Climate Change vs. the Poor

WASHINGTON WATCH Cliff Cobb

Climate Change vs. the Poor

when Innis criticizes the cap and trade or carbon tax schemes as regressive, we must listen. However, we must listen with discernment, particularly since Innis makes clear that he is serving as a mouthpiece for oil and gas interests, even as he defends the poor.

The beginning of wisdom is reverThe climate change debate has taken a new turn of late, with at least one tra- ence for God — and skepticism about all ditional civil rights group, the Congress human claims to knowledge.That applies on Racial Equality (CORE), siding with- to economics as much as it does to cliout reservation with the oil and gas lobby mate change modeling. Every branch of in the fight against regulatory limits on human knowledge has been politicized — greenhouse gas emissions. At the 2009 for centuries. In the case of economic International Conference on Climate models, there is good reason to be skepChange, held last March in New York tical of many of the assumptions on which City, CORE Chairman Roy Innis noted they are based.Thus it is difficult to know that “rising energy prices discriminate what to take seriously.

For example, most models that conagainst the poorest among us. It is a de facto regressive tax on the activity of life.” sider a tax on petroleum presuppose that He then went on to denounce any effort the tax will be shifted either forward to to use the price system to discourage consumers or backward to producers energy use. In this case, his targets were according to the elasticity (i.e., price cap and trade schemes or carbon taxes. sensitivity) of consumer demand and Every honest person finds these issues producer supply. A factor almost never a moral thicket. The inevitable uncer- considered by economists, however, is tainties in climate science (which reveal that some part of the price of oil reprethe vast scope of human ignorance) are sents economic “rent,” which is based on played upon by climate change skeptics, the cost differential between easily obtainwho use those uncertainties to find a able oil and the oil that requires a huge mote in the eye of the climate change investment to extract. If the price of oil activists and fail to remove the log of is $80 a barrel, and the cost of extracting economic triumphalism from their own. it is only $10, then $70 is economic rent.

(By economic triumphalism, I mean the If the cost of extraction is $65, then the idea that maximal economic growth serves rent falls to $15.

Another way to think of rent is as a sort of secular deity that has little biblical justification.) Simple prudence “supernormal profit.”To the extent that and Christian humility suggest that we a tax on oil falls on these supernormal should err on the side of caution when profits, then the oil company pays 100% confronted with our potential destruc- of that portion of the tax. Thus, the tion of God’s creation. This applies to actual incidence of a tax on oil hinges overfishing in the oceans, decimation of entirely on factors internal to the oil busirainforests, species modifications, nano- ness. (A cap and trade system has the technology, and many other forms of perverse effect of increasing oil company human transformation of the earth — rents by effectively transferring property rights in the atmosphere to them.) not just the climate change issue.

But the fact that we are called upon Ignoring rent or supernormal profits to be good stewards of creation does not entirely skews the debate, and convemean that we can turn our backs on the niently allows the oil companies to hide poor while we care for the earth. Thus, their profits and to claim falsely that PRISM 2010

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the poor will bear the entire burden of taxation.

The neglect of rents or supernormal profits is far from the whole story, of course. The correct aspect of Innis’ argument is that the poor do spend a disproportionately high part of their income for energy products — particularly for home heating oil and gasoline.

Either a tax or a cap and trade system will restrict the supply of energy and result in higher energy prices, and that is regressive (falling disproportionately on the poor). Must we then forego any measures that seek to correct the underpricing of energy in relation to longterm costs?

The answer must be “no.” There are many ways of rebating the higher taxes on energy to the poor through other means.

One aspect of the debate must be over which of those forms of making the poor whole is most effective and least demeaning. Innis is correct that the poor do not want “energy welfare.” But a rebate program that increases job opportunities or raises the earned income tax credit or increases Social Security benefits to the low-income elderly cannot reasonably be characterized that way.

The deeper question is whether we as a nation are willing to tackle the problem of poverty independently of rebates on environmental taxes. If not, then this issue will arise continuously and hamper every effort to protect the environment.

The general solution lies in shifting the entire tax burden from consumption to wealth.

In recent years one strand of the environmental movement has been seeking to unite respect for the earth with the call for social justice. Innis reminds us that we cannot lose sight of the importance of those combined efforts. ★ Cliff Cobb (cliff.cobb@gmail.com) has worked in recent years for Redefining Progress and the Robert Schalkenbach Foundation on both environmental and economic justice issues.