Today is the third and final day of our dialogue between two very different voices on the subject of climate change legislation. Steve Everley is manager of policy research at American Solutions and a contributing author to “To Save America: Stopping Obama’s Secular-Socialist Machine,” by Newt Gingrich, and David Roberts writes about energy politics for Grist.
You can read Monday’s exchange here and Tuesday’s here. Today’s dialogue is below. Roberts and Everley will both provide some final thoughts, which will be posted at the bottom later tonight.
David Roberts: I found your answer on climate change somewhat unsatisfying. You accurately note that it’s a heavy political lift, most voters don’t prioritize it, and it’s easier to push for action on other grounds. You go on to ask, “Why would I bother to discuss global warming?” I can think of one reason: It’s happening! It’s not a poll, it’s a real thing in the world.
We’re on track to hit 11 gigatonnes of annual global carbon emissions by 2020, if not earlier. If we average that much or more over the coming century, atmospheric concentrations of CO2 could reach 1,000 ppm within our grandchildren’s lifetime. The consequences would be cataclysmic and irreversible. The operative question is not whether we can avoid climate change. It is doing damage today, and more is already baked into the system. The question is whether we can head off the worst of it.
Put aside our ideological and policy disagreements for a moment. A simple question, to which I ask the courtesy of a simple answer: Do you accept the conclusions of mainstream climate science as described most recently by the National Academy of Sciences?
Steve Everley: While I disagree with the premise, namely that we can “put aside our ideological and policy disagreements” to discuss global warming (it has become somewhat of a religion for the left, which is perhaps why I now must confess my faith), I will honor your request: I do accept that the climate is changing.
We could have a debate about how much, the intensity of impacts, or a suite of other questions related to what studies we accept or reject, but it would be a distraction. The issue before us is whether we impose a new job-killing energy tax to hamstring progress today so that in 90 years we might have a negligible impact on temperatures (EPA found cap-and-trade in the U.S. would reduce global temperatures only one-half of one degree Celsius by 2100).
The last time we imposed a tax regime of this scale was when the Progressives convinced us we needed an income tax. Four years after the 16th Amendment, Congress raised the top rate from 7 percent to 67 percent, partially to pay for cost overruns in administering the tax itself. Would you have us believe that Congress will not use this new energy tax system to dramatically increase taxes and redistribute wealth over time as Congress does frequently with the income tax?
David Roberts: I won’t dwell on your evasive answer, since our time is short, but frankly it’s bizarre to call climate change a “distraction.” It’s the problem we’re trying to solve, isn’t it? If we can’t agree about the nature of the challenge, what criteria can we use to evaluate alternative solutions? It’s like arguing over diets with someone who won’t acknowledge the existence of obesity. Get serious: Either explain why every scientific institution in America is wrong about climate change or explain what you would do to address it.
As for the rest, well, I’m not going to argue over whether America should have an income tax. The 20th century happened; most people have made their peace with it. Your argument consists entirely in repeating the word “tax” as often as possible. Indeed, that seems to be all that’s left of the once-proud conservative intellectual tradition: knee-jerk demagoguery on taxes.
Two questions for you. First, given that carbon pollution imposes costs on society, why shouldn’t those costs be paid by polluters? Why should they receive a vast subsidy from the public?
Second, many conservatives, your boss included, want to offer “incentives” to all sorts of clean energy technologies (which is different, apparently, somehow, from “picking winners”). How should those incentives be paid for?
Steve Everley: If you think it’s evasive to call climate change “a distraction,” then your beef is with the likes of President Obama and Sen. John “it’s not a climate change bill” Kerry. It is they who are arguing that introducing a cap-and-trade energy tax system will create net new wealth and net new jobs.
The reason I emphasized “tax” is because we are discussing a tax. Your refusal to answer my question about future congressional abuse of this new tax system suggests you agree with my concern that Congress will use it to raise taxes.
