Marlo Lewis Slide Show Carbon Tax

5/22/2018 Marlo Lewis Slide Show Carbon Tax

1/21

Carbon Tax: A Conservative Idea

Whose Time Has Come?Marlo Lewis, Ph.D.

Senior Fellow

Competitive Enterprise [email protected]

202-331-2267
mailto:[email protected]:[email protected]


2/21

Self-Identified Conservatives Who

Advocate Carbon Taxes Irwin Stelzer, editor, Weekly Standard

Bob Inglis, former GOP Congressman, South Carolina

George P. Shultz, Secy. of State, Reagan Administration, 1982-1989

Kevin Hassett, Director, Economic Policy Studies, American EnterpriseInstitute

Arthur Laffer, member of President Reagans Economic Policy AdvisoryBoard, 1981-1989

Gregory Mankiw, Chairman, CEA, Bush II Administration, 2003-2005

Douglas Holtz-Eakin, Senior Staff Economist, CEA, Bush I Administration,1988-1989; Director, CBO, 2003-2005; senior economic policy advisor,

John McCain presidential campaign, 2007-2008

R. Glenn Hubbard, Chairman, CEA, Bush II, 2001-2003

Eli Lehrer, President, R Street Institute

Andrew Moylan, Executive Director & Senior Fellow, R Street Institute


3/21

Their argument . . . You cant beat something with nothing.

Conservatives need a serious climate policy or well become

politically irrelevant.

Conservatives complain about EPA regulations and high income tax

rates but have no plan to stop EPA or achieve real tax reform.

A carbon tax is the solution. It taxes bads (emissions), not goods

(capital, labor). It doesnt pick winners and losers but lets the free

market decide.

While making us credible on climate change, championing carbon

taxes will give us leverage to rein in EPA and cut income, corporate,capital gains, and/or social security taxes.

This aintpie-in-the-sky. British Columbia shows it can be done!


4/21

Fundamental Error

Carbon taxers confuse not supporting a compromising,inside-the-beltway deal with not having a plan.

Our plan is to make the moral, economic, and scientificcase for unleashing what technology analyst Mark Millscalls the North American energy colossus. AND . . .

Work to throw the bums out in 2014 and 2016 sonational policy facilitates rather than obstructsAmericas market-driven energy renaissance.

Carbon taxers unstated assumption: full-throatedconservative victory is impossible, maybe evenundesirable. Siren song of defeatism.


5/21

You cant beat something with nothing!

Many of the same pundits who push a carbon tax today did soduring the debates on the Kyoto Procotol and the Waxman-Markey

bill.

Cap-and-trade was inevitable unless Republicans endorsed a

carbon tax, they argued, because you cant beat something with

nothing. Wrong! Cap-and-trade died in the November 2010 elections, because

conservatives opposed it as cap-n-tax a disguised tax on energy.

And skeptics challenged climate alarm.

Rather than learn the obvious lessonwe can rally Americans to

our cause if we champion affordable energy and climate realism

R Street et al. ask conservatives to do openly what Obama and the

Democrats, fearing voter retribution, tried to do by stealth.


6/21

Carbon taxers are behind the times. Voters are not

clamoring for carbon regulation, because the alleged

climate crisis isnt happening.

In the 21st Century, Atlantic

Ocean circulation collapse isvery unlikely, collapse of the

great ice sheets is

exceptionally unlikely, and

catastrophic release of

methane from melting

permafrost is very unlikely.IPCC AR5, Chapter 12


7/21

Voters care much more about jobs and economic opportunity. States

where energy production is growing (Texas, Wyoming, North Dakota,

Colorado, Utah, West Virginia) are among those with the fastest GDP growth.


8/21

Conflicted and Confused

Conservative carbon taxers want to put pedal to themetal & slam on the brakesat the same time.

They profess to support fracking, Keystone XL Pipeline,even coal mining.

But the core premise of a carbon tax is: fossil fuels aredestroying the planet and should be suppressed.

If you tax a thing, you get less of it: Econ 101.

A house divided against itself cannot stand.

Conservative leaders cant promote carbon taxeswithout dividing the movement and demoralizing itsbase.


9/21

Carbon tax: Serious climate policy?

Using EPA climate sensitivity assumptions, Cato Instituteclimatologist Chip Knappenberger calculates that even if theU.S. economy were to shut down tomorrow, the net impactwould be a reduction in global temperatures of approximately0.17C by 2100an amount that is for all intents andpurposes, negligible.

A politically-feasible carbon tax would achieve even less -- acostly exercise in futility.

