Photographer: Luke Sharrett/Bloomberg

Carbon Taxes Gain Conservative Followers

An aborted attempt to institute one in D.C. is a case study on how the politics have shifted.
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Last July, Tommy Wells, director of the District of Columbia’s Department of Energy and Environment, received the final copy of a report that had been in the works for more than a year. Its subject: how to make Washington the first major city in the U.S. to adopt a carbon tax. The 51-page document laid out a framework for instituting a levy that prices emissions of greenhouse gases roughly in line with the cost of their environmental damage, then giving the revenue—projected at about $200 million a year—back to taxpayers. The report was never released, however, not even to the city council. Bloomberg obtained a copy through a public records request. The department, Wells said in a statement, “does not have an interest in promoting or implementing a carbon tax.”

D.C.’s tradition of embracing liberal causes might have made it seem an obvious candidate for a carbon tax. The brief flirtation is a case study on how the politics around such a notion have shifted. Indeed, even as Donald Trump begins dismantling federal regulations aimed at curbing emissions of heat-trapping gases, carbon taxes are winning conservative backing.

In the U.S., the idea of a carbon tax first entered national politics in the early 1990s, when President Bill Clinton proposed a tax on energy championed by Vice President Al Gore; support split along party lines. What followed was a long, slow decline in enthusiasm among centrist Democrats. By the 2016 presidential primaries, Senator Bernie Sanders underlined his outsider status by trumpeting a carbon tax; Hillary Clinton stayed noncommittal (her campaign manager internally called the idea “lethal”).

The federal pullback on climate has prompted cities and states to think about what they can do on their own; legislatures in at least seven states are considering carbon taxes. However, as more jurisdictions weigh actual proposals, the difficulty of securing approval for such levies—from legislators or voters—is increasingly apparent. In the states where carbon tax bills are pending, including Massachusetts, New Hampshire, and New York, only two bills have made it out of committee, according to the National Conference of State Legislatures. In Washington state, 59 percent of voters last November nixed a ballot initiative that would have used revenue from a carbon tax to offset cuts in sales and business taxes.

In 2015 the D.C. government awarded a contract to the Center for Climate and Energy Solutions, run by former Environmental Protection Agency Deputy Administrator Bob Perciasepe, to come up with a blueprint. The report that Perciasepe’s group delivered last summer recommended focusing on the energy use of the city’s 128,000 buildings (including federal properties), which account for 75 percent of Washington’s greenhouse gas emissions. Most of the rest comes from transportation, which the report said should be excluded from the tax because many of the region’s drivers buy gas outside the district.

The report recommended starting the tax at $45 per ton of emissions—close to what the federal government has calculated as the toll attributable to those emissions, which economists call the social cost of carbon. The money raised would be returned to the public via tax cuts or rebates.

Wells says the city didn’t proceed because it’s introduced other surcharges on utility bills to fund grants for solar power and energy efficiency projects. He argues those are more effective means of reducing D.C.’s carbon footprint than relying on prices to alter energy consumption. “What the carbon tax does not do, it doesn’t directly reinvest,” he says.

Conservative climate activists say the city’s government-imposed solution is wrong and that the market-based forces of a carbon tax are more efficient in reducing greenhouse emissions. “The solution that D.C. has landed on seems to be more in keeping with a planning-oriented ideology than a revenue-neutral carbon tax would be,” says Eli Lehrer, president of the R Street Institute, a think tank that advocates limited government.

During the last presidential campaign, Trump tweeted he would “not support or endorse a carbon tax.” But not everyone in his circle shares the view. Secretary of State Rex Tillerson supported a carbon tax as chief executive of Exxon Mobil Corp.; so does Tesla Inc. Chairman Elon Musk, an informal Trump adviser.

Ted Halstead, the founder of the Climate Leadership Council, a group of prominent Republicans that met with Trump’s advisers in February, is pushing for something quite close to the approach outlined in the D.C. report: levy a $40-per-ton tax on carbon emissions and return the money to the public via rebates, or what Halstead calls “carbon dividends.” He plans to solicit support from leading companies.

Adele Morris, policy director for climate and energy economics at the Brookings Institution, says the increased interest among conservatives reflects, among other things, a desire to maintain American leadership in combating global warming as President Barack Obama’s climate regulations get ripped down. “I think some conservatives see an opportunity to shape a positive agenda for climate change in the Republican Party,” she says. They may also be concerned about “the risk to the party of continued obstruction and denial.”

But even if Republicans can be persuaded to endorse a carbon tax, will they be any more successful at getting the public to sign on than Democrats have been? Yoram Bauman, a Republican economist—and stand-up comedian—who organized last year’s carbon tax ballot measure in Washington state, says he’s heartened that such levies “are moving into the realm of polite conversation.” He thinks it’s only a matter of time before the political interests align in favor. “What’s the saying in politics?” he says. “Everything looks impossible until it’s not.”

The bottom line: Trump has pronounced himself against a carbon tax, but more conservatives are warming to the concept.

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