Econo-missed #6: Markets aren't enough to solve climate change

Economics as a discipline wields some ideological power through mystification. What is frequently referred to in media as “basic” economics is in fact loaded with ideological assumptions that often bear little resemblance to reality. Data for Progress (@DataProgress) is proud to host “econo-missed,” an economics advice column for the left, featuring a cast of young economics grad students and practitioners. This econo-missed comes Miles Goodrich (@mmilesgoodrich) an organizer at Sunrise. He explores the need for non-market solutions to climate change.

The People’s Policy Project -- a thinktank with a unabashed populist bent, funded by small dollar donations -- fills an urgent need within the activist faction of the Democratic Party: crafting policy proposals for America’s left.

The policy void in the Democratic Party is particularly distressing when faced with the crisis of climate change. At a point when the world demands unflinching resolve in eliminating carbon emissions as fast as possible, Democrats have offered proposals that do not meet the scope of the problem.

At minimum, facing down climate change requires a massive restructuring of the economy. The question is whether that restructured economy looks like a wasteland of warring rich people after the collapse of civilization, a dystopia of resource rationing meted out by corporate elite, or anything resembling a just society.

Since the activist left’s strengths lie in demanding radical change (“a better world is possible”) and building the political capital to get us there, I am grateful to PPP for their work in bringing a wonkier attitude to our politics.

Matt Breunig, the founder of PPP, recently wrote a short blog post about the climate crisis, that contained some points that I find questionable. He says that he’s skeptical of many socialists’ assertion that climate change is a direct consequence of capitalism.

We do know this: emissions began to spike at the onset of the Industrial Revolution, and have climbed ever since. Socialists make their most compelling argument when they point out that the industrialists who owned the coal-powered engines were mostly wealthy Europeans. Centuries later, the rich remain responsible for the vast majority of emissions, abetted by a broken economy which allowed oil barons to profiteer off poisoned communities.

Regardless of the system that incubated the crisis, a way out of it which retains any semblance of justice and dignity is necessarily socialist. The rich, who are both more responsible for climate change and in a better position to pay for it than those who will be most immediately harmed, ought to fund the transition away from fossil fuels.

Bruenig also points out the ideological turfiness of some in the climate world, like those who forswear climate pricing entirely. Even if I am a socialist (I am), I can still think the market is a valuable tool to reduce emissions (I do, sort of). As Matt points out, the market is so embedded in our politics that even the most ambitious climate legislation proposed in the US would have to rely on something like market tweaks.

The danger lies in relying solely on market regulation. A tax on carbon, as currently envisioned by conservatives and many Democrats, would likely be regressive, while scrapping some of the most important regulatory tools we have to combat climate change. We’re not even sure of the efficacy of a carbon tax — as Kate Aronoff writes at The Intercept, one of the most successful carbon pricing programs in British Columbia, pointed to as a model for carbon pricing in the United States, can’t even claim credit for reducing emissions.

Why has a carbon tax caught the popular imagination, then? In part because taxes are one of the few tools that states, those laboratories of democracy, have to incentivize behavior. (The federal government has a much more expansive toolbox.) Conceptualizing climate change as a market failure is also popular within the elite faction of DC Democrats who defer to economists as much as they do their corporate donors.

But this doesn’t mean we need to spurn market action entirely. Since the efficacy of a carbon tax is still sketchy, and yet it’s DC popularity means that it’s unlikely to go away, the left’s best use for it would be to frame the source of the climate crisis. Rather than a “carbon tax,” let’s call it a “polluter fee.” Whereas a carbon tax suggests that anyone who uses carbon (all of us) is the source of climate change, and thus we all must make some sacrifice, a polluter fee foists blame on the biggest emitters.

The effect would be the same of course: costs would still be passed onto consumers, harming the poorest worst because of their lack of purchasing power. But that’s where a socialist policy, like the one outline by a recent PPP white paper, comes in. With the money collected from the tax, PPP recommends, the government can raise a social wealth fund and write a check to every American. The benefit of this dividend is two-fold: it shows the American taxpayer that government works for you by putting money in your pocket, and it passes off cost to the rich.

A tax-and-dividend scheme, however, isn’t currently en vogue with the grassroots forces leading the push to price carbon. In Washington, where activists have successfully gotten a polluter fee on the ballot, the money will fund an investment in green infrastructure. And in New York, where similar legislation will be a priority if Democrats take the state senate, the revenue raised by the tax would be earmarked for investment in renewable energy projects that create green jobs. While the authors of PPP’s white paper argue that cutting a check to every American is a wiser use of the revenue because it makes the tax more palatable to voters, the Washington plan polls well even without a dividend attached. The problem with a dividend based model is that we need these investments in green energy to stave off climate change - simply imposing a cost on carbon isn’t enough: we need to create alternatives.

To be clear: reducing emissions and staving off the most dangerous consequences of climate change requires much much more than this polluter fee. To transition off fossil fuels, we need massive government action and investment in energy and infrastructure, akin to the mobilization that brought us out of the Great Depression. Call it a Green New Deal: an end to carbon subsidies, a massive infrastructure package, the development of decentralized and democratized renewable energy grids across the country. The marquee policy of such a program ought to be a guaranteed jobs guarantee -- a green job for every American who wants one to build mass transit projects or weatherize homes. Polling from Data for Progress, Sunrise, and 350 Action shows that such a guarantee is popular across the country.

Because the vast majority of existing fossil fuel reserves will need to be kept in the ground, a polluter’s tax to mitigate demand for carbon energy will not be enough. A Green New Deal must introduce far more expansive supply-side solutions to match the magnitude of the climate crisis -- including, eventually, the nationalization of the fossil fuel industry.

But we have work to do in order to get there. The market may prove to be a powerful tool in reducing carbon emissions, but the climate crisis is far too vast to be challenged from the market alone. More important than a carbon tax is government sponsored investment in our infrastructure and energy system -- an investment made possible by a Green Jobs for All program. If a jobs guarantee can rebuild Americans’ trust in government while we tax the rich back to the 20th Century, then maybe a Green New Deal is possible.

Matthew Miles Goodrich (@mmilesgoodrich)  is an organizer at Sunrise.