The Grand Climate Bargain that Some Conservatives Could Get Behind

“A lot of the narrative [put forward by environmentalists] plays out as one of costs, punishment and constraints,” said Lynn Scarlett, former Deputy Secretary of the Interior under George W. Bush, speaking before an audience in Washington last week.  “When you get to solutions that sort of transcend what has become kind of a symbolic umbrella, you start to see common ground.”

The social science largely supports this.  If conservatives and liberals differ on climate change, it’s because they disagree about the role of government in the market.  On the right, the free market represents a force for good, rewarding the diligent and punishing the idle.  By and large, conservatives doubt the science climate change because they oppose regulation on businesses.

There are, however, a limited number of policies that find support on both sides of the aisle. Conservatives may balk at what they see as federally-imposed limits on industry, like the Clean Power Plan, but they believe in the promise of American innovation.  So even while climate change remains contentious, clean energy does not.

Scarlett believes lawmakers should prioritize renewable energy.  Invest in research and development.  Modernize the electric grid.  Promote energy efficiency.  But would these policies go far enough?  Experts say climate change requires a World War II-level of mobilization.  Is that possible without transformational legislation?
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If there is hope for a grand climate bargain, Scarlett believes it will be found in tax reform. Republicans have long aimed to lower the corporate income tax.  Scarlett says conservatives and libertarians may welcome a revenue-neutral carbon tax if the proceeds are used to offset a reduction in the corporate tax rate.

Scarlett believes this proposal has several upsides.  First, a carbon tax is a market-based solution, the kind increasingly favored by conservatives who chafe at top-down regulations like the Clean Power Plan.  Writing in this week’s Weekly Standard, Irwin Stelzer argues conservatives should back a carbon tax to avoid more EPA rules.  Second, a carbon tax could be used to replace the tapestry of state and regional climate policies business leaders find so odious.

Third, and most significantly, the policy may create more winners than losers among political influencers.  Rather than pitting coal companies against environmentalists, the proposal could pit corporate America against itself, lining up carbon-intensive electric utilities and fossil fuel companies against Silicon Valley software giants.

“Just about every industry that uses energy has a carbon footprint,” said Scarlett.  But some industries “will be more specifically the focus of [a carbon tax].”  If structured strategically, the policy could amass the balance of corporate support — a necessity given the outsized influence economic elites exert over the political process.

On the downside, federal government would become dependent on polluters for revenue.  If the measure were effective in dramatically reducing carbon emissions, it could also sap the Treasury of essential resources.  Moreover, the policy would be regressive.  With a carbon tax, Americans would see the price of food, utilities and consumer goods increase, while most of the gains from lowering the corporate tax would accrue to the wealthy.

But, as Scarlett notes, there are ways to make the policy more equitable.  Policymakers could provide rebates to low and middle-income Americans or cut payroll taxes.

“You could take part of [the carbon tax revenue] and use it as a rebate to consumers or low-income folks,” said Scarlett.  “You can keep that regressive dimension in mind and try to address it.”

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