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[ On Carbon Taxes and Competition ]

The United States and China are talking different languages when it comes to reducing carbon emissions.

In the U.S. case, the Obama administration is the name of the game when it comes to federal action on climate change. (See here and here.) As for legislation? I would say there’s a snowball’s chance in our globally warming world that the 113th Congress will pass any climate bill aimed at reducing carbon emissions, let alone something as ambitious as a a carbon tax. Anybody care to debate?

Four Former EPA Chiefs Fuel the Debate
I like to refer to them as the Former Four — William Ruckelshaus, Lee ThomasWilliam Reilly and Christine Todd Whitman, all former administrators of the Environmental Protection Agency for Republican administrations. On August 1, they commented on the state of the climate debate in a New York Times op-ed.

In making “A Republican Case for Climate Action,” they began by noting that “[t]here is no longer any credible scientific debate about the basic facts [of climate change]” and that the ”costs of inaction are undeniable.” They then advise, as so many economists have already (see herehere, here and here), that a “market-based approach, like a carbon tax, would be the best path to reducing greenhouse-gas emissions.” but admit, as most political pundits (and anyone else you care to ask) will tell you, “that is unachievable in the current political gridlock in Washington.”

Gridlock or no, the former EPA chiefs had a bit of a climate gauntlet to throw down in the direction of Congress:

“Rather than argue against [Obama’s] proposals, our leaders in Congress should endorse them and start the overdue debate about what bigger steps are needed and how to achieve them — domestically and internationally.”

A House Flies in the Ointment

The day after their the Former Four’s appeal was published, the House responded to their challenge with a resounding, if indirect, No way.

On August 2, the esteemed House of Representatives passed an amendment by Rep. Steve Scalise (R-LA) to H.R.367 that “require[s] the Administration to receive approval from Congress before implementing a carbon tax” — another way of saying, There will be no carbon tax, Mr. President. The 237–176 vote included 12 Democratic votes in the “aye” column.

In a press release dated August 8 (which, incidentally, as of this writing shows a vote “of xxx to xxx,” literally), Rep. Scalise had this to say:

“President Obama’s plan to impose a tax on carbon would cause household electricity rates to skyrocket while destroying millions of American jobs. … The House sent a strong bipartisan message to President Obama that a tax on carbon would devastate our economy and he needs to drop any idea of imposing this kind of radical regulation.  The Obama Administration has used every trick in the book to implement its radical agenda through back door regulations.  This amendment is necessary to prohibit a carbon tax from being imposed by unelected bureaucrats on behalf of the President without legislative action and oversight.”

One might well wonder what plan of Obama’s Mr. Scalise was referring to. First off, there’s the U.S. Government 101 detail: the executive branch does not approve taxes, Congress does. Then there’s the question of whether Obama actually has a carbon tax plan in the works? No, according to White House Press Secretary Jay Carney who eschewed the idea of a carbon tax in November 2012 like so: “We would never propose a carbon tax, and have no intention of proposing one. “

Perhaps Mr. Scalise and his compatriots weren’t willing to take Carney’s word for it given that a carbon tax, in Scalise’s words, would “devastate our economy”? The thing is, who else says a carbon tax would “devastate our economy”? Many experts have concluded just the opposite — that a tax, properly implemented, would have minimal impact on economic growth: see here [pdf]herehere and here. Some even argue it’s “close to the economic ideal.”

Even so, I can picture Scalise and company arguing that we can’t afford anything that would slow down our economy, even just a little, if we want to be competitive with other countries. I mean, what country in their right minds would willingly “devastate” their economy with a carbon tax?

Actually, there are quite a lot of them. Like Japan [pdf], Great Britain, Finland, Sweden [pdf], Ireland, Netherlands, Denmark, Norway, Costa Rica. The Canadian provinces of British Columbia and Quebec have implemented them too, (For further reading see also herehere and here.)

Okay, then Scalise’s retort might be, But what about Australia? They just decided to drop their carbon tax. And he would be right. But there’s one tiny detail: Australia is replacing it with a market-based cap-and-trade system. (New Zealand also has a carbon trading system.)

Then there’s China, the world’s largest carbon emitter and huge sink for American dollars and the bad-climate-actor poster child for climate deniers seeking to justify not moving forward on climate policies here in the United States.

China’s Search for Carbon-Reducing Measures

China, it turns out, is actively pursuing a variety of market-based strategies. With Beijing’s commitment to cut its carbon intensity (carbon emissions per unit of gross domestic product) by 40-45 percent by 2020, they gotta do something if not many things. They’re already setting a price on carbon through a network of regional cap-and-trade systems in Beijing, Shanghai, Shenzhen, Guangdong, Tianjin, Chongqing and Hubei. The size of China’s burgeoning carbon market — said to cover some 250 million people — is second only to that of the European Union, which covers the EU’s 27 countries plus Iceland, Liechtenstein, and Norway.

On China’s drawing board for some time now, a carbon tax might be the country’s next big thing to address its emissions. Finance Minister Lou Jiwei reportedly announced in July that China “will introduce a tax on carbon dioxide emissions.” This echoed a statement from February via Xinhua, China’s official press agency.

As for the timing of when such a tax will be implemented? That’s not so clear. Finance Minister Lou was not very specific, saying that it “has been considered for introduction at an appropriate time.” A number of others have looked into the tea leaves and have decided that China will ramp the program up in 2015. (See here, here and here.)

Among the more interesting comments you’ll find on the subject is this one found on the pages of the Sydney Morning Herald: “China’s potential carbon tax may spur US lawmakers to consider climate protection more seriously.” I guess the trader rep the paper goes on to quote didn’t check with Congressman Scalise before positing that.

Hurray for China? Not Exactly

I would never hold up China and its atrocious environmental record as a paragon of environmental stewardship — even our worst examples of air and water pollution pale next to the pollution levels the Chinese people are exposed to daily, and history shows that performance in China often falls short of government decree. Still, it’s an interesting, even surprising contrast: Chinese officials embracing market-based strategies to slow carbon emissions while conservatives in the U.S. government decry such policies as “radical” and economically devastating.

So here’s the question we should start asking ourselves: once China and the other big economies are playing “carbon tax” ball, will the United States finally decide to play catch up, or will it take its glove and sulk on home hoping Mom will have milk and cookies waiting on the kitchen table?

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