The DC Policy Center recently published an article that takes a misleading and evasive look at our proposed carbon pricing policy. The article fails to come up with an alternative to tackling climate or to allow DC to achieve its 2032 or 2050 climate goals, and it’s worth considering the interests behind this think tank — executives from Pepco, the D.C. Chamber of Commerce, and development companies sit on the board.
Regardless, the article has several failings, some of which we will to respond here.
DC Policy Center starts with a presumption that pricing must hurt the economy, and ignores (rather than rebuts) our analysis.
DCPC pins its position on the categorical presumption that the “tax revenue, no matter how high and however it is used, will not be sufficient to cover the cost of lost wages and income or the economic activity that drains away from the city.” They offer no support for this presumption – and certainly no analysis of how alternative uses of the revenue would affect the economy. They then wave away a year of intensive design work, stakeholder engagement, and analysis as “a lot of modeling and number crunching,” which they reject without any further reference or substantive critique. DCPC appears to simply be disbelieving, on ideological grounds, the possibility that this policy could be anything other than bad for the economy.
DC Policy Center cites two sources for their presumption of economic loss. Both sources actually support the coalition’s proposal, rather than casting doubt on it.
In The Impacts of a Carbon Tax, Resources for the Future authors point out the potential for well-designed carbon prices to boost employment while limiting economic losses to a few exposed sectors. This is exactly the assessment we presented, when we said the policy could add about 500 net jobs while driving some losses to the utility and professional-service sectors.
The authors point out that “…the employment effects represent much more of a shift in employment—fewer jobs in one sector but more jobs in the other—rather than a change in overall employment.” This is entirely consistent with the coalition’s analysis, and entirely inconsistent with DCPC’s presumption that any such policy must be bad for the economy.
The authors also emphasize the benefit of designing the policy carefully to meet priorities, which directly contradicts DCPC’s assertion that any carbon price is beyond saving from an economic-impact perspective. Specifically, they never say that the price impact is too large for any use of the revenue to repair, and DCPC misrepresents their work by saying they do.
In Effects of a Carbon Tax on the Economy and the Environment, the CBO says plainly, and right up front, “The effects of a carbon tax on the U.S. economy would depend on how the revenues from the tax were used” (italics added). This completely contradicts DCPC’s gloom-and-doom guarantee of economic loss regardless of how revenues are directed. The CBO makes no statement that the burden of the price is automatically larger than the benefit from revenue re-use. DCPC again misrepresents the authors by stating that they find carbon prices to be inevitably more damaging than any use of the revenue could repair, when they say no such thing.
DC Policy Center ignores basic and well-documented opportunities for economic gains through a) reduction of imports and b) shifts in spending to more labor-intensive areas.
DCPC ignores the potential for this policy to reduce imports and redirect resources domestically, but that’s a crucial aspect of any local economic analysis. In the case of the District of Columbia, which imports almost all its energy, a policy that reduces energy spending while stimulating consumers to spend money locally with the money instead absolutely has the potential to expand the local economy.
Also, energy sectors tend to divert a very small amount of each dollar spent to actually hiring people. In DC, where we import energy, almost no energy-industry employment is inside our boundaries. By contrast, the sectors that benefit from residents spending their rebate – restaurants, retail, basic health care, etc. – tend to operate in the District and tend to spend a lot of their revenue hiring people. It is this shift which underlies our assertion that the policy has the potential to expand employment rather than force a contraction.
DC Policy Center characterizes revenue-return strategy as cynical politics rather than legitimate economic stimulus.
Groups left, right and center focused on pricing carbon agree that boosting consumer spending will stimulate the economy. Groups opposed to rebates nevertheless focus on payroll-tax reductions in pursuit of the same effect – increasing consumer spending capacity. Both George W. Bush and Barack Obama made some form of a more-cash-in-pockets approach (Bush relying on a direct rebate check, Obama on a payroll-tax reduction) a part of their respective strategies for recovery from the dot-com bubbles and the financial crisis. This is basic economic strategy, not political trickery.
DC Policy Center makes blatant errors when discussing the Maryland carbon fee bill
The author completely mis-characterizes the Maryland carbon fee bill. The bill was introduced in early 2018 in the House of Delegates only — not the Senate as DCPC asserts. And the House sponsors explicitly intended the bill to be for “educational” purposes only during the legislative session that ended in April. There was a packed and positive House committee hearing, but final passage was never pushed by the sponsors who intend to bring it back next year with growing support for a serious push for passage in 2019.
DC Policy Center didn’t even get our name right!
The author repeatedly characterizes the proposal as coming from “Chesapeake Climate Action Network.” But the “Put a Price on It, DC” campaign was co-founded and actively co-led by a large number of the District’s leading environmental and social justice organizations including the Sierra Club DC Chapter, Citizens’ Climate Lobby DC, Interfaith Power & Light (DC.MD.NoVa), and DC Environmental Network. It has since gained support from dozens of additional organizations and businesses, now totaling more than 70 coalition members. Additionally, the economic analysis DCPC disparages was conducted separately by the Center for Climate Strategies.
We know that a carbon fee-and-rebate is the best way to bring D.C. to a renewable-based economy in a way that will benefit everyone. Sign and share the petition, call the Chairman, and join the movement.