households. The respective 2018 tax rates were 23.0% for the billionaires and 24.2% for working class households. In 1960, Saez and Zucman’s graph informs us, the ratio of tax rates exceeded two-and-a-half to one (56.3% to 21.6%); even as recently as 1980, on the eve of Reagan’s ascent to the White House, the ratio was still close to two to one (47.2% to 25.7%).

These percentages are emblematic of American inequality. Plunging tax rates for those at the top of the income pyramid, engineered primarily through diminished taxation of capital (lower rates on capital gains and corporate income) have fueled what Saez and Zucman call “a snowball effect [whereby] wealth generates income, income that is easily saved at a high rate when capital taxes are low; this saving adds to the existing stock of wealth, which in turn generates more income, and so on.” The income pyramid grows ever steeper.

Snowballing is bidirectional. Burgeoning wealth at the top lets the super-rich buy heretofore unimagined political influence, not just through lobbying and campaign contributions but by creating and/or purchasing wealth-glorifying think tanks and media outlets. The result transcends ready-made votes in Congress and state legislatures to include an intellectual and cultural climate that valorizes the wealthy and stifles those who would counter the snowballing by taxing extreme wealth.

A signal achievement of “The Triumph of Injustice” is its painstaking construction of a century’s worth of tax incidence, not just at the federal level but state and municipal as well. The authors define eight or more tax categories — income, property, corporate, estate, wealth, payroll, consumption and health (the last encompasses payments for private and government health insurance) — and chart their “bite” for each income decile as well as for the top 1%, 0.1% and 0.01% and America’s 400 billionaires.

As if this tour de force weren’t enough, “The Triumph of Injustice” embeds its calculations and findings in a captivating narrative of American tax history from the colonial era through the Civil War, the Gilded Age, the New Deal, the postwar (and bipartisan) high marginal tax rate years, to Reagan’s tax renunciation (“Government is not the solution to our problem, government IS the problem”) and Trump’s tax “reform.” It’s illuminating and disturbing.

U.S. tax breakdown under Sen. Warren’s plan, per Saez & Zucman at taxjusticenow.org.

It wasn’t just tax erudition that vaulted Saez and Zucman to their status as architects of Sen. Elizabeth Warren’s and Sen. Bernie Sanders’ wealth tax plans. The likely clincher was their ability to calculate the revenue the Treasury stands to gain, year by year, through various permutations and combinations of raised taxes on capital (in the form of higher tax rate for capital gains, corporate income, and estates); and to explain how strong regulation backed by an aroused public could seal off the multiplicity of escape hatches from the higher taxes.

Somehow, “The Triumph of Injustice” delivers all this in just 200 pages. Even better, Saez and Zucman have posted their wealth and tax-incidence data on their website, taxjusticenow.org. The topper is their elegant, interactive page that lets you Make Your Own Tax Plan and see how the Warren and Sanders plans, or a plan of your own devise, can cut the holdings of the ultra-rich down to size and return American taxation to the relatively egalitarian shape it maintained from the New Deal through the Great Society.

Our Next Steps

At CTC, we are expanding our program around a new synthesis: a Green New Deal funded by taxes on extreme wealth — “taxing inequality,” you could say — and supported by a revenue-neutral carbon tax.

You can read more about this redirection here. We wish to emphasize that it is not an abandonment of carbon taxing. Far from it. Rather, we intend to situate carbon taxes in a broader framework that is suited to both the political dynamics and the climate emergency that will dominate the third decade of the 21st Century, and beyond.

A New Synthesis: Carbon Taxing, Wealth Taxing & A Green New Deal

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The Carbon Tax Center was founded in 2007 on the belief that the most direct path to decarbonize the world economy lay in enacting a robust U.S. carbon tax and replicating this policy across the globe.

A dozen years on, we are expanding our program around a new synthesis: a Green New Deal funded by taxes on extreme wealth — “taxing inequality,” you could say — and supported by a revenue-neutral carbon tax such as the fee-and-dividend approach espoused by Citizens Climate Lobby.

Illustration by Dan Bejar, from Harper’s magazine May 2019 cover story, “Where Our New World Begins: Politics, power and the Green New Deal.”

Here’s why: After decades of denialism by the right and antipathy from the left, we have reached a point where, standing alone, a carbon tax is too fraught politically and too weak economically to serve as the centerpiece of U.S. climate policy. We now believe that the path to decarbonizing the U.S. economy lies in a Green New Deal-inspired infrastructure and investment program funded by taxes on extreme wealth and supported by a carbon tax.

CTC envisions a three-part program to accomplish this:

  1. A Green New Deal plan investing $10 to $20 trillion over a 10-year period to develop the infrastructure, industrial capability, and consumer incentives to decarbonize the U.S. energy system within several decades.
  2. New taxes on extreme wealth and financial transactions, supplemented by increases in estate taxes, marginal income tax rates, capital gains and corporate taxes, to generate, from the wealthiest American households, the estimated $10 trillion or more needed to pay for the Green New Deal energy programs.
  3. A rising charge on carbon emissions from fossil fuels that supports the Green New Deal energy programs by shortening payback periods for green investment and embedding energy efficiency and conservation throughout American society.

 

Our Program Is Unique and Synergistic

Although others have advanced the three individual elements of our program, none have proposed them in combination. Our integrated treatment offers synergistic political and economic benefits:

  • Funding the Green New Deal through wealth taxes obviates the need to invest the carbon tax revenues, allowing the carbon tax to be revenue-neutral and thus more politically palatable.
  • Assigning the proceeds of the wealth tax to the Green New Deal – a program to preserve the climate and save society – undercuts the argument that confiscating the super-wealthy’s vast fortunes is purely retributive.
  • Tying the carbon tax to taxes on extreme wealth connects carbon taxing to its radical roots, making it more palatable to the left.
  • Taxing extreme wealth limits the ability of the super-wealthy to maintain their political contributions, think tanks and other channels of influence that are stifling not only climate action but other endeavors to reform politics and society.

