The oil and gas industry is trying to get ahead of the climate policy curve.
Former Sens. Trent Lott of Mississippi and John Breaux of Louisiana, longtime lobbyists and two of big oil’s most devoted servants, have formed a new political action committee. It is dedicated to the passage of a carbon tax.
Wait … what?
Yes, it is true: The PAC is called Americans for Carbon Dividends (AFCD) and it is educating the public about, and lobbying for, a policy called carbon tax-and-dividend. More specifically, it is pushing a proposal that was released last year by a nonprofit called the Climate Leadership Council (CLC), led by former Secretary of State James A. Baker III. AFCD is effectively the lobbying arm of the CLC.
The plan would impose a carbon tax starting at $40, “rising gradually” at an as-yet-unspecified rate, with all the revenue returned as per-capita dividends — rebates to individual citizens that the group estimates will start around $2,000 a year for a family of four.
AFCD’s CEO, the conservative author and speaker Ted Halstead, has helped bring on board a who’s who of Washington insiders. RTO Insider reports:
In addition to bringing on Hill+Knowlton to handle communications, Americans for Carbon Dividends has hired Squire Patton Boggs — where Lott and Breaux are senior counsels — as lobbyist and Margaret Lauderback, an ally of Rick Perry and House Majority Leader Kevin McCarthy, to lead fundraising. Political consultant Mark McKinnon, a former advisor to Sen. John McCain (R-Ariz.) and former President George W. Bush, and Joe Lockhart, White House press secretary under President Bill Clinton, have signed on as senior advisers. Former Bush aide Karen Hughes is of counsel.
Former Federal Reserve Chairs Janet Yellen and Ben Bernanke and former EPA Administrator Christine Todd Whitman, all founding members of the CLC, have also signed on to the new effort.
So far, funders include Exelon, the operator of America’s largest nuclear fleet, First Solar, and the American Wind Energy Association. Four big oil companies, Exxon Mobil, BP, Royal Dutch Shell, and Total SA supported the CLC proposal and are said to be mulling donations to AFCB.
You might think a coalition of Bush-era lobbyists and big energy corporations pushing a carbon tax would raise some suspicion. But in the course of a somewhat credulous story on the subject, the New York Times’s John Schwartz quotes Yellen saying, “It’s something that may command bipartisan consensus.”
Similarly, Tom Kiernan, the CEO of the American Wind Energy Association (AWEA), told Greentech Media, “We see this as a valuable opportunity to join a bipartisan conversation on carbon policy.”
This policy is not bipartisan in any meaningful sense, it is not likely to be political popular, it’s not all that great as policy to being with, and it is naive to see it as a gambit that arises primarily, or even tangentially, from environmental concerns. It is first and foremost a bid by oil and gas and nuclear to secure the gentlest and most predictable possible energy transition.
More broadly, it is the US Climate Action Partnership all over again. That was the effort, starting around 2006, to develop a climate bill that big, polluting industries would support. The idea was that support from such companies, combined with support from establishment green groups, would lend the effort credibility and political momentum. Instead, it yielded a compromised bill that no one loved, which died a lonely death in the Senate in 2010.
The folks behind AFCB think they’re avoiding the big mistake of that episode: a policy too complicated to explain. And the tax-and-dividend idea is certainly simpler than cap-and-trade. But the biggest mistake of the 2008-era climate policy push was not the policy, it was the belief that corporate support is the key to climate policy.
Climate activists in 2006 couldn’t have understood the political situation into which their policy would be released, but there’s no such excuse today. The fact is that the political model ACCD represents — start in the very sensible bipartisan center and expand from there — hasn’t been fruitful for many years in the US. There’s certainly no reason to think it will work better any time soon.
This is oil, gas, and nuclear making their opening bid on climate policy
Anyone who has followed the careers of Trent Lott and John Breaux — former leaders of the Senate Republicans and Senate Democrats respectively — knows that they are creatures of a bygone era. Bipartisanship has been declining in the US for decades, but its last redoubt was the kind of bipartisanship Lott and Breaux represented, i.e., the purely transactional, corporate-friendly kind.
From the moment they left the Senate, they’ve been lobbying, first at their own firm, the Breaux–Lott Leadership Group, and now at Squire Patton Boggs, which has represented everything from Shell to solar companies.
In fact, Lott, who resigned from his leadership position in disgrace after praising segregationist Strom Thurmond’s run for president, left the Senate early in part to avoid the recently passed Honest Leadership and Open Government Act, which would have prevented him from lobbying for two years after leaving the Senate.
