The Weird (But Hopeful) Politics of a Carbon Tax

Democrats used to like this way of limiting greenhouse emissions. Now Republicans are open to it. Is there a way forward?

For Earth Day, Joe Biden announced an aggressive pledge: cutting our nation’s greenhouse gas emissions to half of their 2005 level by 2030. When his team briefed reporters, they were asked if Biden’s infrastructure proposal—which is chock full of climate initiatives, but has an unclear path forward in the Senate—was essential to meeting the goal. Biden’s people didn’t give a direct answer.

Biden has assembled, in the words of one administration official, an environmental “Dream Team,” which is trying to pull every executive branch lever to save the climate. But in all likelihood, the climate will need legislation from Congress—this balky, divided Congress. As former Republican congressman-turned-climate-activist Bob Inglis wrote for USA Today, “With a Supreme Court that may be skeptical of regulatory action on climate, we need legislation — sweeping legislation at the scale of the problem and legislation that’s bipartisan and therefore durable.”

You might think sweeping climate legislation could be partisan, passed through budget reconciliation. But when you realize the 50th Senate vote would be coal country’s Joe Manchin, you might then think not.

The door to a bipartisan solution has opened a crack. The American Petroleum Institute, the lobbying arm of Big Oil, in March formally endorsed a “carbon price policy”which could range “from a cap-and-trade system to a carbon tax.” (In exchange, API wants to “minimize the burden of duplicative regulations.”)  Senator Mitt Romney told the Washington Examiner that he is “interested” in the climate proposal from the business-environmental coalition, the Climate Leadership Council, which it describes as a “carbon fee.” Last year, his fellow Republican Senator Lisa Murkowski, who represents oil-rich Alaska, said that a “price on carbon … should be one of the options on the table for discussion.”

There’s just one problem. Now that Big Oil wants carbon tax, most Democrats don’t. 

Used to be that if you want to establish your progressive bona fides on climate change, you supported a carbon tax, as Senator Bernie Sanders did to distinguish himself from Hillary Clinton in the 2016 Democratic primary. The way it works now, polluters can emit greenhouse gas for free, even though the climate crisis imposes severe costs on all of society. A tax on greenhouse gas emissions would increase the cost of goods that contribute to global warming, incentivizing the purchase of goods that don’t.

But over the last five years, progressives have been distancing themselves from a carbon tax. In 2016, a Washington State carbon tax ballot initiative was opposed by some left-wing groups because it was revenue-neutral and didn’t raise revenue for robust investments in green jobs and poverty reduction. With corporate interests lined up against the measure as well, it lost by 18 points. (Two years later, Washington State progressives tried their own carbon tax ballot initiative and lost by 13.)

In late 2018, some on the left pointed to the French “Yellow Jacket” riots, which were sparked by higher gas taxes, to argue that a carbon tax would be regressive and rejected by the working classes. By this point, many on the left had rallied around Rep. Alexandria Ocasio-Cortez’s “Green New Deal” framework, which emphasized plowing massive amounts of money into green energy and keeping all fossil fuel in the ground. (AOC tweeted in 2019 that “carbon tax or cap-and-trade … could be *part* of a solution [but] they are inadequate as the whole answer.”)

When Sanders ran for president again in 2020, he abandoned his previous carbon tax position. Some environmental activists, such as Kassie Siegel of the Center for Biological Diversity’s Climate Law Institute, today view the API position as “self-serving greenwashing” which could “distract the Biden administration from the crucial work of keeping polluting fossil fuels in the ground.”

In the 2020 campaign, Biden was cagey about support for carbon tax or other forms of pricing carbon. He released a climate plan in June of 2019 calling for an “enforcement mechanism” to limit carbon emissions, which aides said would include a price on carbon. But the Democratic Party platform in 2020 stayed silent on carbon pricing. And as Biden further detailed his platform in the general election, his emphasis was on Green New Deal-style spending and mandates (though well short of AOC’s preferred speed and scope).

Team Biden appears to share with the activist left the view that the politics of a carbon tax are terrible. Last December a member of Biden’s environmental transition team shared on Twitter a “brilliant” podcast discussion in which political scientist Matto Mildenberger said, as reported by Inside Climate News, that a carbon tax would “make consumer costs and policy costs extremely salient, extremely visible, and extremely prominent … And it’s going to take all the benefits and background them, make them sort of politically obscure, put them into the future, and sort of hide them.”

