BY ARJIT ROSHAN STAFF WRITER
The climate initiatives in Biden’s American Jobs Plan are certainly very big, but we shouldn’t be fooled into thinking they’re very bold.
Yes, there’s plenty of fine stuff. The electric vehicles market seemed to be doing quite well on its own, but $174 billion in help will certainly rev things up. Half a million charging stations are alright — as long as the supply doesn’t rapidly overshoot the need (governments do this a lot).
More promising are overdue investments like $35 billion in R&D and $100 billion to make our power grid more resistant to extreme weather events. The $10 billion for a New Deal-style Civilian Climate Corps could do a whole lot of good.
What’s conspicuously absent however is the tool that some economists argue would be essential in fighting climate change: a carbon tax.
A carbon tax is a tax imposed on carbon dioxide emissions. This would make producing stuff by burning fossil fuels more expensive for businesses. The idea is that they’ll pass on some of these costs to consumers and accelerate the adoption of renewable energy sources. One economist from Tufts University estimated that a $15 per ton tax that rises over time could cut emissions by 14 percent — and there’s no reason we should stop there.
Biden promised to be bold on climate. He’s been bold enough to pass trillions in new social and infrastructure spending. Revenue measures like taxes only need a simple majority to pass the Senate, not 60 votes like other types of legislation. Why no carbon tax?
Passing spending measures seems to be the only thing every Democrat in the Senate will agree to. In fact, it’s the only thing Biden has been able to do so far.
Passing taxes is hard. Now, Biden is proposing an increase in the corporate tax to 28 percent, but that’s the easiest tax to raise. If you’re a politician trying to make someone foot the bill, big faceless entities are your best bet.
While it may raise some revenue, increasing the corporate tax promotes capital flight more than it reduces carbon emissions (but Treasury Secretary Yellen has a plan for ameliorating the capital flight). A carbon tax, on the other hand, would send signals throughout the economy to reduce carbon consumption and speed up the transition to alternative energy sources.
We would see this single tax translated to our gas prices, in the price of a steak and in our energy bills. That’s precisely what makes it work so well, from a climate perspective, but that’s also what Biden’s afraid of, from a political perspective.
If it works as intended, the costs this program would impose on Americans would be very visible, and the Biden administration would have to tell the American people that its climate plan will mean some sacrifices from all of us. And in American politics, taxes are for bad guy corporations and “billionayuhs,” not the middle class.
So Biden has tried to make his entire climate agenda appear positive-sum to voters by focusing on expensive infrastructure and job plans, at the expense of the most cost-effective policies like carbon tax.
The last time an American president suggested something so radical as changing our lifestyles for the sake of energy policy, he lost in a landslide. After passing a gas tax in France, President Emmanual Macron faced arguably the greatest challenge of his presidency during the Yellow Jacket protests. With the midterms lurking around the corner, a carbon tax is not a political risk Biden is willing to take.
But there are some creative and administratively easy ways to make a carbon tax a net benefit for most Americans. An obvious one is a carbon tax and dividend. We could give lower- and middle-class Americans a carbon tax credit, or even just a plain old check in the mail, that offsets the increased living costs.
But Biden won’t get any political points for an offsetting carbon credit if, like other programs, it’s poorly marketed. Because Americans see tax withholdings every two weeks on their pay stubs, but offsetting tax credits are once a year, many think taxes on the working class are higher than they are and don’t realize many of us have a zero or negative tax burden. Our most powerful anti-poverty program, the Earned Income Tax Credit, is obscure enough that many Americans don’t even know they are eligible! A carbon tax and dividend program would have to have much better PR.
Americans are also very sensitive to increases in costs of living — especially gas prices. Even with checks in the mail, an increase in gas and all sorts of other commodity prices could easily be conflated with inflation and economic mismanagement. Those consequences would provide ammunition for right-wing news (imagine the Tucker segment) and Republicans seeking to crack the Democrats’ razor-thin congressional majority.
Implementing such a program without this sort of electoral punishment would require expert political craft and a frank and compelling way to communicate the costs, benefits and purpose to Americans. Biden would have to make the case for why capping warming at 2 degrees Celsius is worth a more expensive trip to the gas station, and effectively market and administrate a carbon dividend that Americans would give Democrats credit for. It’s not as easy as authorizing trillions of dollars in spending through monetary expansion and no tax increase — but it’s far from impossible. Regardless of policy solutions, it would be a political challenge for sure.
Faced with this political challenge, Biden is running scared.