This new PAC is a pure industry effort, a coalition of energy groups from almost every big energy sector except coal, backed by industry-friend lobbyists.
There are two ways for climate-concerned folk on the left to react to something like this. One is to think, gosh, climate change is such a compelling and urgent problem that even oil companies and lobbyists have seen the error of their ways. And if they’re willing to help, gosh, we should make every effort to meet them halfway. Let’s signal that we’re eager to compromise.
This is the way of the Very Sensible Centrist. But it’s utterly disconnected from anything going on in US politics right now — a kind of enforced naivety that centrists too often mistake for virtue.
Another way to react might be to see the industry bid through the lens of power, to think about how to get more and better. Oil companies are giving ground? Push harder. That’s what Republicans would do.
To understand the political economy of a carbon tax, it helps to understand the motivations of the industries involved, which do not always overlap. It’s easy to understand why coal wouldn’t endorse a carbon tax, and why wind and solar would. Oil and gas and nuclear and more interesting cases.
The oil and gas industry is trying to get ahead of the climate policy curve
For oil and gas, there are two key considerations.
First, US climate policy now seems inevitable. Even though is has been kept bottled up in Congress, and Trump is now squashing it at the federal agency level, it is busting out all over in states and cities, some of which are making plans to switch to 100 percent renewable electricity and ban gas and diesel cars in a few decades, among many other diverse initiatives.
Federally, there’s still the danger that Obama regulations like the Clean Power Plan could survive Trump’s crude attempts to overturn them. (See Mike Grunwald on “the myth of Scott Pruitt’s EPA rollback.”)
Overall, it makes for an extremely volatile and unpredictable policy environment — or rather, dozens of disparate policy environments. And oil and gas companies know that Trump won’t be in power forever. Democrats will return to federal power eventually, and when they do, they will have an appetite for bold climate policy.
Basically, oil and gas sees a big wave of climate policies building. That is what Lott meant when he told the Wall Street Journal that “the tide is turning on the realization that something needs to be done in this area.” He didn’t mean “we’ve been doing some reading and realized we were terribly wrong.” He meant “the jig is up.”
Thus the inclusion of two key provisions in the AFCD proposal.
First, EPA regulations meant to reduce greenhouse gas emissions, like the Clean Power Plan, would be revoked, allegedly rendered unnecessary. (It’s unclear exactly which regulations are included.) And second, energy companies would be given immunity to climate-based lawsuits like several currently underway, a provision climate activists are certain to oppose.
In short, this proposal would radically simplify the federal climate policy landscape, giving oil and gas lobbyists a single target. And oil and gas would use it to argue against further policy at the state level.
The second political consideration for oil and gas companies is even more mercenary. Under any economy-wide carbon tax, it will coal that’s hit first and hardest. And what’s bad for coal is good for natural gas, at least in the short-term. Especially absent further policy, a price on carbon will leave oil quite healthy for quite some time. Oil and gas don’t have to be faster than the bear — they just have to be faster than coal.
As for nuclear, it faces some urgent short-term problems. It is in a tough spot in the US, with several plants closing. Currently, it is stuck in an unsavory marriage of convenience with coal, begging for federal bailouts for “baseload” plants in the name of “resiliency,” a transparently fraudulent case that is winning the industry no friends.
From both a long-term strategic and short-term PR perspective, the nuclear industry would much rather be in an alliance with oil and gas, pushing for a price on carbon, which is the one policy that could truly save its bacon. That way, it can look virtuous and environmental instead of desperate.
This proposal is aimed at Democrats, not Republicans
This is not an attempt by Republicans to get Republicans in Congress to pass climate legislation.
Bush-era Republicans are out of favor in the party. These lobbyists know as well as anyone else that there is absolutely zero chance that today’s Republican Party will be involved in the passage of a new tax, a thing it hates above all else, to address a problem it views as a liberal fantasy.
Today the establishment press (once again) fell for an old line.
WSJ Headline: “Conservative Group will push for Carbon Tax”
They cite lobbyist Trent Lott as “conservative”
Every single Republican in congress has voted to “never” pass a carbon tax.
GOP platform opposes same.
— Grover Norquist (@GroverNorquist) June 20, 2018
So what’s the point of the proposal? The calculation is that eventually Democrats will be in power again, but their majorities will be narrow and their chance at substantial legislation will be fleeting. In that circumstance, they will need some Republican votes to overcome a filibuster and pass anything big. Those few Republican “moderates” — assuming anything by that name still exists — will have enormous power to set an upper bound on the effort’s ambitions.
