How do you stop climate change and shake up American politics at the same time? That's easy: Create an alliance between the Tea Party and the environmental movement.
If you think I'm crazy for suggesting something so unorthodox, you would have a good case. The Tea Party is an insurrection against the size and scope of government. The environmental movement, on the other hand, often demands government action to stop environmental damage. How could there possibly be any common ground between these two very different movements?
For starters, the U. S. government along with the Chinese, Russian and Indian governments currently wastes a significant amount of taxpayers' money by subsidizing fossil fuel extraction and consumption. The International Energy Agency estimated earlier this year that world governments spend $557 billion annually subsidizing fossil fuels more than 10 times the amount that is spent subsidizing renewables. A paper published by the Kennedy Center at Harvard University found that scrapping these subsidies would reduce CO2 emissions by almost 6 percent. Both the Tea Party and the environmental movement would probably support ending the U.S. government's $10 billion annual subsidies for fossil fuels.
It is possible to unite the Tea Party and the environmental movement behind a carbon tax. Why would the Tea Party an anti-tax movement, after all support a new tax? The answer is that the implementation of a carbon tax would provide revenue that could be used to lower other taxes, whereas other proposed solutions to climate change would require overall taxes to be raised. Taxes often have the effect of discouraging people from engaging in the activity that is being taxed. Current taxes on labor and investment income such as the income, payroll and corporate taxes discourage work effort and savings, whereas taxing CO2 emissions would discourage pollution. It is better for society as a whole to discourage bad rather than good things. Furthermore, a carbon tax is a far cheaper means of reducing CO2 emissions than the alternatives, even when one ignores the distortionary effects of other taxes. The cost of reducing CO2 emissions with a carbon tax would probably be about $15 per ton of carbon. For comparison, the reductions achieved through the renewable energy subsidies in last year's stimulus bill cost somewhere between $69 and $137 per ton of carbon.
What we need in order to get both the Tea Party and the environmental movement on board is a grand bargain: the federal government reduces its subsidies to dirty industries, levies a carbon tax and then reduces personal and corporate income taxes by an amount equal to the amount by which the subsidies were reduced plus the amount that the carbon tax raises. This is a win-win-win situation the environment benefits from lower CO2 emissions, taxpayers benefit from a lower overall tax burden and the economy as a whole benefits because the inefficiencies caused by corporate subsidies and income taxes are reduced.
Why would either the Tea Party or the environmental movement support such a plan? Something has to be done about climate change. For the Tea Party, a simple, transparent carbon tax that permits other taxes to be lowered is the only option that would not require higher government spending and therefore higher overall taxes. The alternatives cap-and-trade legislation filled with hundreds of pages of special-interest giveaways, government agencies picking winners and losers among possible new technologies, or the old fashioned, heavy-handed, costly and inefficient direct regulation of numerous industries by the EPA would all require new government spending, which would hinder the Tea Party's tax-cutting agenda. For the environmental movement, a green tax shift is probably the only politically-feasible way of tackling climate change at the present time. The average American simply will not accept the costs of higher fuel and electricity prices unless this is balanced by at least an equal reduction in their taxes.
Climate change is the most important long-term environmental issue that currently faces humanity. Given its standing in world affairs, the United States must be a part of the solution. A grand bargain that reduces corporate subsidies for dirty industries, introduces a transparent carbon tax and reduces personal and corporate income taxes is perhaps the one thing that could unite the Tea Party and the environmental movement. Given this rare opportunity for diverse political activists to work together in the interests of humanity, what are we waiting for?
