Why It's Time for a Carbon Price

On the eve of Pope Francis’s visit, there is much speculation about what he will say and to whom. One thing is sure: he will be talking about the importance of protecting the planet. And Francis’s bully pulpit on this issue is valuable. In the most recent New York Review of Books, perhaps the leading climate economist, William Nordhaus at Yale, has an extended piece analyzing the pope’s encyclical Laudato si’. And just today, Senate Democrats have unveiled an aggressive plan to address climate change that they hope will shape the debate of the 2016 election.

But what should be done? Amidst all the hoopla, I stopped yesterday evening to fill up my Honda Civic and paid $2.10 for a gallon of gas. I’m also flying home to Chicago during my fall break for $49. These low prices, even more than the papal visit, indicate that it’s time for a direct discussion of a carbon tax.

Comparing Nordhaus’s analysis of Laudato si’ and the Senate Democrat’s plan, what we see is the extent to which we avoid moving on this obvious solution. Nordhaus’s article is appreciative of the pope’s attention to the issue, but he suggests that the pope “does not recognize the fact that environmental problems are caused by market distortions rather than by markets per se.” The fundamental problem is that we are able to emit carbon into the atmospheric commons for free. If we don’t change this fact, Nordhaus argues, the pope’s “eloquent description of the natural world and its relationship to human socieities” may remain just that: beautiful words on a page. It seems that the pope’s preferred mode of action – individual rejection of an economy based on excessive consumption – simply won’t get us where we need to go.

If the pope focuses on individual spiritual conversion, the Democratic Senators run full force in the opposite direction. Their plan, like many actions of the Obama administration, relies on behind-the-scenes regulatory changes that attempt to constrain large sources of emissions (like power plants) and incentivize renewables (like solar tax credits). Such schemes are politically attractive, partly because they avoid the issue of taxation, but even more importantly because they allow pressure to be put on entities like power companies, rather than putting the pressure on individual consumers. But, as exemplified by the latest scandal surrounding Volkswagen’s cheating on emissions tests, regulatory rules inevitably produce elaborate attempts to circumvent the rules. Nordhaus’s excellent and comprehensive book on climate economics has several chapters of evidence on how costly and inefficient regulatory approaches to environmental problems are. Yet politicians ignore these findings simply because calling for individual virtue or rational taxation are both so unpopular.

True, individual virtue and industry regulation both have a place in addressing climate change. Sensible regulation of particular industries overcomes collective action problems that would penalize first-movers, and individual virtue is ultimately necessary to change an overall pattern of consumption that plagues this country. But none of this is sufficient to overcome a world in which gasoline is $2 a gallon and flights are $49. Some form of carbon taxation – either a direct tax or an indirect tax set by a cap-and-trade scheme – allows the tens of millions of choices that all of us make to tend in better, less carbon-intensive directions. Part of the magic of price-driven markets is the phenomenon of substitution – when a particular good or service becomes more expensive, we contemplate substitutes that will satisfy us but at a lower price. Almost no one burns carbon as an actual end; rather, carbon-burning is a means. A carbon price doesn’t just change the incentives for one thing; it tips the table a bit on everything. How many companies, for example, might opt for online conferencing rather than travel if burning carbon is more expensive? How many more homes will get built in more walkable areas if burning carbon is more expensive? How many people will pick a somewhat more energy-efficient appliance if the tag showing annual energy consumption has a higher number on it? The list goes on. There are “saints” who will make these choices regardless, but many more “contingent moralists” will have these choices to make if the tables are tipped in a way that seeks the good which is less carbon-intensive. The more choices people then make in the less carbon-intensive directions, the more structures will develop that make these choices easier.

The table-tip metaphor is misleading: right now, we view the atmosphere as a free carbon sink, and so in fact we are living on in a situation where the tables are already strongly tipped toward burning carbon. The time to recalibrate the table is not when gas prices are $4 a gallon, but when they are $2 a gallon. That time is now.

I do not expect the pope to bang the drum for a carbon tax in Congress, any more than he will advocate for a specific fix to the immigration crisis in this country. But it is part of the task of a Catholic moral theologian to apply church teaching to the particulars of the world. If the pope has made clear the need to address climate change seriously (and I think he has), then we can and should ask ourselves whether regulatory action and individual conversion will be sufficient to achieve the purposes at which we aim. Putting a price on carbon – which, after all, will reinforce both regulations and individual virtue – is the only existing option that promises a change on a scale that actually addresses the problem, and does not just us give us the feeling that we are addressing the problem. With the pope here, and with Paris coming up, it’s time to start saying that loud and clear.

David Cloutier is an associate professor of theology at the Catholic University of America and the author of Walking God’s Earth: The Environment and Catholic Faith.

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