It Works in Theory Just Not in Practice

On April 8, George Schultz, one of the nation’s most distinguished public servants, and Nobel laureate Gary Becker wrote an op-ed in the Wall Street Journal explaining Why We Support a Revenue Neutral Carbon Tax.

The Foundation for their argument is that a different approach is needed to address environmental externalities, reduce C02 emissions because of climate change, and provide a level playing field for energy by eliminating subsidies. They then layout a simple and transparent approach to putting a price on carbon. There are at least two serious flaws in their logic which leads to the conclusion that it might work in theory but will never work in practice.

The implication that consumers of fossil energy don’t bear the full costs imposed on society and their impact on “human health and well being, the air we breathe, and the climate we create” is based on an environmental orthodoxy, not established facts. Although the fossil energy we consume has steadily increased over the past 40+ years, air quality has also steadily improved as well. This is the result of both regulations and energy efficiency. Neither is free and the cost has the effect of internalizing the much cost of the externality created by fossil energy use.

Although Schultz and Becker talk about air quality, their real target is climate change which they attribute to fossil energy use. It is unfortunate that two brilliant economists have bought into a theory that has so little empirical evidence to support it. With a little digging they could have determined that global temperatures have not risen in about 16 years and that US CO2 emissions, the primary emission of concern, has been dropping and is not projected by EIA to return to the 2005 level until about 2035. The real world and real climate system is not behaving the way models predict. That should be cause for pause and reconsideration but it is not. Advocates just keep on claiming an impending apcolypse.

More important, Shultz and Becker should know that it is China, India, and other emerging economies that are responsible for the global growth in emissions. So, nothing we do to constrain emissions is going to have any measureable impact on global emissions or global temperatures.

Their proposition would raise well over $100 billion annually. Can any student of government really believe that the Congress, independent of which party controls it, is going to let that much money go into an off budget account and then be paid out to taxpayers? Sounds like a variation of the infamous social security lock box that has always remained empty.

It is a well known fact that money is power and in politics the objective is to gain power, keep it and use it. Writer Ron Bailey recently observed in that “total government spending in the US has risen from 17% of GDP…to 35% in 2010…(T)he more resources government bureaucracies control, the more lobbyists, crony capitalists, and entitlement clients will appear seeking to divert handouts into their pockets.”

Messrs. Schultz and Becker would better serve the national interest with a proposal to address our most serious problems-runaway spending and a growing debt. Our economy will be done in by those long before we are confronted with a serious climate problem of our own making. It is unlikely that our fiscal problems will be solved until we have a leader cast in the mold of Margaret Thatcher who made clear “I am not a consensus politician; I am a conviction politician.” Of course, Britain had to stare into the economic abyss before it turned to her.

This article appeared in the FuelFix weblog at

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