The newly formed Climate Leadership Council — which includes James A. Baker, Henry Paulson, George P. Shultz, Marty Feldstein and Greg Mankiw — is proposing elimination of nearly all of the Obama administration’s climate policies in exchange for a rising carbon tax that starts at $40 per ton, and is returned in the form of a quarterly check from the Social Security Administration to every American.
“I really don’t know the extent to which it is man-made, and I don’t think anybody can tell you with certainty that it’s all man-made,” Baker said in an interview with The Washington Post. However, he also said, “the risk is sufficiently strong that we need an insurance policy and this is a damn good insurance policy.”
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Despite the group’s impeccable Republican credentials — Baker, Paulson and Schultz served as treasury secretaries and Feldstein and Mankiw served as CEA chairs under GOP presidents — the proposal faces long odds. Many congressional Republicans are adamantly against a tax increase of any kind, and President Trump repeatedly emphasized that he is far more interested in promoting the extraction of fossil fuels in the United States than curbing the nation’s carbon emissions.
A proposed carbon tax also failed recently in a ballot initiative in Washington state, in part because it divided the left — with some liberals wanting to use any revenue to invest in clean energy and other social causes rather than to return it to the public.
Baker and his colleagues met Wednesday with Gary Cohn, head of Trump’s National Economic Council, and spoke more briefly with White House chief of staff Reince Priebus and counselor to the president Kellyanne Conway.
Asked about the proposal and Wednesday’s meeting, White House press secretary Sean Spicer said, “We have nothing to announce on that.”
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Another White House official, who spoke on the condition of anonymity to discuss private deliberations, said that it would be premature to conclude that the administration was embracing the idea of a carbon tax. “Secretary Baker is obviously a distinguished public servant with a wealth of experience,” the official said. “This morning is one of many listening meetings the administration is having with experts on a variety of issues and does not represent any eventual policy decision one way or the other.”
Vice President Pence’s spokesman, Marc Lotter, said that Baker had requested the meeting over the weekend when he and Pence ran into each other at the Super Bowl on Sunday. “The Secretary mentioned going to the White House, and the vice president asked him to pop by his office while he is here,” Lotter said. (The two ultimately did not meet due to a “scheduling conflict,” Lotter said.)
As for how the idea would be received politically, Baker told The Post: “I have no idea, but it is a good proposal, it’s simple, it’s conservative, it’s free market, it’s limited government.”
Supporters of the group’s proposal include Ted Halstead, who founded the Climate Leadership Council and the New America Foundation; Rob Walton, former chairman of the board of Walmart; and Thomas Stevenson, a U.S. ambassador to Portugal under George W. Bush.
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The revenue-neutral “carbon fee and dividend” tax, as it is sometimes called, has been popular among economists for years. It has also been strongly embraced by some leading climate scientists, such as former NASA researcher James Hansen, and such advocacy groups as Citizens’ Climate Lobby. But never before have major Republican statesmen from past administrations aligned behind it as publicly as they’re doing now.
Baker and his colleagues estimate that the average family of four would receive $2,000 annually in dividends from the fee if it starts at $40 per ton, and as the tax rises, so would their dividends. This would naturally create a constituency for ever-tougher climate change action. They also assert that the proposal would be fundamentally progressive because everyone would receive the same amount of revenue from the tax regardless of their income level, meaning the new source of income would make a bigger difference for poorer people than for wealthier ones.
Finally, they suggest it’s a needed compromise. “We have a regulatory left and a deregulatory right that are far, far apart,” said Mankiw. “Both should acknowledge they’re not going to have control forever.”
As soon as the plan was hatched, it got a tweet endorsement from Mitt Romney:
Trump Secretary of State Rex Tillerson also supports a carbon tax, which he championed when he was chief executive of ExxonMobil.
In general, however, Trump’s Cabinet appointees have been largely noncommittal about the issue of climate change and its human causation. And at agencies such as the Environmental Protection Agency and the Energy Department, Trump transition teams have brimmed with conservative think tank personas who have a history of questioning the science of climate change and standing up for fossil fuels.
There are also questions about how a carbon tax would affect the carbon-intensive coal industry, which Trump voiced support for during his campaign. Halstead acknowledged that coal would fare poorly under the plan, although he noted that as the carbon tax rises over time it would eventually benefit the economics of carbon capture and storage technology.
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A carbon tax is quintessentially conservative, Baker’s group argues, because it would not increase the size of government but would reduce it by canceling out President Barack Obama’s climate regulatory moves. Revenue from the carbon tax would go directly to taxpayers instead of toward new government programs.
“This ticks every one of their boxes,” said Halstead. “It is pro growth, pro competition, pro jobs, deregulatory, and it will help the working-class voters that Trump promised to help.”
But the prospect of dismantling the Obama administration’s climate rules did not sit well with the Natural Resources Defense Council, a leading environmental group. The council said Wednesday that it would not support a regulatory rollback in exchange for a carbon tax, underscoring the difficult politics behind the idea.
“Putting a price on carbon could be an important part of a comprehensive program,” Rhea Suh, the group’s president, said in a statement. “It can’t do the job alone, though, and is not a replacement for carbon limits under our current laws.”
There’s also the question of whether the current White House is up for big, wonky crossover ideas — especially when recent polling suggests that only a small fraction of Trump voters even believe in human-caused climate change.
Still, Baker said, the idea “gives Republicans a seat at the table on an important issue and does so in keeping with Republican principles.”
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