Is The Carbon Tax A Pricing Signal To Reduce CO2, Or A Funding Mechanism for a Patronage System to Feed Various Constituencies?

This is an absolutely fascinating article at Vox on efforts by green forces and the Left to defeat a carbon tax ballot initiative in Washington State.  The ballot initiative was written very similarly to my proposed plan, where a carbon tax would be made revenue neutral by offsetting other taxes, particularly regressive ones.

Apparently, the Left is opposing the initiative in part because

  1. It turns out the carbon tax, for many on the Left, is more about increasing the size of government rather than really (or at least solely) for climate policy, and thus they do not like the revenue neutrality aspects.  They see carbon taxes as one of the last new frontiers in new government revenue generation, and feel like it would be wasted to make it revenue neutral
  2. The Greens have made common cause with the social justice warrior types, so they dislike the Washington initiative because it fails to allow various social justice and ethnic groups cash in.
  3. Apparently, folks on both the Left and the Right actually like government picking winners and tinkering in individual subsidies and programs, such as funding various green energy and conservation initiatives.  To me, that stuff is all a total waste and made irrelevant by a carbon tax, whose whole point is to allow markets to make the most efficient CO2 reduction choices, but looking at this election it would not be the first time the electorate was ignorant on basic economics.

There is a real disconnect here that it is important to understand.  I don't think I really understood how many of us could use the term "carbon tax" but understand its operation in fundamentally different ways, but I think that is the case.

The authors of the law, like me, see the carbon tax as a pricing signal to efficiently change behaviors in the market around use of carbon-based fuels.  The whole point of a carbon tax is to let individual actions and market forces shape how solutions are created.  But the Left seems to see the carbon tax totally differently.  They don't understand, or don't accept, the power of the pricing signal in the market, or else they would not say things like they want a "put a fee on emissions and reinvest that revenue in clean energy" -- the latter is a redundant and pointless government action if one accepts the power of the tax, since individuals will already be responding by making such investments.  The Left instead sees the carbon tax as the source of a new kitty of money that then must be fought over in some sort of political process.

Check out this passage, and consider whether these folks are thinking of the carbon tax as a pricing signal or a source of new money to be spread around:

Either way, state social justice groups did not feel consulted. "Rather than engaging with these communities," wrote Rich Stolz and De'Sean Quinn of environmental justice group OneAmerica, "I-732 organizers patronized and ignored concerns raised by these stakeholders."

White people who work with other white people — and the white people who write about them — tend to slough off this critique. What matters, they insist, is the effect of the policy, not the historical accident of who wrote it down.

Bauman points to a set of policy demands posted by Black Lives Matter. Among them: "shift from sales taxes to taxing externalities such as environmental damage." Also: "Expand the earned income tax credit."

"Well," Bauman says, "we did both those things, right?"

But communities of color want more than for mostly white environmental groups to take their welfare into account. Most of all, affected groups want some say in what constitutes their welfare. "All of us want to be included from the beginning of any decision," says Schaefer. "We don't want to be told after the fact, ‘Hey, by the way, we decided all this stuff for you.’"

This tension within the climate movement has played out most recently in California, where low-income and minority groups have won substantial changes to the state’s climate law, ensuring that a larger portion of cap-and-trade revenue is directed to their communities. Given demographic changes sweeping the country — and climate funders’ newfound attention to building up the capacity of those groups — those tensions are unlikely to remain confined to the West Coast.

These folks see the carbon tax as a pool of money to fund a patronage system, and are thus scared that any groups not involved in crafting the legislation will be left out of the benefits of the patronage -- after all, that is how most programs from the Left are put together.  The Obama stimulus program back in 2009 was such a patronage project, and those who were in on crafting it got windfalls, and those who were left out of the process had to pay for it all.  Either the Left assume that everything works this way, even when it does not, or they want everything to work this way -- I don't know which.

One thing I do know is that I fear I am going to lose this argument in the future.  Here is one way to look at it -- are more people graduating from college looking at the world through the lens of markets and economics and incentives or are more graduating structuring issues in terms of social justice and government authority?


  • DaveK

    It's ALWAYS been about the money. They just keep trying different ways of applying lipstick to the pig, in an effort to make it appealing.

  • Orion Henderson

    This would be comical. If it didn't have such dramatic real world consequences.

  • Orion Henderson

    When someone says money isn't important-what they mean is that it's the only thing that is important.

  • Theyouk

    Nice reference to your Forbes piece (and use of your graph) by the great Matt Ridley at GWPF: (with apologies if this was already mentioned in comments over the last couple days)

  • Not Sure

    "But communities of color want more..."

    You could have stopped right there.

  • johnmoore

    Many on the left have never understood incentives. Widespread support for minimum wage increases is but one of many examples.

    They also have a visceral, emotional distrust of anyone making economic decisions. In their belief system, governments know best. Technocratic fascism is a religion to them.

    And then, of course, like with any movement, there are the profiteers.

