We need a climate policy without the politics
President
Joe Biden is making a mess of climate policy. That matters, but not as much as most people think. Despite Biden’s claim that climate change represents an existential threat, it doesn’t. Humanity isn’t going to die from climate change.
The federal government’s most recent National Climate Assessment estimates that in 2090 — even if we do nothing — the effects of climate change will reduce U.S. gross domestic product by less than 1%.
Temperatures have risen about 2 degrees compared with the average temperature 1951-80. Despite what TV weatherpeople may claim, there’s no evidence that rising temperatures have led to more extreme weather events. For example, we’re not experiencing more or worse hurricanes. A study published in the Bulletin of the Meteorological Society concluded that “neither U.S. landfalling hurricane frequency nor intensity shows a significant trend since 1900.”
In fact, the United States can’t do much about climate change. The United States is responsible for only about 14% of global greenhouse gas emissions. Most greenhouse gases are emitted by China, India, and other developing countries that rely much more than we do on burning coal to produce electricity. At best, Biden’s climate policies will reduce U.S. greenhouse gas emissions by only 6%-15%. Do the arithmetic and Biden’s policies will reduce global emissions by only 1%-2%. Small beer, so it’s lucky that climate change isn’t actually an existential threat.
The climate bill Biden recently pushed through Congress contains a ragbag of policies. Most are poorly designed and wasteful of taxpayer money. Take the electric vehicle credit. Basically you get a $7,500 tax credit if you earn less than $150,000 per year provided the EV was built in North America and contains no components made in China. In August, the average price of a new electric vehicle was $66,000. In 2021, only 4% of new vehicles sold in the United States were electric. The Biden administration’s goal is to raise the share to 50% by 2030.
The EV tax credit seems insufficient to hit that goal given the high price of EVs and — a key point — the Biden administration’s failure to resist mixing politics with its climate policy. When Biden’s initial proposal to require eligible EVs be assembled using union labor didn’t fly, he settled for the credit applying only to EVs built in North America. That will raise the price of EVs and likely violates our obligations under the World Trade Organization. Similarly the requirement for no Chinese components is about politics not the environment.
Politics also sank another big environmental effort — California’s attempt to build a high-speed rail line between San Francisco and Los Angeles. The aim was to reduce carbon emissions by getting people to switch from driving or flying to taking the train. Rather than being finished by 2020 at a cost of $33 billion, the cost has risen to $113 billion and only a small section in the Central Valley will be completed by 2030. According to a recent article in the New York Times, the fiasco is due to the high costs resulting from “political deals [that] created serious obstacles in the project from the beginning.”
That politics can derail environmental policy shouldn’t be surprising. Politics is what politicians do. Biden boosts unions in return for union votes and campaign contributions. Some people see these deals as corrupt but it’s the way politics has always worked.
The alternative is to swap the whole convoluted apparatus of subsidies, mandates, and technocratic planning for a simple and direct approach: a carbon tax. Emissions from a utility burning coal or from you driving your car contribute to the costs everyone else has to bear from climate change. The costs aren’t as large as Biden pretends they are, but they aren’t zero.
Economists call the cost an activity imposes on other people an externality. The efficient approach is to tax the externality and then let the market figure out the best way of dealing with it. A carbon tax gives every business an incentive to reduce its contribution to climate change because doing so would be good for its bottom line. Politics plays no role.
Will Congress junk the hodgepodge of inefficient and politically driven climate policies for a carbon tax? Unlikely. Republicans hate the carbon tax because it’s a tax. But taxpayers also have to shell out the $369 billion in new spending in Biden’s climate bill. And unlike that spending, revenue from a carbon tax can be rebated back to taxpayers. Democrats hate the carbon tax because they prefer technocratic mandates to relying on the market.
If Congress would follow the (economic) science and implement a carbon tax, the economy and the climate would both be better off.