If climate change is a serious problem, the only real solution istechnological breakthroughs that make non-emitting energycheaperthan carbon energy. Zero-emission energy will scaleup rapidly only when it makes people richer.

Taxing away carbon energy before commercially-viablesubstitutes are available is economically-harmful andtherefore politically unsustainable.


10/21

Carbon Tax Pipe Dreams


11/21

Revenue Neutral?

Congresss big spenders and deficit hawks (oftenthe same people) have no interest in tax reformthat does not enhance revenues.

That was the real attraction of cap-n-tax. CEI FOIAfound Obama Treasury expected Waxman-Markey to generate up to $400 billion in newannual revenue.

David Kreutzer: It is delusional to believe that

$200 billion in new revenues could walk acrosstown [in Washington, D.C.] without beingmolested.


12/21

Carbon taxes are regressive, therefore . . .

(3) Carbon taxes cant be implemented

without significant revenues used for

welfare rather than to reduce other taxes.

(1) Fuel poverty: On average, U.S.

households earning


13/21

Even if possible, a revenue-neutral carbon tax would

harm the economy

The smaller the base on which a tax of a given size is levied,the more it distorts market signals.

Imagine if 10% of U.S. personal income taxes were replacedwith a targeted tax on automakers, farmers, or softwaredevelopers.

There would be a depression in the targeted sector, whichwould then have adverse multiplier effects on otherindustries.

The base of a carbon tax particular commodities and

industries (coal, power generation) is narrower than thebase for retail sales, income, and labor taxes.

Substituting carbon taxes for income taxes would make thetax system less efficient.


14/21

It taxes bads not goods?

A carbon tax is an activity tax, not a consumptiontax.

Its a tax on carbon-based (fossil) fuels, whichsupply 82% of U.S. commercial energy.

Energy, like land, labor and capital, is afactor ofproduction.

Without carbon-based energy, few of us would beemployed or even exist.

A carbon tax is an indirect tax on labor andproduction on goods.


15/21

Carbon tax: monster that eats its own tail

A carbon tax aims to de-carbonize the economy.

By design, it taxes away the base on which it is levied.

The more CO2 emissions decline, the more the tax

must be raised to generate the same revenue.

The higher the tax gets, the more we must rely oncostly, intermittent, under-performing energy sources

(wind turbines, solar panels, biofuels) that are not up to

the task of powering a modern economy.


16/21

A carbon tax doesnt pick

winners and losers? A carbon tax discriminates againstcarbon-based (fossil) fuels.

Thats its core function! Just because the market sorts out theeffects of a discriminatory tax does not make the tax non-discriminatory.

Like green energy mandates and subsidies for Solyndra,carbon taxes rig energy markets but throughout the

economy. Retailintervention bad, wholesaleintervention good thats

carbon taxers free market philosophy.

Like cap-and-trade, the purpose of a carbon tax is to finallymake renewable energy the profitable kind of energy inAmerica (President Obama). Its to drive investmentdecisions towards clean energy (former DOE Secy. StevenChu).

A carbon tax is all about picking winners and losers.


17/21

EPA Rollback? Neither Waxman-Whitehouse nor Sanders-Boxer would remove

one iota of EPAs authority or preempt any state GHG regulation. It [a carbon tax] would be the best legislative option. But I

wouldnt want it to replace the other actions that, say, the EPA

could take. Rep. Henry Waxman, Feb. 1, 2013

If greens really wanted to replace command-and-control with

carbon pricing, Waxman-Markey would have repealed regulations.

Instead, the bill contained hundreds pages of new regulations (e.g.

national green energy quota) before it even got to cap-and-trade.

Does anyone really believe Mass. v. EPA, the proliferation of state

renewable energy mandates, fuel economy standards, federalenergy efficiency standards, state electricity demand-reduction

programs, etc. were just a strategy to put conservatives over a

barrel so progressives could trade it all away for a carbon tax?


18/21

British Columbia: Model for the U.S.?

5 years after enactment,

Pembina Institute lobbied

to raise the tax from $30 to

$200 per ton and scrap

revenue neutrality.

Cost per household:

$1000/yr in higher natural

gas bills.

Christy Clark won Premier

race in part by promising tofreeze carbon tax for

another five years.

Less than 6% of BC electricity comes from fossil fuels!


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Political Big Picture:

A movement that is pro-tax and anti-energy competes for hearts and

minds with a movement that is pro-energy and anti-tax.

Conservatives are truly the dumb party if we squander our tax and energy

advantage, and mangle the product differentiation that gives voters a

reason to support conservative politicians!

Marlo Lewis Slide Show Carbon Tax

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