This proposal is a signal to Democrats and center-leftists that tax-and-dividend is the Respectable Middle, a good-faith starting point for bipartisan debate. Democrats don’t really have a clear sense of their own climate policy preferences at the moment, so a certain faction of the party is certain to embrace the opportunity to be “reasonable” about it.
Of course, any tax that passes through any conceivable Congress will not end up looking like nice, clean cap-and-dividend program. It will get larded up with favors to win over various constituencies. Such is democracy. But precisely detailing the policy is not the point.
Above all, the point is to establish a simple principle as the starting point for debate: no carbon revenue should go to the government or be spent by the government. “The dividend changes everything,” Lott told the WSJ, in the story’s most revealing quote. “The money goes back to the people instead of into the dark, deep hole of the federal government.”
This is a message to Democrats: In the event you need the support of big oil and a few transactional Republicans to pass climate policy, our baseline is no revenue to the government, no new spending, no other climate regulations, no climate lawsuits.
This proposal is “bipartisan” in that it lacks support from both parties
The non-profit, James Baker-led CLC is “bipartisan” in the very odd DC usage of the term, which is that a tiny handful of Republicans and Democrats support it.
Why would Democrats who actually care about climate change go for it?
There are two possible reasons: a) it’s super popular and has a good chance of passing, or b) it’s such good policy that it’s worth backing, even with long odds.
But neither is true.
There’s no reason to think tax-and-dividend is the most popular climate policy
There is no evidence that pricing carbon — the climate policy with the most transparently punitive effects on average voters — is the most popular climate strategy. In practice, it has proven quite difficult. Virtually every wonk and analyst agrees that it’s important, but voters are voters, and they like supporting “good”s more than they like punishing “bad”s, especially when they’re the bads.
A climate policy seeking popularity will foreground goods, like renewable energy, which everyone loves, and leave the taxing of bads in the background, as a funding mechanism.
Similarly, there’s not much evidence that dividends are the key to helping the medicine of carbon taxes go down. In surveys, the public generally prefers uses of carbon revenue that are targeted at reducing carbon, like support for renewable energy (again: goods). That makes sense to people. Taking the money and then giving it back, in an endless game of bureaucratic whirligig, does not seem to grab them the way it grabs wonks.
AFCD released a poll of its own; its online survey of 2,000 likely voters showed support for tax-and-dividend at 56 to 26 percent. But the question was absurdly slanted in favor of the policy.
As you may know, some leading figures in the Republican party have proposed taxing fossil fuel companies on their carbon emissions and rebating all the money directly to all Americans through a monthly check. This new climate solution is called ”carbon dividends” because all households would receive a monthly cash dividend as part of an effort to combat climate change. Would you favor or oppose this plan?
A climate “solution” Republicans support? I’ll get a monthly check? It sounds pretty good, floating there in isolation on an online survey!
Of course, in the real world, voters will hear a few other salient facts. The “leading figures” are retired, out-of-power lobbyists. The GOP steadfastly opposes the policy, both institutionally and almost unanimously. The tax would ultimately fall on consumers, raising the cost of energy and everything that uses energy.
The New York Times says it’s a “plan to fight climate change by taxing greenhouse gas emissions and giving the revenue to American taxpayers.” What sense does it make to take money and then give it back? Just to give bureaucrats something to do? And who’s to say the government won’t grab the revenue for something else whenever it pleases?
The attack ads write themselves. That’s probably why, for all its endlessly touted bipartisan appeal, no actual bipartisan carbon tax-and-dividend bill has passed anywhere.
Well, okay, but is it good policy, worth dying on a hill for?
First off, there’s no way to judge the CLC as a carbon-reduction policy, because the rate of increase in the tax isn’t defined. There’s literally no way to know what effect it would have on carbon emissions.
CLC is pushing this study, which is written by a guy who “has worked at every level of the coal and oil and gas industries” and a guy who was previously at the National Association of Manufacturers, which purports to show that the CLC plan would reduce carbon almost twice as much as Obama regulations by 2025.
Of course, the relevant comparison is not CLC vs. Obama regulations, it’s CLC vs. competing climate policy proposals. But more to the point, the authors of the study simply stipulate an escalation rate of 3 to 5 percent a year — the CLC council “has not yet settled on a final escalation rate.”
Contrast that to a similar proposal (albeit one that would leave EPA regulations in place) from Democratic Sen. Sheldon Whitehouse (RI), which he reintroduced last year. Whitehouse says:
Our bill sets the 2018 fee per ton of carbon emitted at $49, the central range of the social cost of carbon last estimated by the Office of Management and Budget. That fee would increase each year at a real 2 percent until emissions fall 80 percent below 2005 levels, and then follow inflation.