This redirection is not an abandonment of carbon taxing. Far from it. Rather, we intend to situate carbon taxes in a broader framework that is suited to both the political dynamics and the climate emergency that will characterize the new decade, and beyond.

CO2-coin logo courtesy of Tommaso Sansone.Click here for a longer and more recent post outlining how we came to embrace this new synthesis.

Until there are penalties for emitting carbon, clean alternatives will just meet new energy demand. They are not currently displacing ‘fossil fuel use to any great extent’ and will not in the future.”

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Robinson Meyer, commenting on three linked articles by the Global Carbon Project, in 5 Big Trends That Increased Earth’s Carbon Pollution, The Atlantic, Dec. 3. The quote is from the project’s article in Nature Climate Change (links are in the Atlantic article).

The Climate Moment — and Movement — Have Passed Mike Bloomberg By

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I’m rarely without one of my own bikes. But lately, dicey weather and scheduling issues led me to add Citibikes to the mix. And during each hassle-free ride I marveled anew that since 2013 the City of New York, home to some of the world’s most contested streets, actually cleared out space for the bicycle docks and racks.

The man who faced down the skeptics — of whom there were many — and saw bike-sharing through? Michael Bloomberg, during his third and final term as mayor.

As NYC mayor, Bloomberg supported the subways. He also rode them.

Earlier this year, Albany legislators wrote language into the state budget that in 2021 will launch the world’s most ambitious congestion-pricing plan in NYC. As visitors to this site know, I fought for this groundbreaking program, as pamphleteer and traffic-modeler. I recognize that congestion pricing’s passage was made possible by a host of advocates in and outside government. High among them was Bloomberg; his bold though unsuccessful push for traffic tolls a dozen years ago laid the ground for this year’s win.

As mayor, Bloomberg instituted a slew of measures, many of them controversial, that have made New York more healthful and prosperous. All deserve to be counted as green achievements because they have attracted and kept businesses and residents in our dense and efficient, hence low-carbon city. He also, in 2007, called for a U.S. carbon tax, becoming perhaps the most prominent American to back straight-up carbon taxing rather than the convoluted cap-and-trade schemes beloved of mainstream environmental groups back then. More recently, Bloomberg’s post-mayoral contributions to the Sierra Club’s “Beyond Coal” campaign helped shove scores of carbon-spewing coal-fired power plants into early retirement — a certified climate win.

Knowing all this, you might ask why, in an interview with Inside Climate News, I chose to pour cold water on the idea of Bloomberg as a 2020 climate candidate . . . going so far as to call him “the perfect climate candidate for 2007.” (My epithet wrapped ICN’s story yesterday, Bloomberg Is a Climate Leader. So Why Aren’t Activists Excited About a Run for President?)

Why? Because, as I told ICN, I believe that extreme wealth stands in the way of the radical transformations the climate emergency requires.

If, as I believe, rapid and full decarbonization must entail fundamental changes in how humans live and work and organize, then everyone’s lives must transform. It won’t wash for the super-wealthy to go on leading lives of unbounded privilege — luxuriating on their yachts, globetrotting among their mansions, helicoptering from one island or summit gathering to another — burdened only by carbon fees on their huge footprints.

Bloomberg is of that class. That he has greater awareness than his peers is to his credit. But so long as he wields and personifies extreme wealth, he cannot be the avatar of transmuting it into productive use.

In the U.S., new work by the U-C Berkeley economists Emmanuel Saez and Gabriel Zucman suggests that taxes on extreme wealth and financial transactions, supplemented by increases in estate taxes, marginal income tax rates, capital gains and corporate taxes, will be able to generate trillions of dollars from the wealthiest American households. Those revenues, not carbon tax revenues, must be the funding source of the vast amounts needed to pay for the Green New Deal energy programs.

Unfortunately for Bloomberg’s presidential candidacy, fundamental climate solutions can’t co-exist with extreme wealth.

What I meant by my “Bloomberg 2007” comment is that, with climate damage already skyrocketing and emissions still rising, we’ve shot past the point when a carbon tax could have been the primary policy engine to slash U.S. and other nations’ carbon emissions quickly enough to keep the rise in global temperatures under the presumed 1.5ᵒC ceiling.

That wasn’t so in 2007, the Carbon Tax Center’s inaugural year as well as when Mike Bloomberg vaulted to the front of the valiant band of political leaders and advocates calling for robust carbon taxing. But now, a dozen years on, the climate crisis is too dire, and economic inequality too extreme and enraging, for carbon taxing to function as the main ticket out of climate catastrophe.

In the coming months, the Carbon Tax Center will be retooling our program to reflect our new view that the path to decarbonizing the U.S. economy lies in a Green New Deal-inspired infrastructure and investment program funded by taxes on extreme wealth and supported by a carbon tax. Please watch this space.

As for Mike Bloomberg, we acknowledge, with deep gratitude and genuine respect, his past vision and leadership and thank him for his service. The torch is passing to new leadership that will attack the power to lord and the power to pollute at the same time.

March 2020 addendum: On March 1, just before Bloomberg ended his candidacy, NY Times climate reporter Lisa Friedman posted an unusually substantive and nuanced assessment of his climate record, Fighting Coal Was Supposed to Lift Bloomberg. Here’s Why It Didn’t. The money quote is from Paul Bledsoe, a strategic adviser at the Progressive Policy Institute:

Bloomberg is a victim of the climate debate moving much faster than the positive realities he helped shape on the ground. In particular, his focus on coal seems passé now that the target of the left is natural gas.