Incentives aren’t the same thing as picking winners because, for example, prizes for a national goal (such as a 100 mpg car) allow everyone to innovate, regardless of industry or status. Cap-and-trade punishes one set of disfavored industries and transfers its wealth to government-favored industries. Your approach also assumes fossil fuel companies are somehow unable to innovate, so we must punish them into extinction. This is why President Obama wants to bankrupt the coal industry.
How to pay for such incentives? Royalties and tax receipts from expanded energy production, an approach routinely rejected by the left, despite its popular appeal.
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Closing Thoughts
David Roberts: Thanks to Steve for a lively debate. It is too rare these days for people with opposing viewpoints to come together and engage directly; I hope this isn’t our last time.
America faces serious challenges. Above all is the one Steve seems keen not to talk about: climate change. Another is increasing dependence on oil just as the world’s supply is set to plateau. In coming decades the pursuit of oil will be dirtier and riskier (as we’re seeing in the Gulf of Mexico, to tragic effect). The pursuit of coal will follow the same arc.
More immediate are the grievous ongoing effects of recession and 10% unemployment. We’re in a politically delicate situation in which we need both short-term stimulus spending and a long-term plan to address the structural deficit. Ultimately, the deficit problem cannot be solved without new sources of economic growth. What will they be? What industries will dominate the 21st century? Given the Herculean work involved in putting the world on a path to low-carbon prosperity, energy is the obvious candidate.
With some political leadership and a smart set of choices, we can tackle multiple challenges at once. For instance, a top priority in the coming five years should be ramping up energy efficiency programs, particularly around buildings. It’s a win-win-win: construction trades suffer from crippling unemployment rates, efficiency can lower energy use and carbon emissions at a profit, and reduced demand can lower energy bills even if rates rise. We can also put people to work by funding state public transportation programs and building new low-carbon infrastructure like rail lines and transmission wires.
Longer term, we need a stable source of revenue for the necessary investments in clean energy research, development, and deployment. The obvious source for that revenue is a price on carbon. Unlike capricious government tax credits, a carbon price shifts investment incentives across the entire economy at once, especially as it slowly ramps up over time. It also provides money, if necessary, to protect consumers from short-term bumps in energy prices, reduce other tax rates, or pay down the deficit.
I simply don’t share Steve’s conviction that we must cling to the dirty energy status quo or our economy will crumble. I have faith that American researchers, entrepreneurs, and workers can overcome this country’s challenges, if only we set them to the task.
Steve Everley: As we conclude, let me thank David for a spirited and well-informed debate. In a time of intense partisanship, I appreciate the opportunity to discuss this important issue on rational terms with a person who clearly has an intellectual faculty to be envied. I can only hope my arguments have made the feeling mutual.
What we have been debating is actually about values. Do we value affordable energy, or do we value a European model of high energy prices? Do we value an empowered private sector, or do we value an empowered and, yes, even larger government? Most importantly, do we value creating American jobs today, or do we value making insignificant changes in temperatures ninety years from now?
Supporting a market-based economy, what could be called “the freedom culture,” is a necessary prerequisite for enduring prosperity and protecting the American way of life. Continuing to do this will, in turn, continue to pay the dividends we have already reaped: An expansion of wealth through greater opportunities and higher productivity; an economy that is globally envied and attracts immigrants from the world over; and exciting new inventions and technologies, including those that protect the environment in ways central planners could never conceive.
This is the fundamental reason why opposition to cap and trade is so high. The American system rejects the long disproven notion that we can tax our way to prosperity. The Left may believe in their hearts that cap and trade will create jobs and make life better for everyone, but that is a conclusion taken blindly on faith, not its compatibility with the American system.
Nor is it even based upon empirical research, as Spain and Europe as a whole have discovered. Numerous reputable analyses have indicated that cap and trade will kill jobs, and it is universally accepted that cap and trade will raise energy prices: Even President Obama says so, and the president’s now-former budget director has testified that higher prices are necessary for cap and trade to work. The only mitigating factor for these new taxes is the hope that government will fulfill its promise to redistribute wealth effectively. Again, that must be taken on faith, not history or experience.