Clear enough! (The bill, also a dividend plan, was a bit of outreach to Republicans. The results were predictable to everyone, possibly including Whitehouse.)
It’s unclear how fast the ACFD tax is meant to rise, and so unclear what it would do. “If the language says the tax will increase over time without defining the actual increase,” Robbie Orvis, director of energy policy design at Energy Innovation, told me, “the long-term economic and emissions effect of this tax are impossible to accurately predict.”
A future Congress will determine both the level of the tax and the rate of escalation, which means it will determine the strength of the proposal — and there’s no way to know how strong it is until then.
Meanwhile, using all the revenue on dividends leaves none for anything else. It leaves none for the myriad infrastructure, R&D, and transition assistance programs that will be needed to address climate change. And it leaves none to use to secure political support from diverse Democratic constituencies, all of whom have their own parochial interests in climate policy.
The political gamble is that the broad public appeal of dividends will overwhelm the power of interest groups, but that is almost entirely a matter of faith, not evidence.
For those who believe in the power of a price on carbon, dividends are a somewhat arbitrary bottom line. “Putting a price on the uninternalized cost of greenhouse gas emissions via some sort of tax is the goal,” Jerry Taylor of the Niskanen Center told me. “What we do with the revenue from that tax is an entirely separate question that will largely be determined by the political bargaining required to get a meaningful carbon tax across the legislative finish line.”
There is certainly nothing magic about the dividend, such that it’s worth surrendering other climate policies (and constituencies) to get it.
So there’s no real political, pragmatic case for what AFCD wants.
It’s time to quit pre-capitulating to garbage policy
There are all kinds of assumptions buried in CLC’s policy that climate hawks should reject.
First: that a price on carbon is a replacement for other carbon regulations.
No, it isn’t.
A price on carbon would be a welcome backdrop and accelerant to other decarbonization and just-transition policies. I scarcely know a soul who opposes carbon pricing as such. But a price on carbon is not a substitute for those other policies.
Second: that a price on carbon should be “revenue neutral,” i.e., that all the revenue should be returned automatically to taxpayers.
No, it shouldn’t.
It certainly makes sense to use a portion of the revenue to shield middle- and low-income taxpayers from the regressive effects of a carbon tax. But that leaves plenty of revenue left over. And it’s a good thing, because adequately addressing climate change in the time remaining is going to involve lots of spending — infrastructure, RD&D, retrofit and efficiency programs, adaptation, the list goes on.
More broadly, the federal government is not a “dark, deep hole.” It can and must be a force for good if there’s to be any hope of decarbonization. We have lots of collective needs, and we should pay for them collectively, through taxes. Liberals have got to stop acceding to the toxic premise that government is bad.
Third: carbon policy should be “deficit neutral,” i.e., it should spend only what it collects in revenue.
No, it shouldn’t.
A tax on carbon might be good climate policy in its own right, but there’s no reason it should set a limit on climate spending. Deficit spending in the name of building long-term low-carbon infrastructure makes all the economic sense in the world.
Democrats were suckers to ever adopt “pay-for” requirements, which end up being a one-way ratchet, constraining progressive policy but never, ever constraining the GOP’s deficit-funded tax cuts. Dems should ditch them, in climate policy above all else.
Climate change is a big problem that’s going to involve a bunch of different policies at all levels of government — taxing, spending, regulating, all of it. Conservative dogma has been a disaster for the US. It is unbelievable that some Democrats, in the name of showing how darn reasonable they are, are accepting versions of that dogma as a starting point for climate negotiations.
A price on carbon is a fine thing. But climate hawks should be designing their policies around the real political economy, in which multiple goals and strategies must be pursued at once. They need policies that make clean energy cheap, policies that address the plethora of market failures (which include far more than unpriced carbon), policies that help change public attitudes, policies that shelter vulnerable communities from the impacts of climate, and yes, policies that reshape markets to value carbon. All of it.
Making things tidy and predictable for giant energy companies is just not a top-tier consideration, much less a starting point.
Democrats don’t often act like it, but they are right on climate change. They’re on the right side of history. That’s why fossil fuel companies are reaching out to, ahem, “end the impasse.” It’s what you do when you’re losing.
Dems should have the courage of their convictions, support the policies they believe most able to pass and most likely to work, and begin negotiations there, not where fossil fuel lobbyists draw the line.