With several key Democrats on the fence and Republicans united in opposition, the $3.5 trillion budget reconciliation package hangs by a thread. Failure to enact the legislation will be devastating. Failure would be a lost opportunity to invest significantly in the health, education and quality of life of many Americans. Failure will squander the only opportunity in the foreseeable future to mitigate decisively the greenhouse gas emissions which cause climate change. Delay will impose huge damages on future generations from worsened climate or will make the ultimately necessary steps to mitigate even more expensive.

For these reasons, we must enact the core of the package, and it must contain ambitious measures to reduce and eventually eliminate greenhouse gas emissions. The key to both goals is one simple but powerful policy: levy a significant and rising tax on fossil fuels in proportion to their carbon content. That is: put a price on carbon. The policy works because 1) it raises revenues in an extremely efficient way and 2) is the only policy which can effectively and fairly reduce emissions to the degree required.

Consider point No. 1. Critics of the bill say that we can’t afford the $3.5 trillion price tag. Several commenters note that this objection is a bogus exaggeration. The 10-year spending program is only about 1.2 per cent of GDP over the decade. The necessary taxes can be obtained through measures – a partial return to pre-2017 corporate tax rates, a clamp down on tax evaders and various taxes on the super-rich – that will be invisible to most Americans and generate only modest economic costs. 

A carbon tax at the recommended level will raise significant revenue at a trivial cost. Even after setting aside rebates to low income households to cover their increased energy expenses, the tax proposed in several current bills would collect sufficient funds on net to cover at least a third of the $3.5 trillion over the decade. And, best of all, it would do so at virtually no cost because the value of the benefits of the consequent climate improvements in the future and immediate health advantages of improved air quality roughly match the amount of money collected.

Critics cannot object to the burden of paying for the reconciliation with carbon tax collections, because there is almost no burden at all when benefits are recognized.

On point No. 2, note that experts are almost unanimous in asserting that a price on carbon is the single most effective and efficient measure to achieve emissions reductions and the fulcrum of any package which achieves mitigation on the required scale. The reason is simple: people will use less fossil fuel, will innovate and will reduce their carbon footprints in the ways least costly for them only when they are faced with higher fuel prices. 

Climate policies which use subsidies and regulations to influence specific sectors, such as the clean energy standard, are popular with politicians because they mask the true cost of emissions reductions. But these policies are not comprehensive, do not raise revenue, can be inequitable and can easily be reversed.

Energy intensive businesses, corporate taxpayers and the fossil fuel industry are trying to defeat the reconciliation package. If they succeed, average Americans will be denied crucial amenities that can be had a low cost. And their grandchildren will inherit climate risks that could be avoided by the timely implementation of a carbon price. 

— Special to the Press Herald


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