Carbon pricing deserves to make a comeback

The right idea for a world where budget math matters

This past weekend, I am at the Breakthrough Institute’s ecomodernism conference, which is always a good time. It got me thinking that while I find myself largely agreeing with Breakthrough these days, I used to have a low opinion of them. And that’s true even though I’ve always found the broad concept of ecomodernism very appealing.

I’m not an outdoorsy person or a nature-lover by temperament, but I do take the facts about pollution and its harms very seriously.

And I think the divergence between people who care about pollution because of its impact on humanity and people who subscribe to a kind of anti-modern, anti-human, nature-centric worldview is real and important. I’m on the humanistic, tech- and progress-friendly side of that divide, and that’s the idea behind ecomodernism and the Breakthrough Institute. So why didn’t I like them?

I discussed this when I reviewed Breakthrough’s founders’ book in 2008, but the big topic in climate policy back then was carbon pricing, which they saw as part of the bad anti-modern politics of limits. I was then (and am now) much more of a generalist than a climate writer, and I argued that this was missing the important tax policy aspect of carbon pricing. A prosperous, technologically dynamic society with a growing economy needs some sources of tax revenue. And taxing things that have negative externalities is a great source of tax revenue. It’s not that you price carbon dioxide emissions into non-existence, but you do limit them with the price, and then you use the revenue for things you think are important.

I wrote that in January of 2008, but later that year the global economy imploded and we entered a nearly 15-year period in which my green eyeshade view of the situation was basically wrong. There were no particular fiscal tradeoffs involved with anything that happened during the Obama or Trump years, so the only reason anyone would be interested in a broad-based and somewhat regressive new tax genuinely was hairshirt environmentalism.

Today, though, while inflation has fallen, it remains above the Fed’s 2% target. And the interest rate hikes the Fed has used to bring inflation under control are putting a meaningful squeeze on all kinds of things, including new investments in energy production. And in a world of limits — fiscal limits — it’s time for carbon pricing to make a comeback.

The left’s case against a carbon tax

The point Danny Cullenward and David Victor and David Roberts make in their left critique of carbon pricing is that we’ll never have a carbon price that’s high enough or comprehensive enough to achieve the climate goals that they aspire to. That is completely true, and when Roberts writes in this piece that carbon pricing is not and should not be the be-all end-all of energy policy, he’s entirely correct. At the same time, the reason we can’t possibly implement a high enough carbon price to achieve the left’s climate goals is that the goals themselves are unrealistic.