Now is the time to start a carbon tax

Today, the United States has an opportunity to respond to global warming in an intelligent and effective way, but sadly, we won't.

Global warming is caused by increased carbon dioxide in the atmosphere, and this carbon dioxide comes from the burning of fossil fuels. If we want to reduce global warming, we have to cut back on fossil fuels. The scientific consensus on this is overwhelming, as Pope Francis noted in his encyclical Laudato Si'.

Economists tell us that the easiest and most effective way to reduce carbon emissions is to make it more expensive to burn fossil fuels.

When oil prices were low, oil consumption in the United States increased from about 6 million barrels a day in 1949 to about 17 million barrels a day in 1973. The OPEC oil embargo in 1973 sent prices skyrocketing and higher prices slowed increases in consumption.

Higher prices caused people to drive less, buy more efficient cars, and reduce heating and cooling. Businesses also became more energy efficient to the point that in 2014 oil consumption was lower than in 1997 even though the economy had grown by 50 percent during the same period.

The problem today is that we have a short memory. Oil prices dropped all the way to about $29 per barrel in January, down from about $100 per barrel in January 2014. Prices are beginning to rebound, although they are still half what they were at the beginning of 2014.

With the price of oil and gas down, consumers are driving more miles and purchasing big cars and trucks. Solar power and other nonpolluting sources of energy are in trouble because with cheap oil and gas there is less reason to invest in these technologies. Businesses are postponing investments in energy efficiency.

Over the last 40 years, we saw the impact of higher oil prices on consumption. High costs slowed increases in consumption, but the money went from the pockets of consumers into the bank accounts of oil producers, both abroad and in the United States.

There is a way to increase the price of carbon emissions without enriching oil producers and that is through a carbon tax. A carbon tax discourages carbon emissions by increasing fuel prices but allows the people of the United States through their government to keep the money resulting from higher fuel prices. The problem is that no politician will support such a tax in an election year.

The economics are simple. Increase the cost of oil and gas and individuals and businesses will use less in order to save money. We have seen this happen every time the price of oil goes up. When the price of oil goes up, people drive less and buy smaller cars and trucks. They turn down their thermostats in winter and turn them up in the summer. Nothing turns one into a conservationist faster than higher prices.

A carbon tax is simple because it uses the market rather than government regulations and subsidies to get people to use less fossil fuels.

Today the government imposes fuel-efficiency standards on automobiles, subsidizes converting corn into ethanol, and encourages solar power through tax credits. None of this would be necessary if we had a high carbon tax. If fossil fuels were more expensive, investors would put their own money into alternative technologies because they know they could make money finding technologies that reduce or replace the burning of expensive fossil fuels.

Ever since the first energy crisis caused by the OPEC oil embargo, economists have been recommending a tax on oil to reduce our consumption, but no politician has listened. No politician -- not even a liberal Democrat -- from an oil-producing state would support any increased taxes on the oil industry. But even politicians with no links to oil would not support increased taxes because consumers would revolt. We cannot even get an increase in the gasoline tax to repair roads and bridges and finance mass transit.

There is not a lot of public support for increasing taxes on fuel. In 2013, Gallup found that two-thirds of Americans opposed raising the gasoline tax by 20 cents a gallon to improve roads and bridges and build more mass transit. A more recent study, found that 71 percent of Americans would support an increase of 10 cents a gallon but support dropped to only a third for a 20-cent increase.

The people who object to a carbon tax do have one argument in their favor. They note that for a carbon tax to work, it has to be high enough to really bite. To suddenly impose a big tax would be very disruptive to our economy. The public opinion polls reflect this concern. A 10-cent increase could be processed but a 20-cent increase would be painful.

The simple response to these concerns is to phase in a carbon tax slowly so that consumers and businesses would have time to adjust. For example, a carbon tax that was the equivalent of a penny per gallon of gasoline would hardly be noticed. If that tax were raised by a penny each month, it would take 10 years before the tax amounted to $1.20 per gallon.

The advantage of such a phase in would be to put consumers and businesses on notice that higher prices are coming and give them time to adjust. They would know that it would be stupid to buy inefficient cars and equipment because the operating costs would continue to climb in the future. They would also know that it would be smart to invest in more efficient and alternative technologies.

Implementing the tax slowly would also provide time to adjust trade legislation to make sure that American companies were not put at a disadvantage through higher energy prices. 

Others object that a carbon tax would be regressive, hitting the poor the hardest. Billionaires don’t care how much they have to pay for gasoline.

The impact of higher fuel prices on the poor can be mitigated by using the revenue raised by the carbon tax to help the poor. Reducing taxes on the working poor, making mass transit cheaper, and increasing government benefits for the poor can make sure that the poor do not suffer from a carbon tax.

Revenue from a carbon tax can also help make government buildings, including public housing, more energy efficient. It can also fund research into energy efficiency and alternative forms of energy.

If we really want to take global warming seriously, we need to reduce our carbon footprint both as individuals and as a nation.

Now is the time to start such a carbon tax while oil and gas prices are low and while the economy is recovering. When the economy fully recovers, oil and gas prices are going to go up and it will be harder to increase prices with a tax. We should act now, but sadly, we do not have the political will. This is an opportunity we will miss.

[Jesuit Fr. Thomas Reese is a senior analyst for NCR and author of Inside the Vatican: The Politics and Organization of the Catholic Church. His email address is [email protected].]

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