In a recent post I showed that the enthusiasts for a carbon tax are really getting desperate, with people such as Paul Krugman now using rhetoric that he himself considered cringe-worthy back in 2009. Specifically, the pro-carbon tax crowd is shifting the emphasis away from climate change—which remember, was itself the new term to replace “global warming”—and towards things like reducing respiratory problems for people who live near coal-fired power plants. The pro-carbon tax crowd is focusing much of its attention on “particulate matter” or “PM” concentrations, and the alleged benefits from reducing PM are now considered a majority share of the total benefits of a carbon tax.
One problem with this change of tactics, at least for an American audience, is that EPA already regulates PM. In fact, EPA is required by law to set a standard for PM that protects public health and welfare. So there is no justification for using PM regulation as a Trojan horse to sneak in U.S. government restrictions on carbon dioxide emissions.
Even in principle, this current focus on PM concentrations as a co-benefit is a dubious enterprise, which we have blogged about before (see for example the last section of this post, which details the scant empirical evidence of the large benefits EPA claims from PM2.5 reductions). However, in the post today I want to emphasize something very revealing in the new attention. I want to walk through the analysis of the new IMF study (the one touted by Krugman) to show something that ought to shock average Americans, and convince them that they have been systematically misled for years. Specifically, all along the alleged benefits of carbon restrictions were global ones, while the costs (of a U.S. policy) fell entirely on Americans. The economists and policy wonks knew the true situation, but most Americans would be shocked to learn this inconvenient truth: they are being asked to endure slower economic growth and higher energy prices in order to shower the lion’s share of (climatic) benefits on people in other countries. Whether one thinks this is a good or bad idea, it surely is not how a carbon tax has been pitched to the American public all these years.
First of all, consider the title of the new IMF study: “How Much Carbon Pricing is in Countries’ Own Interests? The Critical Role of Co-Benefits.”
I hope the reader’s Spidey Sense is tingling at this point. The IMF study’s entire raison d’étre is that without co-benefits—which we must remember, is a concept enjoying relatively recent attention from the carbon tax crowd—a large carbon tax is not in a given country’s own interest. Here’s how the IMF itself explained the context of the political and economic debate, in order to give context to the new paper:
The time has come to end hand wringing on climate strategy, particularly controlling carbon dioxide (CO2) emissions. We need an approach that builds on national self-interest and spurs a race to the top in low-carbon energy solutions…
Ever since the 1992 Earth Summit, policymakers have struggled to agree on an international regime for controlling emissions, but with limited success….Reducing CO2 emissions is widely seen as a classic “free-rider” problem. Why should an individual country suffer the cost of cutting its emissions when the benefits largely accrue to other countries and, given the long life of emissions and the gradual adjustment of the climate system, future generations?
From burden to benefits
This argument crucially ignores immediate domestic environmental benefits from reducing CO2. Fossil fuel combustion, especially coal, is a leading cause of local outdoor air….A carbon tax would also increase motor fuel prices, which will reduce traffic congestion and accidents.…These health and other “co-benefits” from reducing fossil fuel use add to the gains in economic efficiency that start with pricing CO2 emissions.
…So how important are these domestic co-benefits? A new IMF working paper assesses how much CO2 pricing is in countries’ own national interests by looking at the domestic co-benefits alone—before even counting the climate benefits. [Emphasis added.]
Again, we can pause to object to the Trojan horse strategy; there are already gas taxes and tolls on roads to influence traffic congestion, which the government could much more easily adjust than to introduce a new carbon tax. But the more general point is that the IMF is saying in its quote above that the “benefits [of carbon dioxide reductions] largely accrue to other countries” and “future generations.” Did Americans realize that the breezy assurances of how “obvious” the case for a carbon tax was, actually referred to the planet as a whole and not net benefits for Americans?
In my Senate testimony on the so-called “social cost of carbon,” I stressed that the Obama Administration was ignoring a clear mandate from the Office of Management and Budget (OMB) that when conducting cost/benefit analyses for federal regulations, the numbers should refer to domestic impacts, with global impacts being optional. The reason (I speculated) that the Obama team ignored that requirement is that according to their own analysis, the benefit to Americans of limiting carbon dioxide emissions might be as low as 7 percent of the figure being reported as the benefit of action.
The relatively recent pivot of the pro-carbon tax crowd to focus on “co-benefits” is very revealing, comparable to the earlier move to start calling it “climate change” rather than “global warming.” More and more Americans are getting wise to the fact that absent eager cooperation from other major emitters (like China and India), a steep U.S. carbon tax would actually impose net harms on the United States—even using the computer models hand-picked by the Obama Administration.
This is why those favoring a steep carbon tax are now changing their argument (again). They have to come up with new items to throw on the scale in favor of their pet policy, and so get ready to learn all about “particulate matter” and traffic congestion in the coming years.
 Clean Air Act §109(b)(1).