As a representative democracy, the American people have the power and freedom to choose, through tradeoffs and establishing priorities, how they want to address a host of problems, ranging from the economy to the War on Terror. On global warming, it’s clear that Americans do not support a policy that will kill jobs and raise their taxes so they might put an insignificant dent in temperatures many decades from now.
Cap and trade is an attempt to redistribute wealth, kill jobs, and let the government define what opportunities are permissible, all of which represent a fundamental rejection of the American freedom culture.
Today is the second of Salon’s three-day dialogue between two very different voices on the subject of climate change legislation. Steve Everley is manager of policy research at American Solutions and a contributing author to “To Save America: Stopping Obama’s Secular-Socialist Machine,” by Newt Gingrich, and David Roberts writes about energy politics for Grist.
You can read Monday’s exchange here. For Day 2, Roberts led off this morning and Everley’s reply is now up and can be found below Roberts’ post.
Steve Everley: Before plowing ahead, I would like to make a couple of points about Mr. Roberts’ first comments.
First, Roberts is astonished that I did not make any mention of global warming or climate change in my opening post. I am astonished by his astonishment. Why would I bother to discuss global warming when all the leading proponents of imposing cap and trade have given up trying to convince people of the benefits of an energy tax based on the idea of trying to control the Earth’s temperature 100 years from now?
Senator John Kerry, after all, said of his cap and trade bill, “It is not a climate bill.” President Obama did not once utter the words “global warming” or “climate change” in his recent Oval Office address calling for a new energy tax (but he did endorse taxing our way to prosperity.) He clearly shares Roberts’ bedrock faith in the federal government’s ability to conjure up a Goldilocks tax system – one that will impose high enough taxes to change behavior but not too restrictive to kill jobs – and then know how to reallocate the revenue to the best new energy technologies. It’s an endorsement of the federal government becoming the largest venture capital firm in the world.
It seems that Roberts didn’t get the liberal strategy memo published last year that advised against focusing on global warming because voters don’t see it as an immediate threat. They are right. The public ranks concerns about global warming dead last in importance. Given that the argument to impose energy taxes because of global warming has already been lost and conceded by the Left, I thought I would concentrate my time on the remaining economic arguments.
Second, I made the point that President Obama has ominously cited Spain as the model of his investment plan in new green technologies, paid for with cap and trade revenues. In response to my citing a Spanish study by Professor Calzada pointing out that every green job created by Spain cost $800,000 and resulted in the loss of 2.2 other jobs, Roberts writes that this Spanish study had been “debunked up one side and down the other” and that “no one but conservative ideologues takes it seriously any more”.
I readily concede that this Spanish study has been debunked. An internal memo of the Spanish government leaked to the media last month makes clear that the job loss in Spain due to its green jobs program is actually worse than what Calzada found. It seems that even Spanish socialists take the Calzada report seriously now, even if their American counterparts are unwilling to do so.
The headline from the newspaper La Gaceta says it all: “Spain Admits that the Green Economy as Sold to Obama is a Disaster.”
That disaster is a Spanish jobless rate of 20%, meaning the Spanish government wasted an enormous amount of money in pursuit of the green jobs mythology, killing twice as many jobs as it created in the process. Spain is now flirting with bankruptcy, which apparently has the power to concentrate even the socialist mind.
In today’s post, Roberts’ argues that “there are some on the green left who trust only prescriptive, command and control regulation” who are “suspicious of markets.” By his reading these individuals have “virtually no power any more”. He then says that almost all the mainstream environmental groups and politicians support a market-based energy policy.
It is a strange understanding of the words “market based.” Cap and trade is not market-based, even though it is being branded as such. To most people, market-based means freeing the private sector from the constraints of government interference. This doesn’t mean anarchy, but market solutions generally lean toward more freedom for private economic actors as opposed to more regulation by the government.
