The Case for a Green New Deal without a Carbon Tax
Alex Lenferna
One of the major questions surrounding the Green New Deal (GND) regards what role a carbon price should play. The Washington Post (WP) editorial board recommends a carbon tax first approach where you “Start with carbon pricing. Then fill in the gaps” – making a carbon price the central policy lever in a GND. Last Week Tonight with John Oliver focused their GND episode on carbon pricing. And many economists have long favoured a carbon price as a key element of climate policy.
Here I argue that the WP’s carbon price first approach to the GND is politically misguided and that instead we should take a carbon price last approach, where we lead with positive programs that deliver benefits to people, garner support, and provide low carbon alternatives. Only after doing so should we implement a carbon price, as a carbon price is not needed to fund a GND and making it central to the GND can drag down the GNDs popularity, making it harder to pass.
Economic Punishment First, Benefits Later
Putting a price on carbon pollution creates an economic incentive that dissuades people and businesses from polluting. While this is an important economic lever, it is also a form of economic punishment which can potentially draw ire from those dependent on fossil fuels – a reality which is driving more GND advocates away from focusing on carbon pricing.
Making a carbon price the central policy lever of a GND as the WP recommends, runs into the political difficulty of centring unpopular tax punishment. While the economic effects of the carbon price will likely be felt immediately through increases at the pump and utility bills, many of the benefits that will come from proposed GND investments will take many years to materialize.
A revenue-neutral carbon price could avoid some of these dynamics by returning revenue to citizens. However, by being revenue neutral it does not facilitate the sorts of large-scale investments GND proponents envision to ensure ambitious climate action and a rapid and just transition away from fossil fuels.
If carbon pricing is the central policy tool, the economic pain will have to be very high if it is to be sufficiently effective. The latest Intergovernmental Panel On Climate Change report shows that to meet the Paris Agreement’s safer, aspirational target of 1.5°C, we will need to impose a steep effective carbon price of $135 to $5,500 per ton of carbon dioxide pollution by 2030.
Gaining strong political buy-in for a GND arguably does not come from high taxes, but rather by demonstrating the benefits of the GND and providing people with positive low carbon alternatives. After doing so, it could be easier to get the support needed to introduce a high carbon price. Additionally, by investing in clean energy and green infrastructure, we can also reduce the need for high carbon prices by boosting low carbon alternatives.
Structural Obstacles to Carbon Price Efficacy
Another difficulty with a carbon price first approach is that it may overlook the structural factors that prevent people from reacting to economic incentives to move away from carbon intensive activities. For example, a low-income family pushed to the outskirts of a city by gentrification cannot easily switch to low carbon transport without meaningful access to public transport or the ability to afford an electric vehicle.
Those without meaningful access to low carbon alternatives may often be economically punished by a carbon price while not being able to afford alternatives. If, however, we implement structural change first, it allows people to have alternatives and enjoy the positive benefits of a GND. Then phasing in a carbon price as those alternatives become available can ensure that people and businesses do make the transition to those alternatives.
A central aim of the GND is to tackle economic and societal inequalities. If we introduce a regressive carbon tax before addressing those inequalities, then we may find revolt, as France’s President discovered when he introduced a regressive carbon price amidst growing inequality and after introducing tax breaks for corporations and the rich. In the increasingly unequal U.S. context, perhaps the response may not be too dissimilar, unless a GND frontloads measures to address inequality and structural obstacles to a low carbon transition.
Learning from Lost Carbon Pricing Fights
France is one of a number of real-life examples demonstrating the difficulty of implementing carbon pricing, which cautions against making a carbon tax the central element of a climate strategy. Another example comes from the failure of a 2018 ballot measure in Washington State, which would have put in place a carbon tax funded, state-level Green New Deal.
Washington’s ballot measure failed to gain voter support after a multi-million-dollar flood of fossil fuel propaganda managed to turn the tides against the proposal. Central to their messaging was the economic pain that such a proposal would enact. The measure was one of several unsuccessful attempts Washington made to put a price on carbon.
Seemingly realising the political difficulty of carbon pricing, Democratic presidential candidate Senator Elizabeth Warren aims to fund her vision of a Green New Deal not with a carbon price, but rather by taxing corporations and the wealthy and ending fossil fuel subsidies. Hers is a savvy way to make addressing economic justice, inequality and tax fairness central to the GND.
To be clear, this is not an argument against carbon pricing. Like Governor Inslee, the author has worked on trying to implement a carbon price for many years. However, it is a call to learn from hard political lessons about the unpopularity of putting a carbon pricing first.
A politically savvy GND would start with investments and positive programs. Then once we have built political buy in and popular low carbon alternatives, we could introduce the economic incentive of a carbon price to fill in the gaps a GND might miss, help clean up harder to decarbonise sectors, and raise revenue.
Alex Lenferna is a South African Climate Justice Campaigner with 350 Africa. Views expressed are his own.