The future of the BC carbon tax -- and what it could mean for the United States

ClimateWire reports that the BC Carbon Tax, enacted in 2008, has survived three years and $848 million of carbon taxation [ClimateWire story]. Because the carbon tax is so small, and because teasing out the effect of the carbon tax is so difficult in changing economic times, it is hard to say how much effect the carbon tax has had on greenhouse gas emissions in the province. But it would be petty to begrudge the bits of anecdotal evidence that seems to indicate that for some (like the University of Northern British Columbia or the University of British Columbia), it helps tilt some decisions towards energy conservation and lower emissions.

Perhaps the most compelling and practical piece of punditry about carbon taxes is that in the near term, the pressure to reduce deficits will inevitably place the spotlight on carbon taxes. Barry Rabe of the Ford School of Public Policy at the University of Michigan is the latest of several (including myself) to point out that there aren't a lot of attractive options in terms of reducing spending or raising revenues, so taxing carbon might not seem so contemptible after all. It really is not such a hard sell to say that taxing carbon is better than taxing labor.

The one thing omitted in the otherwise serviceable reporting job by ClimateWire was an analysis of the provincial politics of the BC carbon tax. For Americans, the "Liberal" Party in BC, the one that ushered in the carbon tax, is actually the not-quite-as-liberal of the two political parties in the province. As a matter of fact, former Premier (that's Canadian for "Governor") Gordon Campbell, who really pushed through the BC carbon tax somewhat autocratically, is really politically a lot like former California Governor Arnold Schwarzenegger, if perhaps even a bit more conservative.

If Republicans in the United States don't learn anything from the Republican former California governor, maybe they can learn something from Gordon Campbell. He resigned late last year amid a number of political missteps, but the carbon tax was not chief among them. What they can learn from Campbell is that the more conservative party can split the more liberal party by instituting a carbon tax. For true conservatives, (and not Tea Party hacks), a carbon tax is really consistent with many of their core principles: taxing consumption is better than taxing productivity (income), it is a non-regulatory way of reducing emissions (i.e., it doesn't involve EPA), and it places environmental protection on the same level as other economic considerations, a mortal sin in environmental circles. In other words, it allows people to "pay to pollute," something that rankles some environmentalists, though none have really come out against something like a carbon tax. West Coast Environmental Law, in fact, came out in favor of the BC carbon tax in 2008, angering some of its traditional left-wing supporters. So some have seen the political costs incurred by Campbell and the BC Liberal Party, but some have begrudgingly given it credit for leading, when no other jurisdiction in North America has imposed a carbon tax, and neither the Canadian or US federal government has done anything to reduce greenhouse gas emissions.

There is a new party in waiting to emerge in the United States. It draws inspiration from the Tea Party for its anti-establishment populism, but draws from a much more educated, affluent, and practical centrist population. This constituency is considerably more sophisticated than most Tea Party supporters and almost all Tea Party politicians, believes that global climate change is a substantial risk, and is willing to spend money to reduce greenhouse gas emissions. Like Tea Party members, they are concerned about government deficits. Hence a carbon tax. When the dust settles in ... a few months or years, a carbon tax will emerge as a very practical option.

Blue-Green is not actually Green

The stalemate in Wisconsin appears over, with the Governor and the Republican State Senate adopting a tactical legislative maneuver around the quorum requirement that Senate Democrats had used to block the Governor's attempt to strip public sector unions (other than the firefighter and police unions that had supported the Governor's campaign) of their collective bargaining rights. Putatively, it was about Wisconsin's budget woes ("we're broke," was the Governor's often-used line), but it was really about clawing back benefits that public worker unions had won from the State when things were different.

Shahla Werner, director of the Sierra Club's Badger State chapter, wrote to Wisconsin's Sierra Club members that "[w]e need to stand together to support the people who work every day to ensure that the air we breathe and the water we drink is safe." [see NYT story] This is the way that environmental groups have traditionally aligned themselves, on the other side of The Man -- as one of the downtrodden against the powerful. The Blue-Green Alliance is a coalition of labor and environmental groups, purporting to advocate for "good jobs, green jobs." But this is just a modern message repackaging of a traditional suspicion of economic growth as a policy driver.