Cap and trade is clearly the latter. It’s a government program that allows members of Congress to literally pick winners and losers in the economy by issuing carbon permits to favored industries. Once it’s implemented, it must be policed, regulated, monitored, and adjusted constantly, all by Congress or other public officials.
If government control of the means of production is now what passes as a market-based system, what would it take to call something socialist?
I find Roberts’ assessment of the many nuances of the energy sector incredibly well-informed, and I share Roberts’ faith in American entrepreneurs and markets as the “engines of innovation.” But Roberts appears to suggest the resilience of the American innovator means imposing higher taxes on them won’t have much impact. While I doubt our engineers and inventors would ever fully “go Galt” under cap and trade, it makes little sense to experiment with how many taxes we can levy on American businesses before their backs break.
David Roberts: Energy politics in America is in a state of high irony. One party is furiously defending market distortions that favor its highest paying constituencies; the other is pushing pro-market, fiscally conservative policies. Meanwhile, the former is accusing the latter of socialism.
Welcome to post-truth politics.
In theory, there should be a large space for bipartisanship on climate and energy issues in the U.S., for a simple reason: energy markets are broken. Fixing them would improve both economic and environmental outcomes.
So why can’t the left and right agree on this? There is in some sense blame to be laid on both sides. There are some on the green left who trust only prescriptive, command-and-control regulation. They are suspicious of markets and hostile to corporations on principle. But here’s the thing: that cohort has virtually no power any more. Almost all the big, mainstream environmental groups and Democratic politicians support market-based energy policy. In fact, they support market-based policies originally conceived in consultation with conservatives in the Bush I administration.
In sharp contrast, all Republicans, from powerful politicians down to foot soldiers like Mr. Everley, are united by a single theology: taxes, indeed revenue-generating mechanisms of any kind, are always and everywhere to be fought. Don’t mistake this for libertarianism — there’s no corresponding aversion to subsidies or regulatory favors. And don’t mistake it for fiscal conservatism — there is no similar aversion to spending. Indeed, if one reads Mr. Gingrich’s ideas on “green conservatism” you’ll find little else but spending; he advocates a whole skein of unpaid-for tax breaks, loopholes, and credits. The tax code, as Sima Gandhi recently documented, is where politicians like to hide spending to pretend it’s not spending. It’s exactly the kind of dysfunctional government policy that results when taxes have been rendered radioactive.
Insofar as there are sincere pro-market conservatives in positions of power, I won’t claim they will or should support everything I consider good policy, but there’s a good 75% of it to which I can’t see any libertarian objection.
Think of good climate/energy policy as a three-legged stool. The first leg is an economy-wide price on carbon, which serves a dual function. First, it internalizes an externalized cost, i.e., it removes an enormous implicit subsidy to fossil fuels. It forces energy markets to represent the cost of their products more accurately. By definition, a market in which more information is embedded in prices leads to more rational allocation of capital than the alternative. Secondly, a price on carbon funds the consumer protections and energy investments needed in the coming century. This point is worth emphasizing: a price on carbon is how you pay for the rest of it. It’s responsible fiscal policy, plain and simple. (The CBO found that the Kerry-Boxer climate bill would reduce the deficit; funny how the Senate’s purported fiscal hawks didn’t line up to support it.)
The second leg is regulatory. In part this means new regulations designed to address the signature failures of energy markets. Energy efficiency, for example, abounds with market failures; strong efficiency standards could save consumers more than enough money to offset higher energy prices. But regulatory reform also means untangling and rationalizing existing regulations. One familiar example is the network of land-use regulations that mandate sprawl through excess parking, separation of retail and residential, height limits, and the rest. Those regulations force people to drive more, increasing their transportation costs and greenhouse gas emissions. Another example is the Clean Air Act itself, which direly needs to be strengthened and reformed by switching to output-based standards. Another is utility regulations (oy). One could go on. Plenty of existing regulations have perverse economic and environmental effects.
The third leg is public investment. As a recent report from the American Energy Innovation Council showed, energy markets are unique: the investments are enormous, slow to turn over, and carry enormous risk. It’s not an environment that encourages rapid innovation or substantial R&D. That’s a market failure that can be compensated for by large-scale public investments in RD&D.
