Recap of the Climate Panel

We were pleased to host former U.S. Representative Bob Inglis.

The majority of America seems to have agreed that humans have had a noticeable and negative impact on our environment; yet, we have still not taken unified steps towards dealing with that issue. A schism has developed on the political stage, between liberals advocating strong regulations to curtail emissions and conservatives concerned with protecting economic growth and limiting government overreach. The resulting deadlock begs the question, how do we save the planet, while creating jobs and avoiding another Solyndra? Perhaps, corporations are the solution.

On October 29, The Dartmouth Review co-sponsored a panel on “Free Market Solutions to Climate Change” with the New Hampshire Sierra Club and the Dartmouth Department of Environmental Studies.  The panelists – Bob Inglis, Former Congressman for South Carolina’s 4^th District and Executive Director of the Energy and Enterprise Initiative (E&EI), Professor Anant K. Sundaram, Visiting Professor of Business Administration at the Tuck School of Business, and Charles J. Wheelan, Senior Lecturer in Economics at Dartmouth College – put forth the idea that the solutions to the climate issue would come from natural developments and adjustments in the private sector. Provided that certain policy obstacles are removed and the right incentives are created, all three panelists agree that American businesses would voluntarily produce clean energy systems that would break fossil fuels’ iron grip on American energy.

The greatest impediment, according to Mr. Wheelan, are the externalities caused by the burning of fossil fuels. In simple terms, externalities are costs or benefits to individuals who did not choose to accept those costs or benefits. In the case of energy, the externalities are the emissions that harm public health, but are not explicitly included within the cost of fossil fuels. Both Mr. Wheelan and Professor Anand support substantiating this cost with a dollar amount – a carbon tax. By increasing energy prices carbon tax proponents hope to curb consumption, as many other “sin taxes” have done.

While putting a price on units of carbon emissions has long been a talking point of liberal legislators, as Mr. Wheelan points out, “It is very hard to make people pay for something that they’ve always gotten free.” The idea of taxing the most basic commodity, something that represents 8.3% of Americans’ expenditures, is difficult to swallow in a nation that started a revolution over taxes. Economists’ solution is to offset the carbon tax entirely with an income tax cut. By making the policy revenue-neutral, they hope to sugarcoat the medicine enough to make America take it.

But that raises significant questions, chiefly the net-regressive effect of the proposed policy. Income taxes are highly progressive, with the top ten percent of earners paying 68% of all Federal income taxes. However, energy consumption is far more equally distributed amongst all income levels – after all, everyone commutes to work and heats his home. As result, any shift from income tax to consumption taxes that did not explicitly exclude high-income earners would also shift the tax burden down to lower earners. If public reaction to the Bush income tax cuts were any indicator, such a policy would likely not garner much support.

On the other hand, if some of the carbon tax revenue were used to support the economically disadvantaged, as Prof. Sundaram proposed, the legislation would quickly lose much needed conservative support. Congressman Inglis pointed out that the most important facet to passing effective environmental policy is to engage conservatives on the issue, and convince them that environmental protection aligns with their ideals. Trying to attack two fundamentals ideals of the traditional conservative base – lesser environmental regulation and lesser welfare – in the same piece of legislation would be suicidal while Republicans still dominate the House of Representatives . If the former representative of the “reddest district in the reddest state” can be convinced of the urgency of climate change, then so can the conservative base, but that takes time and convincing, not new tax burdens, and certainly not legislation with the word ‘tax’ in it.

Furthermore, to what extent can the personal liberties and expectations of American individuals be limited? Prof. Sundaram estimates that 85% of global emissions stem from the production of goods for our consumption-based economy. That economy exists based on the premise of desire, and the privilege of desiring and fulfilling desires, basic property rights, is one of the most central of American liberties. There is national outcry over the banning of sixty-four-ounce sodas in New York City; imagine the response to blanket reductions in consumption. Our cultural fabric is based upon our ability to buy the things that we want, at fair prices, and trying to limit that expectation  will be met with resistance from every level of society. Never mind the billions of individuals in developing countries only beginning to gain the right to middle class consumption, a privilege that we have no right to deny them of. In short, while economists may agree that a carbon tax is the solution, such a policy is not the easy solution that the panelists seemed to suggest it was.

Nevertheless, there were many insightful solutions coming out of the panel. Foremost is the laissez-faire idea of eliminating all energy subsidies championed by Congressman Inglis’ Energy and Enterprise Institute. Oil and coal subsidies will be cut along with wind and solar ones, electric car credits will end, but companies such as Tesla Motors will have the right to sell their products freely, and innovative new technologies will emerge from the American private sector. Already, environmental impacts are affecting consumer decisions, with Nielsen’s 2014 Global Survey on Corporate Social Responsibility, showing that 55% of online consumers from sixty different countries are willing to pay a premium for products from environmentally friendly companies. By creating a level playing field for all industries, America can rekindle the technological furnace that invented the light bulb, the airplane, and the cell phone.

The future of energy has only two certainties: global consumption will increase exponentially and the current trajectory of that  consumption will irreparably damage the planet. The lifestyle we have built revolves around cheap, easily accessible, and reliable energy. Preserving that lifestyle within a more sustainable society will take what Prof. Sundaram calls “macro” solutions: projects on a global scale, fueled by cooperation and mutual understanding. Progress will require a unified approach on an unprecedented scale for environmental policy, and that is why the first and most crucial step is to simply start the conversation.