Q&A: The Conservative Case for a Carbon Tax

As world leaders convene at the United Nations this week for a climate change summit, the overarching question is how, exactly, to reduce global carbon dioxide emissions. (See "With UN Climate Summit Opening, Marchers Rallied Around the World.")

The United States, most experts believe, must play a key role in any meaningful global agreement on the issue. But the U.S. has dragged its feet on promoting a global deal for years, as Republicans—and some Democrats—argued that it could cripple the nation's economy. (Related: "Ahead of UN Climate Summit, Environmental Report Sees Economic Opportunities.")

One idea for reducing global emissions that's sure to surface at this week's summit: a carbon tax. The proposal has no chance of passing in the U.S. Congress. But it is getting support from an unlikely source: American conservatives. A small cadre of influential conservatives, among them former Secretary of State George P. Shultz and supply-side-economics guru Arthur Laffer, favor a carbon tax.

So does Bob Inglis, a former congressman from South Carolina who runs the Energy and Enterprise Initiative at George Mason University in Virginia. A conservative who received an "A" rating from the National Rifle Association and a 100 percent rating from the Christian Coalition during his tenure in Congress, Inglis is also a climate hawk. National Geographic spoke with him about the conservative case for such a tax.

You founded the Energy and Enterprise Initiative in 2010 to push for what you call a "100 percent returnable emissions tax." What is that?

Having been tossed out of Congress for the heresy of saying that climate change is real—along with some other heresies—I decided to just go for broke and to try to advance this idea. Economists would call it a revenue-neutral carbon tax. The problem with that is that "revenue neutral" sounds like you've got marbles in your mouth and it also sounds like government-speak. And when you get to "carbon," a lot of my fellow conservatives break out in hives, and then go into anaphylactic shock when you say the word "tax." So it's better to call it what it more palatably could be known as.

What does "100 percent returnable" mean?

It means that if we impose a price on carbon dioxide, it would be matched dollar for dollar with corresponding cuts of existing taxes. So it might be corporate income tax reduction, it might be individual income tax reduction, it might be FICA [social security] tax reduction. Any of those accomplishes the purpose of returning 100 percent of the money raised through a price on carbon dioxide to the taxpayers. Because it's essential for us as conservatives that action on climate change does not result in the growth of government.

There's only one other imperative for us, and that is that it also be border-adjustable. That would mean that the price on carbon dioxide would be removed on exports and imposed on imports.

What you're talking about involves a global carbon price. How do we roll that out?

This doesn't require some grand international agreement that takes forever to negotiate. It involves bold leadership ... and also the certainty that we're not going to expose ourselves needlessly. It becomes a system of global pricing, but it happens that way because one key actor is big enough to pull that off by their leadership in the marketplace. The United States steps in and says, "We just priced carbon dioxide and if you're shipping stuff in here, we're collecting on entry. But if you do the same thing in your country, great, you won't pay any landing fees here."

There would be an immediate issue with the World Trade Organization about whether that is an impermissible tariff. We think we can win that case. We think that China would very quickly find it in their interest to impose the same price on carbon dioxide. They can either collect the tax and remit it to Beijing, or continue to pay landing fees and remit to Washington.

We must find a way to get our trading partners in on this solution, because otherwise America could be the double loser. Any country that acts first and without others participating becomes a double loser. You lose employment because companies may pick up and move to lower energy cost locations. But you also lose the race to reduce global emissions, because when that productive capacity picks up and moves, say from the United States to a greater emitting country, we just went downhill.

That's why, by the way, we're not very keen—that's an understatement—on doing this through Clean Air Act regulations. It's a very cumbersome solution, but its biggest problem is that it's domestic only and it doesn't accomplish this objective of getting other nations to follow suit.

So what is the reaction from your fellow conservatives when you talk about this?

Well, given a few minutes to explain it, it becomes something that is interesting to conservatives. The challenge is getting those several minutes to explain it. In the Great Recession, it became the fashion among conservatives to dismiss action on climate because it seems like it's an issue that's a decade or two or three away and we had more pressing challenges of jobs and economic growth. As the recession lets up and we get a few more minutes to explain why this is a danger but also an incredible opportunity, then we think conservatives will respond positively.

What about the challenge of people not wanting to accept that climate change is real?

There have been some people who were able to create doubt where very little doubt exists. They spent their money very well at the height of the Great Recession, at the high tide of mistrust. But the tide is going out on that.

We're trying to change the question. If the question is, "Is climate change real?" the unfortunate answer starts with the words, "Well, I'm not a scientist"—and then it goes downhill from there. We want to change the question to, "Is there a free-enterprise answer to climate change?" That's a very different question.

Even if you think that climate change is hooey, if the country decides it wants to do something about climate change and there is not a free-enterprise answer on the table, then the country will take a big-government answer. And so our appeal to fellow conservatives is, you might want to join us in listening to the scientists because it only makes sense, but even if you don't want to listen to the scientists, just look at the situation we face. This is a very rare opportunity for conservatives to be out there with a solution that actually improves economic performance and accomplishes other things.

If we price carbon dioxide as we're talking about, in a revenue-neutral, border-adjustable way, we can actually repeal some of the Clean Air Act regulations that would become redundant. Which is exciting. Give me a minute and I'll start preaching. I think this is something that conservatives can get excited about, even if they don't like the science.

What do you think the likelihood is of a carbon tax being enacted in the U.S.?

I think we have a window of opportunity that will open after this midterm election, with President Obama becoming a lame duck. We'll gain some momentum, because there will be less of this populist rejectionism—rejection of the science, rejection of all things Obama, rejection more fundamentally of the idea that we can get together and solve big challenges. That will be on the decline.

But I think it's most realistic in the context of a tax reform package or a grand bargain on the structural deficit. Those are most likely after the '16 presidential race.

The greatest likelihood will be a conservative president who acts on climate change. It may well be that Nixon was the only one who could go to China, Bill Clinton the only one to sign welfare reform, and it may take a conservative president to lead the country on climate change. Because the country just may not trust somebody who appears too hepped up on climate change to balance action with the need to preserve the economy.

That's why we think that this completely different approach can be attractive. The case can be made it actually reduces the size of government, improves economic performance, and unleashes innovation that adds wealth.

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