I am not so sure that this is the right future for environmental groups. The problem with aligning with labor groups is that it is lining up with the wrong kind of capital for strong environmental protection. The future of environmental protection lies with those that have high human capital, those that have moved away from jobs that actually require a labor union to protect job security. I don't believe, like some environmentalists do, that most labor groups are really interested in anything more than a marriage of political convenience when it comes to lining up with environmental interests. Autoworkers, mine workers, and workers in various manufacturing sectors, would indeed sooner protect their employing industries, even if as the circle of environmental harms from their employing industries grows wider and wider and becomes more and more apparent.

Are these folks environmentalists?

Inaugural

Skeptical environmentalists, meet the dismal environmentalist. I am dismal because I optimize. Or so it is popularly believed, that economists mindlessly maximize and optimize, losing sight of all manner of intangible costs and benefits. I still recall quite prominently that an environmental law professor from a top-15 law school once opined, without a shred of doubt, that "sure, economists would advocate for slavery if it maximized profits." For obvious reasons, this person will not be named. And yet this perception of dismal-ness also comes from much weightier thinkers, such as one of my favorites, C.S. Lewis, who wrote in Letter I of The Screwtape Letters:

"My Dear Wormwood...Jargon, not argument, is your best ally in keeping him from the Church. Don't waste time trying to make him think that materialism is true! Make him think it is strong, or stark, or courageous — that it is the philosophy of the future. That's the sort of thing he cares about. The trouble about argument is that it moves the whole struggle onto the Enemy's own ground. By the very act of arguing, you awake the patient's reason; and once it is awake, who can foresee the result?"

* * *

Above all, do not attempt to use science (I mean, the real sciences) as a defence against Christianity. They will positively encourage him to think about realities he can't touch and see. There have been sad cases among the modern physicists. If he must dabble in science, keep him on economics and sociology...

So writes Lewis's Uncle Screwtape, a Devil's disciple who in trying to school his nephew Wormwood on how to foment disenchantment with Christianity, advises him that Economics, and its accompanying Jargon, and not real science, is a good battleground for the dark side, which as juxtaposed with Reason, is not on the "Enemy's own ground." The Devil, it appears, has a comparative advantage in Economics and Jargon.

Among environmentalists (appreciating that this is far from being a monolithic group), there are a number of anti-economists, who are like-minded, and who bear more than a few misconceptions about economics, like one of my least favorite (and most popular) writers, Bill McKibben:

"Let's assume, for the duration of this article, that to you trees are vertical stalks of fiber, that a forest carries no more spiritual or aesthetic value than a parking lot, that woodland creatures are uninteresting sacks of calories, and that the smell of sunbaked pine needles on a breezy June afternoon merely matches the scent that comes from those conifer-shaped air fresheners that dangle from your rearview mirror.  Let's assume, in other words, that you've done something rotten and God has turned you into an economist." (Bill McKibben, What Good Is a Forest? Audubon, May 15, 1995, at 54)

Perhaps above all, I hope to convince the two groups of people with which I most closely work -- law professors and environmentalists -- that economics is not, as some would assert, a tool to perpetuate power, but an analytical approach. To be sure, economics is a way of thinking that is very different from those modes of analysis and thinking that form much of the intellectual capital of law professors and environmentalists. Maybe that is why economists find friends hard to come by in these circles.

We environmental economists are not dismal. Of all the economic areas, why would we pick environmental economics if we didn't care about the environment? Far more lucrative specializations are available.

And there is a third group of people I hope to reach: those who really are skeptical about environmental problems. I don't hope to change people's minds about the science of environmental issues, but of the economics of environmental protection. Years ago, a cost-benefit analysis of of the US Clean Air Act from 1970 to 1990 showed that just the monetizable benefits were more than an order of magnitude greater than the compliance costs. This is old hat for those that spend time thinking about air pollution regulation, but seemingly lost on modern libertarians, such as Tea Party members, that seem to delight in ranting about the excesses of environmental regulation.