Despite their relatively rarity in the real world, carbon taxes are the subject of endless hype and discussion in the climate-policy world.
That hype was reinvigorated last year with the introduction of a carbon tax proposal from the Climate Leadership Council, a bipartisan group that boasts several prominent (retired) Republicans among its founding members, including James Baker and George Schultz, along with a number of fossil fuel companies.
Though it didn’t go anywhere — if you’ve checked in on Congress lately, you will understand why — the CLC proposal has taken on a kind of elevated status in Washington, DC. It is now viewed as the model of what a bipartisan carbon tax should look like, should such a thing should ever become politically viable. (Weirder things have happened.)
But hang on. The CLC pitches its proposal on the premise that it will appeal to the broadest possible swathe of the public, across partisan lines. Is that true? Does it actually line up with public preferences?
Turns out, maybe not.
Designing a carbon tax requires answering two core policy questions. First, how much money should it raise? And second, how should the money be spent?
As to the first, the CLC proposal starts at $40 a ton and rises $5 a year. As to the second, the revenue goes to dividends, i.e., it is distributed back to citizens on a per-capita basis. (It’s a dividend of roughly $2,000 a year for a family of four, to begin with.) Policies like this are called “tax-and-dividend.”
Is that what the public wants?
It’s funny you should ask. The Yale Program on Climate Change Communication recently completed a large-scale survey of the public on this subject. The results were just published in the journal Environmental Research Letters.
Researchers asked a representative sample of 1,226, American adults questions seeking to determine two things. First, how much are Americans willing to pay per year to fight climate change? And second, what would they prefer government do with the revenue?
It’s the answers to the second question I want to highlight, but let’s look at the first really quickly.
How much are Americans willing to pay a year to fight climate change? $177.
To get at the first subject, researchers took an interesting approach. They did not simply ask, “would you support a carbon tax, and if so how big?”
Rather, they phrased the first question this way: “If a tax on fossil fuels (coal, oil, and natural gas) to help reduce global warming were to cost your household $X more each year in higher energy bills, would you support or oppose it?” Respondents were randomly assigned values of X.
Based on those binary yes-no answers, the researchers used some statistical hoodoo to determine overall “willingness to pay” (WTP). The results: “We find an overall mean WTP of US$177 per year, with a confidence interval ranging from US$101 to US$587.”
If you average that out over regions — which, remember, have widely varying energy costs — it translates to about 14.4 percent more on energy bills. That’s a pretty good sized hit!
A carbon tax that big would generate about $22.3 billion a year in revenue.
There are, of course, a million reasons to take these results with a grain of salt. First off, the idea that Americans know exactly how much they’re willing to pay, in advance, to the dollar, is a little fanciful. WTP on a survey is very different from WTP in the midst of a pitched political battle with partisans on different sides pushing sharply contrasting messages.
Secondly, public opinion does not generally determine US public policy anyway. Donors, organized interest groups, and larger political trends will determine the fate of carbon policy, not broad (and shallow) public opinion.
I’d say the most we could confidently learn from this kind of WTP survey is that Americans are not overtly horrified by the idea of paying a decent chunk of money to stop climate change. Given Americans’ generally tax-averse attitudes, that’s something!
What do Americans want to spend the revenue on? Clean energy.
Among some in climate circles — an odd coalition of conservatives, libertarians, and far lefties — there is an unshakeable faith that per-capita dividends are the skeleton key that will unlock public acceptance of carbon taxes. That’s why it is part of proposals from both the conservative-leaning CLC (see its paper on the “conservative case for carbon dividends”) and the grassroots Citizens’ Climate Lobby.
It seems like dividends ought to have political appeal. If every member of the public starts getting a yearly check, it makes sense that they’re going to want to keep getting those checks. And the bigger the carbon tax, the bigger the check, so it’s an insurance policy against backlash.
Unfortunately, the public steadfastly refuses to show any similar enthusiasm for the idea. (I reviewed some of the evidence in this post.) Americans are instinctively suspicious of dividends and generally support using the revenue for the same purpose as the tax, i.e., to transition off fossil fuels.
Sure enough, here’s what the Yale researchers found:
Per-capita dividends are down below 50 percent. Developing clean energy is at 80.
As I keep saying: clean energy is consistently popular, across political and demographic lines, like almost nothing else in political life these days. It is a political vein for smart politicians to mine, the current administration notwithstanding.
In fact, I suspect that public support for plans like CLC’s would be higher if they were presented first and foremost as bold, large-scale plans to transition to clean energy — with carbon taxes a secondary feature, a funding mechanism, not the highlight.
Economists love to price externalities. Fine, we get it. But the public does not think like economists; it does not see “taxing bads” as an inspiring policy initiative in and of itself. Trying to present a tax as a positive, proactive policy is a communications nightmare, flying directly in the face of decades of conservative anti-tax propaganda. It’s about the most difficult way you could imagine to get to climate policy.
Most people’s intuitions run the other way. If we want a certain kind of future, they reason, we should take active measures to achieve that future — spend the money, develop the tech, build the infrastructure. Not just tax the stuff we don’t like and hope for the best.
In this, most people are much wiser than economists.
But even if you don’t agree, carbon tax advocates have got to grapple seriously with the fact that the public does not share their enthusiasm for dividends, or for “revenue neutrality,” another shibboleth whose political appeal is vastly overestimated by wonks.
Those concepts might have some appeal in elite circles — which, realistically, have much more influence on policy than the public does — but they are highly unlikely to be the basis of any grand upswell of public support.
It’s just hard to build a movement around a negative. People want an inspiring, positive vision to reach for. Economics is the wrong place to look for that kind of thing.