During a podcast exchange about a carbon tax and carbon pricing with The New York Times’ Ezra Klein, White House economic adviser Brian Deese made a similar point: “It has to be that Americans see and experience that the investments in building out a more resilient power grid actually improve their lives and create job opportunities for them or their neighbors or otherwise.” Deese also said that carbon pricing had limited value on policy grounds, arguing that “economywide pricing” doesn’t cut emissions adequately in all industry sectors, since some “market failures or barriers [to private sector investment] are not just solvable by a [carbon] price…”

Deep mistrust of Republicans, and the oil lobby, surely plays a role in Democratic thinking. In fact, this is not the first time oil companies have entertained paying a fee as part climate legislation, only to see Democrats flinch.

In 2010, the “tripartisan” Senate team of Democrat John Kerry, Republican Lindsey Graham, and Joe Lieberman (the former Democrat who got re-elected in 2006 on behalf of Connecticut for Lieberman party), were trying to craft a “cap-and-trade” bill that would attract oil industry support, and in turn, bipartisan support. As The New Yorker reported, three oil companies agreed to a complicated arrangement offered by Kerry. A “cap-and-trade” system involves companies buying, and trading, a finite number of pollution permits, thereby limiting the amount of pollution without the government dictating exactly how much polluters pay. But the oil companies would buy permits outside of that system at a set price

Obama White House officials were skittish that the plan would get dubbed a “gas tax.” Fox News reported, attributed to “senior administration sources,” that “WH Opposes Higher Gas Taxes Floated by S.C. GOP Sen. Graham” even though it was not really a tax and it wasn’t Graham’s idea. Graham was livid, and at Kerry and Lieberman’s request, the White House subsequently released a statement saying the senators didn’t support a gas tax. That temporarily appeased Graham. But then Graham asked Senate Majority Leader Harry Reid to issue a statement in support of the plan. According to The New Yorker, “Reid’s aides thought the Republican leadership was trying to trick Reid into supporting something that sounded like a gas tax.” When Reid instead issued a noncommittal statement, “Graham shouted some vulgarities at Reid” during a phone call, and Reid hung up on him.

That wasn’t the only contributing factor to the ultimate failure of the climate talks (The Deepwater Horizon oil spill happened as the talks were nearing completion, creating new Democratic demands for oil drilling regulations, which Graham opposed.) But the same dynamics appear at play today. Democrats aren’t openly hugging Mitt Romney and the American Petroleum Institute for expressing interest in a carbon tax, because then the broader Republican Party can gleefully attack Democrats for supporting a carbon tax. On top of that, the mere act of grabbing the olive branch doesn’t guarantee ultimate passage of a bill.

Nevertheless, if Biden wants to meet his new climate pledge, he will likely need climate legislation, and that climate legislation will likely need to be bipartisan. Democrats may be understandably skeptical that a smidge of Republican interest in a carbon tax will grow into support from 10 Senate Republicans. But what other climate proposal has even that smidge?

No doubt the politics of a carbon tax are fraught. And Democrats are correct in deducing that people want to see immediate benefits from a climate policy, not pain and sacrifice. But the carbon tax bills introduced in the House and Senate incorporate everyone’s favorite policy these days: direct checks. Senate Majority Whip Dick Durbin’s bill would send 75 percent of the revenue back to the public, while Congressman Ted Deutch’s bill would send all of it back, in monthly checks. The Climate Leadership Council, which includes ExxonMobil, BP, Shell and ConocoPhillips, supports giving all carbon tax revenue to individuals.

A carbon tax isn’t necessarily a panacea for the climate crisis. In any compromise, the impact could be diluted by a low level of taxation, tax loopholes, or deregulatory concessions. But anything that gets through Congress will be an imperfect compromise. And trying to avoid Senate Republicans and Joe Manchin by solving the crisis strictly through executive actions will also be insufficient. A system for pricing carbon would be a massive step forward, which can be strengthened over time as the science dictates.

Progressives may want to create the space for a bolder climate policy by moving the Overton Window. But trashing a carbon tax isn’t moving the Overton Window to the left; it’s slamming the Overton Window on our own fingers.

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Bill Scher

Bill Scher is the host of the history podcast "When America Worked" and the co-host of bipartisan online show and podcast "The DMZ"