Why a price is right for carbon

In their new budget plan, Senate Democrats call for a tax on imports from high-emitting countries, but they lack a carbon price at home.

According to economists on the right and the left, taxing carbon domestically is the best weapon against climate change. Accounting for the price of pollution would incentivize the prompt development of affordable technologies necessary to lower emissions. But the idea of pricing carbon in America still receives political pushback. Properly understood, however, this solution doesn’t require conservatives or liberals to sacrifice their principles. In fact, a comprehensive carbon tax is the best way to simultaneously slash global emissions and spur U.S. competitiveness.

Liberals have supported pricing carbon stateside before. But many on the left are now deriding a carbon tax as a half-measure. On the left there’s an understandable temptation to regulate and mandate to a cleaner future. But regulations and mandates are subject to lengthy litigation and can even be outperformed by the market alone.

Consider the Obama administration’s Clean Power Plan. It aimed for a 32 percent reduction of power sector emissions by 2030, yet it ran into legal obstacles (a common problem for regulations) and was never implemented. Regardless, because of market forces and the clean-energy transition already underway, the power sector beat that target before 2020!

Regulations and mandates also can’t be exported. Climate change is a problem for the whole world — not just the United States. So, any proposal for reducing emissions must provide a way to lower them everywhere, not just within our borders.

That’s the beauty of pricing carbon and using a border adjustment to hold other countries accountable. The border adjustment would add the same carbon tax to imports from countries that don’t price pollution, ensuring that foreign producers own up to their emissions, too.

Some on the left also say the market can’t be trusted for equitable outcomes. Yet it’s hard to argue with the market’s ability to hasten the arrival of desperately needed products. Just look at the remarkable vaccines, produced in record time, that are lifting the world out of the pandemic’s grim shadow. The innovative energy technologies that will dramatically and affordably lower global emissions haven’t been invented yet. But a tax on carbon in the United States will accelerate their arrival.

All of this talk about innovation sounds great to Republicans, yet many are reluctant to embrace pricing carbon — which would optimize it. Some on the right say that taxing carbon will hurt American competitiveness and raise the cost of energy.

Far from harming American competitiveness, pricing carbon would ensure that the United States is rewarded for what it is already doing. America is the least carbon intensive producer of many goods.

A new study provided by the Climate Leadership Council quantifies this fact: “The U.S. steel industry is 75% – 320% more carbon efficient than global producers, depending on the product segment.” The study even concluded that adding a carbon tax and border adjustment would decrease imports and increase sales of U.S. steel.

American leadership extends beyond steel. The Department of Energy found that Russian exports of natural gas to Europe emit over 40 percent more than U.S. LNG exports to Europe. That’s Russian gas traveling a short distance and American gas crossing an ocean!

On top of helping U.S. manufacturing and exports, pricing carbon doesn’t have to raise costs. That’s because a carbon tax could be paired with reducing income or payroll taxes. Americans wouldn’t be worse off if we priced carbon; they could benefit from bigger paychecks, a stronger economy and healthier environment. 

Liberals worry about a carbon tax’s efficacy and the free market’s equity. But pricing carbon here is a global solution that will expedite energy breakthroughs faster than government alone ever could — and a tax will avoid the lawsuits and endless delays that cling to regulations.

Conservatives fear that pricing carbon could harm U.S. industry and increase energy prices. But a carbon tax would reward America’s remarkably low-emitting products and could be offset by eliminating other taxes.

It’s time to listen to what economists on both sides of the aisle have to say: a price is right for carbon in this country.

Former U.S. Rep. Bob Inglis (1993-1999; 2005-2011) leads republicEn.org, a growing group of conservatives who care about climate change.