  • mesaeconoguy


    It turns out the carbon tax, for many on the Left, is more ALL about increasing the size of government rather than really (or at least solely) for climate policy.

    Coyote, your use of the term and mechanism is correct. The left, who are completely economically ignorant, has no understanding of the term.

    This should surprise no one.

    The green/AGW/eco-mental movement is entirely about acquisition of, use and expansion of state power, by them. That is what makes them so dangerous.

  • sch

    For reference purposes, stoichiometrically, one ton of CO2 is equivalent to perfect combustion of 110gallons of gasoline.
    A bit less if you add 10% ethanol, as ethanol is partly burned already. So $25/ton CO2 is about $0.22-23 per gallon and
    the maxed out (20+ years down the road) at $100/ton or ~$0.90 per gallon. Fortunately gasoline is bulky enough that
    bringing in large amounts of untaxed gasoline is not feasible, but towns near state borders would experience gasoline sales

  • Chris

    This is not surprising. The "green" movement partisans were described some 40+ years ago as "watermelons" - green on the outside but red on the inside. They are socialists (described by Mike Vanderboegh as communists who haven't found their AK-47 yet) in the guise of environmentalists.

  • Mike
  • Jim Collins

    The Soviets through the KGB practically created the Green Party and the environmental movement.

  • SamWah

    What???? Let the great unwashed make their OWN decisions?? HERESY!!!!!!!!!!!!11111!!!!!!!!!!!!11!!!!!!

    "Carbon Tax": Means only what the Left wants it to, and revenues only for what they want, because they know what's best for all of us, and will brook NO opposition.

    I concur with your last two paragraphs.

  • progenitive

    This parallels a discussion I had with a graduate student in philosophy a couple years ago. He had made a significant portion of his life's work to ban supermarket plastic bags. Not really knowing why he hates them so passionately, I sincerely asked what is the problem? He replied that they are made of such low grade plastic (already recycled once or twice, is what he said) that they cannot be recycled again. That sounded to me like a great reuse of recycled plastic, one last time, but I bit my tongue and said, 'that sounds like a market externality... why don't we tax their use to offset the hidden costs to society'? He got visibly upset, and this ended any chance of rational discussion. My solution was unacceptable and he wouldn't consider it. And I really don't know why exactly. Other than it put me in a tribe that his tribe is opposed to? We didn't even get to the revenue neutral aspect. So I'm not sure I buy your explanation, Warren. I don't think the tax is acceptable to most on the left, because you can choose to pay or not pay, and reality might cause you to prefer paying. But you're doing something inherently evil, and therefore it must be banned.

  • JTW

    "It turns out the carbon tax, for many on the Left, is more about increasing the size of government rather than really (or at least solely) for climate policy, and thus they do not like the revenue neutrality aspects."

    That's not surprising. EVERYTHING the left does is aimed at increasing the size of government first and foremost, any other effects it has being at best a nice bonus and at worst a minor inconvenience that can be used to create more government to compensate for it.

  • slocum

    "One thing I do know is that I fear I am going to lose this argument in the future. "

    Me too. But the country has been through lurches to the left before (roughly from the 30s through the early 70s) and recovered. If we're in for a statist period lasting *that* long, I'll be somewhere between really old and dead when it's over, which is depressing. But, on the other hand, it'll take a good while to 'eff it up completely and unless my wife and I do something really stupid (or the whole world does), we already have enough to live comfortably through it.

    The best hope for a turnaround, I think, is the laboratory of democracy in action -- as time goes on, the differences in economic dynamism between the 'blue' and 'red' states will become more apparent and some blue states and cities may go tits up in the next recession (yes, Illinois and Chicago, I'm looking at you). Reality may eventually smack some sense into people. I'm not counting or betting on it, mind you, but it's not that far-fetched.

  • Herb

    The first one really surprises me because it seems they have forgotten a tactic I watched for a decade after Connecticut got an income tax: increase the sales tax one year and the income the next. A new tax allows a particularly nasty variant: drop other taxes to get "revenue neutrality" even though often it isn't then a few years later blame new budget trouble on the "cuts" in taxes when the new one was introduced.

    The overall situation is one reason I don't buy into climate alarmism: the people claiming I should be alarmed and take drastic action don't themselves behave like they are as alarmed as I should be. I realize that isn't a scientism reason, like your excellent recent series, to set my level of alarm but I think it is a valid lens to use when evaluating calls to action. In the opposite sense, things like your series and some climate activist working on modern and more common nuclear power[1] get my attention and have moved my position on acting closer to your conclusions at the end of the article.

    [1] This has a degree of picking winners and losers but framed in a "we have to act now and the only carbon free near term alternative is nuclear so let's get what needs to be done now done and find an optimal solution over time" way.

  • Herb

    Fortunately gasoline is bulky enough that bringing in large amounts of untaxed gasoline is not feasible

    I cannot help but enjoy the irony of contrasting that statement with the fact that the popularity of gasoline as a fuel comes specifically from its energy density (both per unit mass and per unit volume)