The two big progressive goals of the moment, as we all know, are "saving the planet" (otherwise known as restricting the emission of CO2 into the atmosphere) and fixing income inequality. Certainly these are the top two policy priorities of our President, and we all also know that he is really, really smart. (See yesterday's post.) But are any progressives, including our President, smart enough to realize that there is a fundamental inconsistency between these two goals?
On Wednesday, MIT put out a press release to publicize a new study by one of its professors, energy economist Christopher Knittel, titled "Will We Ever Stop Using Fossil Fuels?" As is evident from the press release, Knittel (as well as MIT institutionally) is a serious believer in impending global apocalypse caused by the human sin of using cheap carbon-based energy. (E.g., "Such scenarios [of using all available fossil fuels] imply difficult-to-imagine change in the planet and dramatic threats to human well-being in many parts of the world.") Obviously, believes Knittel, human use of fossil fuels must be dramatically reduced or stopped. But how to get from here to there?
To Knittel, there is only one possible answer: carbon taxes. And not small in amount.
The problem according to Knittel, is that even though renewables are getting cheaper as technology improves, fossil fuels are getting even cheaper even faster. (You may or may not view this as a problem, but then you are not a brilliant MIT professor like Knittel.)
At least two technological advances have helped lower fossil fuel prices and expanded reserves: hydraulic fracturing, or fracking, which has unlocked abundant natural gas supplies, and the production of oil from tar sands. . . . So whereas some energy analysts once thought the apparently limited amount of oil reserves would make the price of oil unfeasibly high at some point, that dynamic seems less likely now.
And thus carbon taxes are "necessary":
Still, the immediate problem of accumulating carbon emissions means some form of carbon tax is necessary, Knittel says — especially given what we now know about declining fossil fuel costs.
So exactly how much in the way of carbon taxes will be "necessary" to force the shift to renewables and avoid the apocalypse? Knittel provides some examples of helpful information:
Alternately, look at it this way: Currently battery costs for an electric vehicle are about $325 per kilowatt-hour (KwH). At that cost, Knittel, Greenstone, and Covert calculate, the price of oil would need to exceed $350 per barrel to make an electric vehicle cheaper to operate. But in 2015, the average price of oil was about $49 per barrel.
Whoa! The current oil price per barrel is about $33. I guess that means that Prof. Knittel, et al., are telling us that we "need" an oil tax of around, say, $317 per barrel. That sure makes President Obama's recent suggestion of a per barrel oil tax of $10 look rather paltry! And I guess if $33 per barrel oil at the well translates into about $1.70 per gallon gasoline at the pump, we'd then be talking about gasoline at around $17 per gallon. And, undoubtedly, we would also "need" something roughly equivalent to be done to the price of electricity. Hey, it's to "save the planet."
Now, if you were trying to think of a really, really regressive tax to punish poor and low income people while high income people basically skate, could you actually come up with an example more extreme than this one? (OK, the lottery may be even worse. But not by much!) Andrew Follett at The Daily Caller yesterday, discussing the MIT study, points to this NBER study from 2009, and summarizes its conclusions as follows:
[A] carbon tax would double the tax burden of the poorest households, making it effectively impossible to have both a carbon tax and a living wage. A tax on all man-made greenhouse gas emissions would make the tax burden of the poorest households three times greater than the richest households, according to the study.
But don't worry, when we multiply the price of gasoline and electricity by 10, we'll blame the increase on the evil oil companies. Income inequality? That's just a line to stir up jealously and resentment. We'll pretend to fix that with something guaranteed to have no effect for at least the next 20 years, like expanded pre-K education, while imposing the super-regressive multi-trillion-dollar carbon tax today. To a really, really smart progressive, it all seems to make perfect sense.