On June 2 the EPA will release its proposals designed to regulate carbon emissions from existing power plants. To put this in historical perspective, these new regulations come less than fifteen years after George W. Bush promised to deliver them on the campaign trail in 2000.
The public will have a year to comment before the rules take effect. We don’t know yet what the rules will be, but because this new regulatory scheme comes from the EPA’s existing authority rather than from new legislation, we already know some important things about what won’t be in these new rules.
Without new legislation we cannot get the kind of comprehensive, globally significant, Pigovian marketplaces that would be most effective. What we’ll have instead is some combination of new rules power plants must follow and a fresh patchwork of additional rule-making and taxing authority granted to state governments. In short, this is the worst case scenario for carbon regulation.
This approach will likely be the Obamacare of carbon regulation. It means we will add a fresh new layer of regulatory burdens to our energy markets while failing to deliver any nationally or globally effective regimen. We will add new costs to energy, but only in certain markets and for certain users. It will lay on additional cost and complexity without solving the core problem – the central theme of the Obama Era.
Democrats can only bear some of the blame for this outcome. The best approach to carbon reduction was developed by Libertarian economists decades ago and incorporated by Republicans, briefly, into legislative proposals. If Republicans weren’t in full retreat from reality on all fronts we would have been operating under this scheme for more than a decade already.
Instead of writing millions of lines of new rules dictating in ever finer detail the operating procedures of energy producers, simply apply a tax on carbon, paid at the point of generation or import. That’s it. From there, you could potentially allow producers to “trade” credits created through offsets, like carbon capture. You could use the revenue to provide a tax credit to lower income families hit harder by higher costs, use the funds for remediation. You could also use the money to “buy back” carbon, essentially setting up a market for carbon sequestration.
Countries that did not match our carbon taxes, or failed to consistently impose them, would face steep import duties which would be directed into the carbon fund. The impact to countries like India and China would be steep and immediate, helping to curb the urge to skirt the carbon regime.
The carbon tax would change the market balance among other products like cars, solar panels, and other technologies. Alternative technologies would get the boost they need without government intervening to pick winners and losers. Funds would be available to fuel a market for remediation which does not exist today. A market approach has vast advantages over the clumsy hand of regulation.
This is just one more example of the national and global cost of a Republican Party that has opted out of reality. As in the debate over health care, sound, market-focused Republican voices are completely absent, replaced by shrill denial. Simply voting for Democrats is not a solution. We desperately need the Republican Party to sober up.