WASHINGTON—The Progressive Policy Institute (PPI) today released a new policy report, “Long-Term Carbon Pricing: The Great Swap,” at a packed public forum featuring a cross-partisan roundtable discussion with moderator Hannah Hess of E&E News and panelists John Larsen, Director of the Rhodium Group, Jerry Taylor, President of the Niskanen Center, Catrina Rorke, Director of energy policy at R Street and Todd Wooten, Senior Counsel on the U.S. Senate Finance Committee.
The report proposes an economy-wide carbon tax as the most effective and efficient way to reduce U.S. greenhouse gas emissions, while also encouraging investment in clean fuels and technologies. The report also explores the intriguing possibility of a “great swap”—a carbon tax and regulatory streamlining as a part of tax reform—that could create the basis for bipartisan negotiating and compromise to break the current impasse in climate and energy policy.
“The rationale for coupling a carbon tax and tax reform are twofold,” writes Joe Aldy, author of the report and Associate Professor of Public Policy at the Harvard Kennedy School. “First, the climate policy and tax reform benefit from each other in terms of economics. Tax reform lowers the costs to the economy—and potentially eliminates the net costs of a carbon tax—while the carbon tax provides the revenues to finance the tax reform.
“Second, such an approach can neutralize the difficult politics that characterize each issue by broadening the political coalition that would derive a ‘win’ from at least some element of the policy package. Such a broad coalition would ensure the durability of the carbon tax and tax reform, and is consistent with major policy efforts in the past that have coupled policy initiatives to draw broader support, such as under the regular farm bill and transportation bill processes.”
America urgently needs a balanced energy policy that supports both strong economic growth and a healthy climate. Yet many observers fear that with Republicans in charge of both the White House and Congress, our country’s transition toward a low-carbon economy will stall.
Nonetheless, there is bipartisan interest in linking an economy-wide carbon tax to other goals Republicans strongly favor, namely tax and regulatory reform. This could create unexpected opportunities for bargaining and compromise should “normal” politics break out in 2017.
The report comprehensively outlines the political challenge of climate policy, the political support for the great swap (including what both Republicans and progressives would gain, and why both business and labor would support it), the case for an economy-wide carbon tax, carbon price certainty, how to design a carbon tax, and how to use the carbon tax revenues.