Most of this amounts to making better markets: markets that tell the truth about costs, markets whose failures are meliorated by smart public policy. My prediction: when energy and efficiency technologies compete on level playing field with fossil fuels, or even a less-tilted playing field, we’ll be astonished by the results. American entrepreneurs and markets, forever engines of innovation, will rapidly render our fearful projections of high cost and slow speed obsolete. We’ll get a healthier economy, healthier citizens, and a healthier world. That seems like an outcome liberals and conservatives could agree on.
Over the next three days, Salon will be featuring a dialogue between two very different voices on the subject of climate change legislation. Steve Everley is manager of policy research at American Solutions and a contributing author to “To Save America: Stopping Obama’s Secular-Socialist Machine,” by Newt Gingrich, and David Roberts writes about energy politics for Grist.
Everley led off with his thoughts this morning, and a response from Roberts followed a few hours later (it appears below Everley’s post).
Steve Everley: With the unemployment rate near 10 percent, creating jobs should be the first consideration of our elected leaders, but instead President Obama and his liberal allies in Congress are insisting on enacting a national energy tax that will kill jobs and drive American businesses overseas.
The vehicle for imposing this vast new energy tax system is cap-and-trade, a scheme where the government arbitrarily determines how much carbon each company can emit, chooses which companies get free permits to emit carbon and which companies have to pay for them, and then puts unelected bureaucrats in charge of regulating the whole system.
The result is higher energy costs, which virtually every economist will tell you are necessary for cap-and-trade to be effective – higher prices are necessary to prevent consumers from using what the left considers too much energy. President Obama even bragged that under his ideal cap-and-trade plan, electricity prices would “necessarily skyrocket.”
President Obama has also listed Spain as the model for his energy policy, noting last year that the Spanish government’s investments in green energy “are paying off in good, high-wage jobs – jobs they won’t lose to other countries.”
But a study from economics professor Gabriel Calzada of King Juan Carlos University in Spain shows that his country’s push for “green jobs” has been a disaster for the economy: Calzada found that each green job created not only costs on average 2.2 jobs in the private sector, but also upward of $800,000 each in government subsidies. Two months ago, Spain’s unemployment rate topped 20 percent.
If Spain is the model that President Obama and the left wish to emulate, then America’s unemployment rate will also “necessarily skyrocket.”
Many other studies have shown, including those from the Brookings Institution and the Congressional Budget Office, that higher energy costs lead directly to fewer American jobs. The CBO adds that the shift toward so-called green technologies, President Obama’s biggest selling point for this new cap-and-trade energy tax, would actually reduce economic productivity as each worker in the energy industry would now spend the same amount of time producing less energy.
The European Union sold cap-and-trade to its member countries in 2005 on the basis that it would create jobs and boost their economies. The opposite happened. Since 2005, this policy has cost the EU economy over $7 billion, and the U.S. Government Accountability Office found last year that the EU system did not significantly advance investment in new technologies, which President Obama and his liberal allies in Congress keep pointing to as the source of new jobs that cap-and-trade energy taxes are supposed to deliver.
With that kind of record, what rational policymaker would seek to impose this new energy tax system on his or her own constituents as a way to create net new jobs and net new economic wealth, and not just a massive redistribution of wealth?
Last fall Sen. Kerry tried to sell his cap-and-trade energy tax plan by pointing out that America had effectively reduced its emissions in the past year “because of the downturn in the economy.” In order to get to where we need to be, Kerry concluded, we just need to go “another 14 percent.”
It was an illuminating admission from the Senate’s staunchest defender of the energy tax. Kerry articulated a direct relationship between economic stagnation and cap-and-trade, proof that an energy tax is a strategy that will kill more American jobs and make the recession permanent.
