October 26, 2020

TAX THE EXTERNALITIES:

The Immediate Case for a Carbon Price (JOSEPH MAJKUT, OCTOBER 26, 2020, nISKANEN)

 The oil and gas industry is already shrinking and eyeing real transition. Clean energy is now big business. Low-carbon energy accounts for more than half of new generation capacity added to the power grid. This summer, analysts at Goldman Sachs estimated that new capital investment in renewables would exceed new investment in upstream oil and gas exploration for the first time in 2021. They see a $16 trillion global investment opportunity over the next decade. Opportunities to scale up, and the beneficiaries of achieving that scale, already exist.

A marketplace that valued low-carbon production would immediately give many U.S. manufacturers competitive advantages. For example, the Boston Consulting Group estimates that American steel mills have half the emissions intensity of those in China. Overall, the Climate Leadership Council reports that  U.S. goods are 80 percent more carbon-efficient than the world average. If that difference were recognized in prices, U.S. manufacturers would have an immediate competitive advantage and the incentive to build upon it. 

Establishing a carbon price will give ambitious CEOs the pass to bring big decarbonization plans to their Boards and Shareholders. The benefits of reducing greenhouse gas emissions will be plain in excel sheets and tax calculations. Writing in The Hill, Curt Morgan, CEO of Vistra Energy, one of largest emitting companies in the U.S. power sector, says that "companies want to hasten the transition to clean energy. But they need regulatory predictability and market certainty to innovate and make clean energy investments with confidence." Regulatory predictability and market certainty come from a carbon price, not from continually changing command-and-control measures.

Some segments of industry will resist any serious attempt at climate action. They will find political support from the few remaining climate skeptics and policymakers most opposed to climate policy, reflecting long-standing coalitional relationships on the right. But at this moment, that coalition is in tatters and isolated. The denial apparatus that formerly united the fossil fuel industry with their political allies is losing members as the coal industry shrinks, and the oil industry supports carbon pricing. Denialists are split from much of the business community, large segments of the fossil fuel industry, and the growing number of Republicans interested in climate action. 

With the political coalition that has historically opposed action divided and much of industry in favor of climate action, climate hawks should take advantage. 

Posted by at October 26, 2020 5:10 PM

  

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