Pour­ing petrol on cli­mate de­bate

The Paris ri­ots high­light the dif­fi­culty of fight­ing global warm­ing with taxes, write Seth Boren­stein and An­gela Charl­ton

Bay of Plenty Times - - World Feature - Con­fronting the Cli­mate Chal­lenge.

The “yel­low vests” protests in France are wor­ry­ing green move­ments around the world. The worst ri­ots in Paris in decades were sparked by higher fuel taxes, and French Pres­i­dent Em­manuel Macron re­sponded by scrap­ping them on Thurs­day.

But taxes on fos­sil fu­els are just what in­ter­na­tional cli­mate ne­go­tia­tors, meet­ing in Poland this week, say are des­per­ately needed to help wean the world off of fos­sil fu­els and slow cli­mate change.

“The events of the last few days in Paris have made me re­gard the chal­lenges as even greater than I thought ear­lier,” said Stan­ford Univer­sity en­vi­ron­men­tal econ­o­mist Lawrence Goul­der, au­thor of the book

Economists, pol­i­cy­mak­ers and politi­cians have long said the best way to fight cli­mate change is to put a higher price on the fu­els that are caus­ing it — petrol, diesel, coal and nat­u­ral gas. Tax­ing fu­els and elec­tric­ity could help pay for the dam­age they cause, en­cour­age peo­ple to use less, and make it eas­ier for cleaner al­ter­na­tives and fuel-sav­ing tech­nolo­gies to com­pete.

Th­ese so-called car­bon taxes are ex­pected to be a ma­jor part of push­ing the world to re­duce car­bon diox­ide emis­sions and try to pre­vent run­away cli­mate change that economists say would be far more ex­pen­sive over the long term than pay­ing more for en­ergy in the short term.

But it’s not so easy for peo­ple to think about long-term, global prob­lems when they are strug­gling to get by.

Macron said the higher tax was his way of try­ing to pre­vent the end of the world. But the yel­low vest pro­test­ers turned that around with the slo­gan: “It’s hard to talk about the end of the world while we are talk­ing about the end of the month.”

The re­sis­tance to the fuel tax is a per­sonal blow to Macron, who sees him­self as the guar­an­tor of the 2015 Paris cli­mate ac­cord, its strong­est de­fender on the global stage. He has po­si­tioned him­self as the anti-Trump when it comes to cli­mate is­sues.

The French Gov­ern­ment qui­etly fears a Trump-led back­lash against the ac­cord could spread to other ma­jor economies whose com­mit­ment is es­sen­tial to keep­ing the deal PHO­TOS / AP to­gether.

The fuel tax was not orig­i­nally Macron’s idea; it dates back to pre­vi­ous ad­min­is­tra­tions. But he vig­or­ously de­fended it and won the pres­i­dency in part on a prom­ise to fight cli­mate change.

So what went wrong?

Yale Univer­sity econ­o­mist Wil­liam Nord­haus, who won this year’s No­bel Prize for Eco­nomics, said the tax was poorly de­signed and was de­liv­ered by the wrong per­son. “If you want to make en­ergy taxes un­pop­u­lar, step one is to be an un­pop­u­lar leader,” he said. “Step two is to use gaso­line taxes and call them car­bon taxes. This is hard enough with­out ad­ding poor de­sign.”

Macron, like French pres­i­dents be­fore him, made en­vi­ron­men­tal and en­ergy de­ci­sions with­out ex­plain­ing to the pub­lic how im­por­tant they are and how their lives will change. He’s also seen as the “Pres­i­dent of the rich” — his first fis­cal de­ci­sion as Pres­i­dent was scrap­ping a wealth tax. So rais­ing taxes on petrol and diesel was seen as es­pe­cially un­fair to the work­ing classes in the prov­inces who need cars to get to work and whose in­comes have stag­nated for years.

The French Gov­ern­ment al­ready has pro­grammes in place to sub­sidise driv­ers who trade in older, dirt­ier cars for cleaner ones, and ex­panded them in an at­tempt to head off the protests last month.

But for many French, it was too lit­tle, too late.

The French re­ac­tion to higher fuel prices is hardly unique, which high­lights just how hard it can be to dis­cour­age fos­sil fuel con­sump­tion by mak­ing peo­ple pay more. In Septem­ber, protests in In­dia over high petrol prices shut down schools and gov­ern­ment of­fices. Protests erupted in Mex­ico last year af­ter gov­ern­ment dereg­u­la­tion caused a spike in petrol prices, and in In­done­sia in 2013 when the Gov­ern­ment re­duced fuel sub­si­dies and prices rose. In the United States, Wash­ing­ton state vot­ers hand­ily de­feated a car­bon tax in Novem­ber.

“Higher taxes on fuel have al­ways been a pol­icy more pop­u­lar among economists than among vot­ers,” said Greg Mankiw, a Har­vard econ­o­mist and for­mer ad­viser to Pres­i­dent Ge­orge W. Bush.

Even pro­po­nents of car­bon taxes ac­knowl­edge that they can dis­pro­por­tion­ally hurt low-in­come peo­ple.

En­ergy costs make up a larger por­tion of their over­all ex­penses, so a fuel price in­crease eats up more of their pay cheque and leaves them with less to spend. And be­cause en­ergy costs are al­most im­pos­si­ble to avoid, they feel trapped.

It is also not lost on them that it is the rich, un­both­ered by fuel taxes, who are hard­est on the en­vi­ron­ment be­cause they travel and con­sume more.

“The mis­take of the Macron Gov­ern­ment was not to marry the in­crease in fuel taxes with other suf­fi­ciently com­pelling ini­tia­tives promis­ing to en­hance the wel­fare and in­comes of the yel­low vests,” said Barry Eichen­green, an econ­o­mist at the Univer­sity of Cal­i­for­nia, Berke­ley.

The ques­tion now, Goul­der said, is: “How can we ad­dress the cli­mate prob­lem while also avoid­ing pro­duc­ing po­lit­i­cal up­heaval?”

The key is giv­ing a good chunk of money back to the peo­ple, Wes­leyan Univer­sity en­vi­ron­men­tal econ­o­mist Gary Yohe said.

Many economists back pro­pos­als that would tax car­bon, but then use that money to of­fer tax re­bates or cred­its that would ben­e­fit lower-in­come fam­i­lies.

The protests, while sparked by fuel prices, are also about in­come in­equal­ity, pop­ulism and antielitism, ex­perts say, not just about car­bon taxes.

“Is it a death knell for the car­bon tax or pric­ing car­bon? I don’t think so,” Yohe said.

“It is just a call for be­ing a lit­tle bit more care­ful about how you de­sign the damn thing.”

Days af­ter clashes at the Arc de Tri­om­phe in Paris, Em­manuel Macron scrapped plans to raise fuel taxes.

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