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David Roberts: I confess to being uncertain how to respond to Mr. Everley’s opening salvo. Like his boss Mr. Gingrich, one of the original masters, he seems to be stringing together words and phrases poll-tested to inspire fear. The presence of the term “unelected bureaucrats” does not generally signal good faith and seriousness.
So let’s back up a bit. Why would we want a mandatory cap on greenhouse gas emissions? Because we have a large and pressing problem to solve, namely climate change, a phenomenon that Everley astonishingly fails to even mention. The best science indicates that the developed world needs to reduce its emissions over 80 percent by 2050. That is a truly Herculean task, and I’d be quite curious to hear how Everley proposes to accomplish it without a mandatory cap on carbon pollution — or if he thinks it’s a real problem at all.
By emitting greenhouse gases, industries are imposing costs on the public, but they are not paying those costs. Carbon pollution is a classic economic “externality” that distorts the proper functioning of the market. One way or another, those costs need to be internalized, incorporated into the market price of fossil fuel-intensive goods and services. It’s important to note that such a move would not raise net costs — it would simply move those costs to their rightful owners. It would force the market to tell the truth.
So how to go about it? In the late 1980s, a group of market-inclined environmentalists, recognizing the limits of “command-and-control” air pollution regulations, developed a new model: rather than plant-by-plant mandates, set a declining upper limit on the total pollution emitted across the U.S. economy, issue tradable pollution permits, and allow private capital to flow to the best (read: cheapest) means of meeting the cap. Thus you harness environmental goals to market forces. This essentially conservative idea impressed the administration of George Bush Sr., who signed into law the 1990 Clean Air Act amendments, which implemented such a system for acid rain pollutants. It was a resounding success, reducing pollution much more cheaply than expected, with massive social and health benefits. (For a compact history of cap-and-trade, I recommend this article in Smithsonian.)
Market-based pollution limits have been so effective that a bipartisan group of senators led by Sens. Carper. D-Del., and Alexander, R-Tenn., is now pushing a similar trading system for SO2, NOx, and mercury — so-called multipollutant legislation. Leading lights on the right used to feel the same way about using market-based systems to reduce greenhouse gases. For instance, a wise man once said:
“I think if you have mandatory carbon caps combined with a trading system, much like we did with sulfur, and if you have a tax-incentive program for investing in the solutions, that there’s a package there that’s very, very good. And frankly, it’s something I would strongly support.”
That was Newt Gingrich in 2007, before he was angling for a presidential nomination from a party dominated by its Tea Party fringe. Similarly, in 2008 California Senate candidate Carly Fiorina said that a cap-and-trade system would “both create jobs and lower the cost of energy.” Now that she’s seeking votes from the Tea Party, she’s allying with the Senate’s premier flat-earther, James Inhofe, R-Okla.
In short, conservative politicians are turning away from — and grotesquely mischaracterizing — a market-based pollution control system for primarily self-interested electoral reasons. This has made clear dialogue on the subject extraordinarily difficult.
Anyway, I don’t want to bore people, but a couple more quick notes. First, the Spanish study Everley cites has been debunked up one side and down the other, most recently by the DOE’s National Renewable Energy Laboratory. No one but conservative ideologues takes it seriously anymore. Recent studies of cap-and-trade bills, like the one a couple weeks ago from the Peterson Institute for International Economics, show that they would be net job creators, if modest ones. Other studies, from, for example, the EPA and CBO, show that the bills would reduce the deficit, which you’d think would be attractive to conservatives.
On the costs of a cap-and-trade system, the economic consensus is that it would cost American households about a postage stamp a day — a far, far smaller price than would be imposed by the damages from climate change. For more on that consensus, see this discussion paper (PDF) from journalist Eric Pooley.
To conclude: virtually everyone agrees that the U.S. needs to invest in new clean energy industries and solutions. That’s the easy part. The politically more difficult part is how to pay for those investments. A cap-and-trade system offers a twofer: It discourages carbon pollution by raising its price, and it uses that revenue to fund clean energy solutions. Conservatives want to spend the money, but they don’t want to raise it. It’s fiscally and morally irresponsible.
