Conference Considers How to Combat Climate Change Without Direct Taxation

December 12, 2008 — The best way to reduce U.S. greenhouse gas emissions, nearly all economists agree, is to impose some sort of carbon tax that will force the market to determine the cheapest and most efficient ways to reduce carbon dioxide levels.

While about seven in 10 Americans think climate change is real and immediate government action is needed to deal with the issue, only 10 percent strongly support increased gasoline taxes as a way to lower emissions, according to a new national poll released Thursday as part of the National Conference on Climate Governance, hosted by University of Virginia's Miller Center of Public Affairs.

How to design and politically sell a climate policy that can work amidst those and other political realities was the focus of the conference. While public discussion of global warming and climate change has focused on the science and politics of the subject, "too little attention has been given to the governance of climate-change policies," Miller Center director and former Virginia Gov. Gerald L. Baliles said.

The Miller Center will issue a conference report in the first quarter of 2009 as the Obama administration and the new Congress begin considering how to approach these issues.

In recent weeks, the Obama transition team has discussed making green technology a cornerstone of a "new New Deal" that would create thousands of jobs through federal spending, as an engine to pull the nation out of the current recession.

"The idea that green spending will be an engine for economic recovery is an appealing idea, and it taps into the underlying public support for dealing with climate change," said Christopher Borick, director of Muhlenberg College's Institute of Public Opinion and co-author of the poll released at the conference.

There is some public support for climate policies that involve more indirect costs, Borick said. Americans generally embrace regulations that promote alternative energy sources and energy efficiency. For instance, 59 percent strongly support the creation of a renewable portfolio standard, while 52 percent strongly support increased fuel efficiency standards for automobiles.

However, support was 16 to 25 percentage points lower among self-identified Republicans for those two policies, and roughly 10 points lower for most other policy options, including hybrid vehicle tax credits and restrictions on suburban development. In fact, only 49 percent of Republicans think that immediate government action is needed to deal with global warming.

Establishing a cap-and-trade system of auctioning a declining amount of emissions allowances to polluters received greatest bipartisan support, with only 5 percent fewer supporters among Republicans compared to Democrats.

In the past decade, Republican governors in several Northeastern states have supported new climate policies by emphasizing the "green-collar" job-creation aspect of such policies, and this has been well received, according to other opinion polls, Borick said.

The biggest fundamental threat to policy solutions is Americans' strong disdain for taxes, including taxes on gas or fossil fuels.

"When you look at direct tax-based solutions, public support just dries up," Borick said, adding that this appears to be mostly an anti-tax sentiment, rather than an attitude specifically against spending for climate-change policies.

"The public doesn't want to pay for anything — not even for local roads or bridges or schools," he said.

Panelists agreed that politicians will stay away from such clearly unpopular solutions. But all climate policies involve costs that will eventually be passed on to Americans, whether in higher electrical rates, greater national debt or some other form.

"Whether or not Americans really understand how they're paying for it, politicians today, especially in this economy, will shy away from implementing anything that will impose a direct cost on the consumer's pocket," said Vivian Thomson, a U.Va. professor of environmental sciences and politics and vice chairman of the State Air Pollution Control Board. "It's more likely that costs will ripple through the system rather than hit consumer pockets directly."

That is one of the appeals of a cap-and-trade policy, said Barry Rabe, a Miller Center Visiting Scholar from the University of Michigan.

"Cap-and-trade is a stealthy, incredibly complex version of a carbon tax," Rabe said.

Rabe and U.Va. politics professor Sid Milkis wondered if a similar policy, known as cap-and-dividend, would be even more palatable. In a cap-and-dividend system, when emissions allowances are auctioned off to polluters, the billions of dollars generated — at least most of it — are returned to every taxpayer in a monthly check. Those who reduce their consumption more than average can potentially earn more from the monthly checks than they would pay in increased energy charges.

A portion of the dividends can pay for things like basic climate-related science and tax credits for new technologies.

Climate policy goals are long term. Virginia's Commission on Climate Change recently mirrored Obama in calling for reducing greenhouse gas emissions by 80 percent from 1990 levels by 2050, roughly in line with recommendations from the Intergovernmental Panel on Climate Change. The Virginia commission also set an intermediate goal of 25 percent reduction by 2020, more aggressive than Obama's current pledge to simply return to 1990 levels by 2020.

Climate policies will require durable bipartisan political support in order to remain in place for the decades needed to gradually ratchet down emissions. If policy costs are indirect and somewhat hidden, opponents can be expected to sponsor ad campaigns that drive home how consumers will pay these indirect costs, warned political scientist Leigh Raymond, associate director of the Purdue Climate Change Research Center. For instance, power companies might air ads that outline how electricity bills have gone up because a renewable portfolio standard makes electricity more expensive to produce.

If hidden costs are highlighted, will Americans remain stuck in a "free lunch" mentality because politicians have long been reticent to ask them to sacrifice or change their behavior?

Such predictions don't account for the fluidity in how people think about complex issues like climate policy, noted Anne Khademian, a professor of public policy at Virginia Tech. Attitudes will evolve as public understanding of the issue evolves. A key to leadership on this complex issue, she suggested, may be simply defining the problem in a new way, rather than having all the answers.