Issue Paper #3: Climate Change

It is not “conservative” to ignore the clear scientific evidence that global temperatures are increasing at least in part due to the burning of fossil fuels by people and businesses. There is, however, a great deal of uncertainty about the severity of the problem and the effects of reducing carbon emissions now. In light of that uncertainty, it is prudent to take measured actions to begin reducing carbon emissions. These actions should phase in gradually to minimize the economic costs. The measures we take should allow us to accelerate emissions reductions as evidence of humankind’s contribution to global warming strengthens, and be reversible in case new scientific evidence shows that humans are not a major cause of global warming.

The Obama Administration has proposed strict new regulations on carbon emissions from electrical utilities that threaten to raise costs and hurt the employment prospects for millions of American workers. At the same time, the Administration is following the example set by the G.W. Bush administration in introducing costly government subsidies for untested technologies such as ethanol, wind power, and solar power. This amounts to a radical industrial policy under which government is tasked with picking winners and losers. It is a vast intrusion into private business decisions that violates time-honored conservative principles. The Administration’s proposed new mileage standards for automobiles is industrial policy on steroids. If elected I will push for a reversal of these programs and their replacement with a more sensible approach to dealing with the problem of climate change.

My approach reduces carbon emissions by relying on private enterprise and the prudent decisions of American households working through markets. Basic economic theory tells us that if the price of emitting greenhouse gases rises, businesses and households will find the most efficient ways of reducing emissions. All government needs to do, then, is to impose a tax on carbon emissions (or, equivalently, to require companies and households to purchase permits to emit greenhouse gases and then let them purchase these permits through auctions). The tax or “cap-and-trade” system will raise the price of emissions. Businesses and households, faced with higher costs of emissions, will make the changes required to reduce their emissions that are best for them, as opposed to the current “one size fits all” industrial policy approach. At the same time, I will support the elimination of all of the green technology subsidies and regulations on carbon emissions that the Obama Administration has imposed.

Under my proposal, the tax on carbon emissions will be phased in gradually over a ten year period. This will allow us to avoid wrenching changes now that will slow the recovery. It will also provide an incentive for businesses to invest in new technologies such as electric cars and solar power that will be profitable when the taxes are fully phased in, stimulating growth. A tax on the carbon content of all products bought and sold in the US will apply equally to goods imported from countries like China, so American manufacturers will not be put at a disadvantage relative to foreign competitors. If in the years to come new scientific evidence emerges showing that carbon emissions are not a major cause of global warming, the taxes can be reduced or eliminated.

Pricing carbon emissions through taxes or a cap-and-trade system is the conservative solution to problems like climate change. A cap-and-trade system was applied successfully to the problem of sulfur dioxide emissions under the G.H.W. Bush administration in the early 1990s. The market-based solution has been endorsed by many conservative economists, including Gregory Mankiw, the Chairman of the Council of Economic Advisors under George W. Bush. It is an efficient approach to a serious environmental problem and accomplishes its objectives with as little government interference in private business decisions as possible.