Dancing around the obvious climate solution

There’s a lot of dancing around a carbon tax as the obvious solution to climate change. What’s lacking is the confidence to go all in. If we had the confidence of a self-governing people, the steps would be obvious: untax payroll; tax carbon dioxide instead; apply the tax to imports; cause the world to follow our lead.

Sen. Mitt Romney (R-Utah) has penciled the idea on a dance card. He pointed out in that lengthy interview last month with the Washington Post that a border-adjusted carbon tax is the most powerful way to reduce worldwide emissions. That’s because trading partners would find it in their interest to skip a U.S. “border-adjustment” by implementing their own carbon tax. If so, the cost of CO2 would become visible to 8 billion people. Dirty products would be more expensive relative to clean ones, and accountable free enterprise would deliver innovation quickly.

Romney pointed out that Democrats could have enacted a carbon tax through the reconciliation process. They didn’t. Instead, they gave us the Inflation Reduction Act—a collection of tax credits that will drive clean energy innovation in America but likely fail to spur worldwide innovation. (American tax credits don’t incentivize foreign firms. Tax credits affect a firm’s decision to deploy clean energy only if it pays American taxes.)

A Democrat would be right to complain, though, that Republicans haven’t exactly stepped out onto the dance floor of the middle school gymnasium. Rather, Republicans seem to be standing on the walls of the gym, snickering about the history lessons of the 1994 midterm elections. Back then, Democrats lost control of the House, perhaps in part because of Al Gore’s BTU tax (British Thermal Unit tax).

Critics are right to point out that a BTU tax or a carbon tax would raise the price of nearly everything that we buy. That’s terrible policy and worse politics.

But what if we paired a carbon tax with a cut in payroll (F.I.C.A.) taxes, exercising the right of self-governing people to change what we tax? Such a tax swap requires trust, and that trust will come only if Republicans and Democrats work together.

The incoming Congress will have two opportunities to build that trust—in themselves and in their constituencies.  

First, Congress can work on bipartisan permitting reform. The clean energy that’s going to be created because of the IRA tax credits for nuclear, hydrogen, wind and solar energy will need to get to population centers. That means powerlines and, yes, pipelines—for natural gas, for hydrogen and for captured CO2. We need more copper and lithium and cobalt and nickel. That means mines. Our EVs don’t drop down from heaven like manna. Somebody’s got to get busy and make the materials for us. If we do it right, we can make those materials without fouling our air and water. But let’s be clear minded; there are going to be impacts on our landscapes. It’s a fallen world, and we have to make tradeoffs.

Second, Congress can anticipate the European Union’s enactment of a carbon border adjustment mechanism (CBAM). American companies selling certain commodities to Europe are going to have to pay a carbon tax when their products land in European ports. That’s a tax that we could collect ourselves. If we did, those products would enter Europe without adjustment. The carbon tax revenue would be here, not there. And it would make no difference to the American exporter’s customers because the carbon tax is going to be built into the price of the product either way.

Thankfully, Republicans like Sen. Kevin Cramer (N.D.) are stepping forward with a somewhat parallel proposal for a carbon tariff. He would have the U.S. collect a tariff on Chinese steel, for example, to account for their heavy CO2 emissions. Cramer argues that our existing clean air regulations are equivalent to a domestic carbon tax. Perhaps the World Trade Organization would agree with Cramer, but even if they don’t, he’s much to be congratulated for starting toward the dance floor.

Our ability to govern ourselves is at the heart of who we are as Americans. We can decide to untax some form of income, to put a tax on carbon dioxide instead and to apply that tax to imports. That would get the world “in” on solving climate change, and accountable free enterprise would deliver innovation at scale and fast.

Rep. Bob Inglis represented South Carolina in Congress from 1993-1999 and 2005-2011. He is the executive director of republicEn.org, a growing group of conservatives who care about climate change.