On April 2, Swarthmore kicked off Green Spring with a discussion of carbon taxes, hosted by Mountain Justice and The Citizens’ Climate Lobby Philadelphia. The discussion was aimed at educating about the tax, recruiting activists for policy reform, and was a much-welcomed reprieve from the divestment debate. The CCL’s representative, Sarah Davidson, urged discussion attendees to spread the good news about carbon taxes, press legislators for climate change legislation, and spark widespread political will for tax reform. Her attempts to engage students with the carbon tax issue and environmental activism were honest and reasonable. However, the discussion left many unanswered questions on the basics of carbon taxes.
The discussion was fruitful in its explanation of why many environmentalists consider a carbon tax preferable to cap-and-trade programs. Carbon taxes are more straightforward, more transparent, and can be implemented faster. Carbon taxes are not watered down, whereas cap-and-trade programs are subject to loopholes for certain industries. Because carbon taxes directly affect consumers at the gas pump or otherwise, they are more likely to change people’s mindsets regarding fossil fuel usage. But with a tax as broad as the carbon tax, what are the potential drawbacks?
At the heart of the debate lies the question of the cost that a carbon tax would place on the economy. Ms. Davidson made a commendable effort to answer several difficult questions about the negative effects of a carbon tax, but was hesitant to delve into the ramifications such a tax would have on America’s economy. Taxing fossil fuel emissions would cause energy prices to rise, which would increase the prices of consumable goods. With higher prices comes lower purchasing power in terms of real wages. Lower real wages would effectively lower the amount people work overall, which would negatively impact total output. Not to mention that the U.S. economy would become far less attractive for investors in comparison to developing countries such as India and China, which will continue to use fossil fuels and offer much lower prices on goods as a result.
Perhaps one of the most concerning impacts a carbon tax would have is its effects on low-income families. Low-income families spend proportionally more of their income on fossil fuel-created goods than middle class and wealthy families do, and as such, would bear a disproportionate burden. The CCL asserts that the tax would be revenue-neutral, meaning that some of the cost to lower-income families would be offset by returning 100% of tax revenue back to the people by providing an income tax credit.
But what about the number of jobs employing coal and oil workers, and jobs within other industries hit especially hard by the tax that would be lost as output declines? Ms. Davidson argued that some of the tax revenues could also go towards guiding people who have lost jobs in fossil fuel-dependent industries towards other jobs. Ms. Davidson said revenues could be used to“train people to retrofit houses, or learn new computer skills.” The problem here is the policy then faces a trade-off between using carbon tax revenues to alleviate the tax burden on low income families, or to minimize unpleasant effects of the tax on the economy as a whole.
Last, is there concrete data on how much fossil fuel emissions affect the earth’s temperature per year, and the exact level of emissions the U.S. would need to stay below? Ms. Davidson was unable to give me any data offhand, and admitted that the Intergovernmental Panel on Climate Change is still inconclusive on the numbers. She did, however, reference some generalized research on sea levels as evidence of global warming. If the carbon tax is supposed to safeguard against future environmental damage, it would be nice to know some numbers that could shed light on just how big the tax would need to be. An ideal carbon tax should rest at equilibrium between public benefit and public cost. If an optimal level cannot be calculated, the tax runs the risk of being inefficient and overly burdensome on the economy.
Although the libertarian in me recoils at the mention of “taxes,” a carbon tax is a comparatively efficient way to redirect resources without government intervention. It is far better for a government to tax harmful things, such as pollution, instead of positive things such as income, labor, and profits. In this sense, a carbon tax swap could prove to be a more favorable policy. Swapping out existing taxes that affect investment in exchange for taxes on energy could promote economic growth while keeping government growth in check.
Ms. Davidson was receptive to skeptical view points and approached the discussion of carbon taxes with a level of passion not uncommon in environmental activists. Surprisingly, Ms. Davidson was open to alternatives other than solar, wind, and hydropower, and expressed support of nuclear energy. At times it seemed as if Ms. Davidson came to Swarthmore expecting to preach to the choir, enlist hordes of supporters, and was therefore ill prepared to answer the tough questions. However, it was refreshing to see campus environmentalism veer from the rhetoric of divestment towards a more serious discussion about environmental problems.